Obama Jobs Bill

[Embar Angylwrath]

Actually, I think we have a different definition of "investment".

Direct investment in a company... throwing capital at a company for an equity share... results in immediate spending.

That would be true if the only reason a company would issue stock is because they wanted cash for a project. And while it is always the end result that the company gains cash (or some other asset) from the issuance of stock, it does not always follow that the company spends said asset.

In most cases it does, Kulaf. An IPO, or release of block shares, generates direct revenue for the company. There's no reason to sell off part of a company (whihc is what issuing shares do) if the company doesn't need cash. (Unless a core group of owners want out) In the larger number of instances this happens, the company uses that money to further its business model, which usually invloves hiring people, expanding operations, reasearch and development, etc. That's a direct stimulation of the economy. Sure, some of that cash should be reserved for a safety net, that's just good business, but a company only sits on as much cash as it thinks it needs for safety and planned expenses. Just sitting on a pile of cash isn't good business. I know a lot of unsophisticated people think that companies and rich individuals manage their money like Scrooge McDuck, throwing it all into a swimming pool and taking a swim in it, but the reality is far different than that.

I'll use an anecedotal instance of why "investment" in a company is more powerful than stimulus spending by the government.

My company was started with an "investment" of $100K. Five years later it employs about 25 people, will be hiring another three or four in the next couple of months, and churns revenue in the millions of dollars per year. Contrast that with "stimululs" spending that gets you about one job per $250,000 spent (if you beleive the rosier estimates). Tell me, what's the better stimullus per dollar for the economy?

[Lurker]

Do you think our current economic and employment crisis is caused by a lack of capital for business expansion or a lack of consumer demand?

[Embar Angylwrath]

Surely you don't see it as simple as that. One or the other? C'mon, you can toss a better question than that.

[Kulaf]

Which is having a larger impact?

[Lurker]

He's just going to dodge or come up with another meaningless anecdote. Answering honestly would destroy his argument.

[Ddrak]

My company was started with an "investment" of $100K. Five years later it employs about 25 people, will be hiring another three or four in the next couple of months, and churns revenue in the millions of dollars per year. Contrast that with "stimululs" spending that gets you about one job per $250,000 spent (if you beleive the rosier estimates). Tell me, what's the better stimullus per dollar for the economy?

The stimulus - this has been proven quite frequently on statistical aggregates. You haven't accounted for the effect of your company on competitors, the rate of startups that fail, the ratio of hires to direct investment, etc. No company exists in a vacuum so comparing a nationwide aggregate against a single company is a bit like saying you disproved the second law of thermodynamics by freezing some water.

In any case, anecdotes aren't necessary. The CBO has already done the math from what happened and it shows pretty clearly that supply side stimulus returned far less than demand side.

On average, $100k investment into infrastructure, welfare, etc. returns $100k-$250k in GDP growth.
$100k paid off a company's debt (ie direct investment) returns between $0 and $40k in GDP growth.

Dd

[Embar Angylwrath]

My company was started with an "investment" of $100K. Five years later it employs about 25 people, will be hiring another three or four in the next couple of months, and churns revenue in the millions of dollars per year. Contrast that with "stimululs" spending that gets you about one job per $250,000 spent (if you beleive the rosier estimates). Tell me, what's the better stimullus per dollar for the economy?

The stimulus - this has been proven quite frequently on statistical aggregates. You haven't accounted for the effect of your company on competitors, the rate of startups that fail, the ratio of hires to direct investment, etc. No company exists in a vacuum so comparing a nationwide aggregate against a single company is a bit like saying you disproved the second law of thermodynamics by freezing some water.

In any case, anecdotes aren't necessary. The CBO has already done the math from what happened and it shows pretty clearly that supply side stimulus returned far less than demand side.

On average, $100k investment into infrastructure, welfare, etc. returns $100k-$250k in GDP growth.
$100k paid off a company's debt (ie direct investment) returns between $0 and $40k in GDP growth.

Dd

I don't get the $100K paid off a company's debt... thats not what I'm talking aobut. I'm talking about paying off debt a company incurs. The only way that islinked to "direct investment" is if a company buys back its own stock. I'm talking about seed money.. capital investment in a company.

You're right, a company doesn't exist in a vacuum. But I'd say that the more companies there are offering competitive services, the better off the consumer, wouldn't you agree? Therefore the more companies there are, the better off the economy. Sure, its consumer driven, but a consumer needs a place to consume. And if those places to consume are competing for those consumers, it makes the consumer's dollar stretch more. It increases their buying power.

[Embar Angylwrath]

Which is having a larger impact?

The lack of jobs. There are a couple million jobs that disappeared with the recession. Those aren't coming back. That, of course, affects demand. But this isn't a recession we can borrow and spned ourselves out of. Until those people get employed, demand will lack, so its up to the entrepenures of the country to find those niches where they can start a successful business. It can be done. I started mine in ealry 2007, right before the crash, and grew it through the recession by taking advantage of opportunities as I found them. I'm not a Wharton grad. If I can do it, anyone can, if they put their minds to it.

[Kulaf]

So you are agreeing that the lack of consumer demand (people can't buy things if they don't have a job) is having the greatest impact.

Here's the problem with your analysis that "anyone can do it". If demand is down, you add another barrier to entry to anyone looking to start a new business. Banks are less willing to lend money. The population in general looks to hoard money (look at the price of gold......hint it is not being driven by the limited supply of the stuff). This is starting to look a lot like how we slid into the Great Depression.

And we got out of it by the government demanding new jobs. I said it before and I will say it again, small infrastructure investments are NOT going to cut it. You need to demand so much infrastructure construction that firms have to hire people to meet the demand, and perhaps some of those out of work construction people with drive start up a new company to get some of those government contracts.

We really are at this point beyond the hope that entending unemployment benefits is really accomplishing anything other than putting a bandaid on a gaping wound. You might as well just put out a convoy of trucks from the treasury to run around tossing money out, because that is the kind of stimulus you pay for with that approach.

We need to be looking at how we can stimulate opportunity in the face of certain risk and where the free market is unwilling to put a toe in the pool to test the waters......we need to plunge in at some point. I am not sure we have/will reach that point.....but we need to turn off the spigot and see where we go.

[Embar Angylwrath]

You won't see an argument from me that government investment in infrastructure is the best stimulative bang for the buck, and in the interests of all tax payers. And like you, I don't see continuing of the unemployment benefits as an effective way to jump start the economy.

[Lurker]

Unfortunately, your Party filibustered the infrastructure investment legislation, blocking the best stimulative bang for the buck and standing in the way of the interests of all tax payers. Republican electoral needs are more important than the needs of the country.

[Ddrak]

I don't get the $100K paid off a company's debt... thats not what I'm talking aobut. I'm talking about paying off debt a company incurs. The only way that islinked to "direct investment" is if a company buys back its own stock. I'm talking about seed money.. capital investment in a company.

You're right, a company doesn't exist in a vacuum. But I'd say that the more companies there are offering competitive services, the better off the consumer, wouldn't you agree? Therefore the more companies there are, the better off the economy. Sure, its consumer driven, but a consumer needs a place to consume. And if those places to consume are competing for those consumers, it makes the consumer's dollar stretch more. It increases their buying power.

Seed money is most often borrowed money. Paying off debt results in more seed money being available. This has been shown under half as effective as welfare and infrastructure.

Seed money is also very likely to collapse. Remember, 90% of startups fail. Just because you got lucky doesn't mean everyone will, and certainly doesn't mean anyone can repeat your experience.

If consumers have no money (the symptom of a recession) then your entire argument falls flat. Any amount of seed money only improves supply and doesn't magically stimulate demand. If no one is buying your services then having more companies offering the same services is hardly "better off for the economy", in fact it's worse. Your analysis only works in a supply constrained situation and that's not where the economy is.

Do you really think the appropriate response to "sales are down" is "build another store, that'll fix it"?

Dd

[Fallakin Kuvari]

Do you really think the appropriate response to "sales are down" is "build another store, that'll fix it"?

Dd

That's like saying "home sales are down, build more homes." Or "We have a ton of ghost cities, build more and make sure to use tons of copper so we can prop up our currency".

[Kulaf]

Unfortunately, your Party filibustered the infrastructure investment legislation, blocking the best stimulative bang for the buck and standing in the way of the interests of all tax payers. Republican electoral needs are more important than the needs of the country.

The Senate voted 51-49 in favor of a procedural motion to bring up the component of President Obama's jobs bill, nine short of the 60 votes needed to break a filibuster. Sen. Ben Nelson (D-NE) and Sen. Joe Lieberman, a Connecticut independent who caucuses with Democrats, joined Republicans in opposition to the bill.

In a second, 47-53 party-lines vote, the Senate blocked a Republican alternative that would have cost $12 billion paid for by $18 billion in spending cuts.

Let's not forget the 2nd bill shall we. Not to mention the 15 House jobs bills waiting for the Senate to even consider them.

[Lurker]

Let's not forget the 2nd bill shall we

You mean the bill that Moody's said wouldn't create any jobs and wouldn't boost the economy? The House bills that contained radical proposals that would cripple the government? Those bills?

The Republicans aren't offering serious jobs bills; they are pushing legislation that would do nothing to create jobs, would advance an extreme winger agenda, and the only purpose is to create the illusion that there are two jobs bills. You're damn right we shouldn't forget it.