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Friday, January 23, 2009


Economic "logic"

Republicans are objecting to the proposed stimulus package because, they say, the "shovel-ready" projects aren't really ready, and won't get money into the economy fast enough. What do they want instead? Tax breaks for businesses, of course (as if you didn't know). Which makes no sense whatsoever.

First of all, unlike government, which often "approves" projects but doesn't fund them (meaning that the project is ready to go once funds are available), businesses rarely if ever work that way. They approve budgets once a year (typically), and that's what they'll be doing that year. Any "bonus" money will either go into the bank (or to the shareholders as a dividend), or maybe to buy out another company.

And second of all, companies don't build, say, a new plant, because they have money to do so. They get the money one way or another because there's demand for the products coming out of the plant. Intel didn't just close its last wafer fab plant here in Silicon Valley because they didn't have enough money; they closed it because demand for the products had fallen off. No extra tax break will keep that plant open. The way to stimulate the economy is to do things that will stimulate demand. Tax breaks for business aren't it.

Meanwhile, Barack Obama continues to defy logic himself, making concessions to Republicans despite the fact that the election gave him a huge mandate from the American people, and his party huge majorities in both houses of Congress.

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