

Obama Acts to Aid Small Businesses - lssndrdn
http://www.nytimes.com/2009/03/17/business/smallbusiness/17sbiz.html?_r=1&ref=politics

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tjic
Speaking as the owner of a small business, I wish he'd help me by cutting
spending, stop talking down the economy, allowing insolvent firms to fold,
etc.

Micromanaging billions of "knobs" on the economy is a losing proposition and
it creates "regime uncertainty", where folks are afraid that the rules (on
taxes, regulation, inflation, contracts, etc.) can change out from under them
at any time.

~~~
spamizbad
Cutting spending in a deflationary recession is never a good idea. You want to
execute spending cuts when the economy is vibrant and growing, not when your
GDP is shrinking and your unemployment numbers are kissing double-digits. If
anything, Obama hasn't been doing enough spending on projects that will be
putting people to work in the next 1-2 years.

~~~
nazgulnarsil
Deficit spending is based on the fallacy of increasing aggregate demand.
taking money from people and then spending it on government projects doesn't
increase aggregate demand because you've just decreased demand by the same
amount by taxing people in the first place. How is this any different from
normal redistribution? You're redistributing from the private sector to public
works contractors. Prove to me that the public works contractors will produce
more jobs than the private sector would have with the same capital.

Money is a commodity. When the government prints more it reduces the value of
all other dollars in circulation. This inflation is a hidden tax that we will
be paying off for years.

~~~
olefoo
> Prove to me that the public works contractors will produce more jobs than
> the private sector would have with the same capital.

You are absolutely correct.

Dams, Bridges, Interstate Freeways, Air Traffic Control and Nuclear Power
Plants all work so much better when they are built entirely by private
enterprise. In cases where they were built using public obligations, they
provide very little benefit and do not enable other industries.

~~~
Radix
You're changing the subject a bit from micromanagement of smaller more
specific interests to infrastructure, which I would expect more people to
agree should be regulated, and especially in the case of dams and freeways,
should be government backed.

~~~
olefoo
Obviously I was not sarcastic enough.

Look: public infrastructure spending stimulates the economy on multiple
levels; directly, through spending on contractors and suppliers (who in turn
buy from their contractors and their suppliers) and indirectly by creating
public benefits that create new opportunities and enable new industries; and
through the fact that it engenders stability (a dam has a lifespan measured in
centuries if it's maintained, a functional transportation link is not likely
to vanish overnight, and so forth). The thing is that these benefits are
diffuse enough (though they are measurable) that no single commercial entity
can afford the risk that they might not be able to capture those benefits.

The blinkered view that all public spending is automatically evil prevents
clear discussion of the possible alternatives. Not all public spending is
equal, some projects deliver more overall benefit than others.

I guess my take is that those who are strident in their distaste for any
public spending are patsies in the hands of the special interests who are
trying to capture as much of the benefits of public spending as possible.

~~~
nazgulnarsil
you're completely ignoring my original point. government money comes from
somewhere. I'd recommend a basic course on economics before going off on
details. <http://www.fee.org/pdf/books/Economics_in_one_lesson.pdf>

~~~
olefoo
That is patronizing and wrong. I did address your point fairly directly modulo
the sarcasm.

Public infrastructure provides economic benefits throughout the economy,
enabling more economic activity; which more than makes up for the money
withdrawn from circulation by taxation.

If you cannot wrap your head around this concept. You have no business
lecturing others about basic economics.

Governments are not exempt from economic forces, in fact a very good argument
could be made that they are created and sustained by economic necessity. To
put that argument in the simplest terms; governments save us money.

My other point is that blind negative rage toward all public spending makes
you an easily manipulated member of a mob. A mob that others are adept at
using to shelter their favored projects.

~~~
olefoo
Well, I see that none of the "libertarian" downmod tribe wants to actually
argue the point. It's so much easier to engage in groupthink and hit the
little down arrow than to actually defend your assertions against someone who
aggressively questions them.

~~~
Radix
FWIW, I didn't downvote you. And, upon review, it looks like Nazgul brought up
infrustructure, sorry.

As I said in my earlier post infrustructure is fine depending on the
situation. I believe government works are a necessary evil where we expect
private interests to create monopolies for expoitation. Dam's are such a case.
A good highway system is probably such a case. But these things take time and
I expect them to be taken advantage of. They have to be maintained even if
they aren't useful. You say. "Public infrastructure provides economic benefits
throughout the economy, enabling more economic activity; which more than makes
up for the money withdrawn from circulation by taxation."

We just disagree on the last sentence. I believe it only makes up for it if
the end result of the infrastructure encourages more economic activity.

Of course, this tbread started complaining about giving small business owners
stimulous. Well, I agree with the original sentiment. They could also try
relaxing some laws that get in small business owners ways.

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ggruschow
To correct for the problems sins of loaning money to people who probably
couldn't pay it back, he's loaning money to small businesses that probably
can't pay it back?

I guess it's a relatively small amount.. so I'll still continue hating his
policy mostly for the decision to tax my charitable donations.

~~~
calambrac
I'm guessing you're referring to home loans, which had the lovely property of
inflating prices without any correspondence to a real increase in value. There
was more money in the system to bid on a fixed set of assets, so prices went
up.

Business loans are fundamentally different, aren't they? Sure, a lot of these
businesses will fail, but at least the whole point of a business is to create
value, and there will be a lot of winners, too. Money has to move around,
that's how the economy works. I'd much rather see it moving around trying to
drive people to create value, than to consume concrete assets.

~~~
ggruschow
Yeah.. really though I think I was bitching more than trying to make a real
point.

A couple of points though. First, there were a lot of "concrete assets"
created in recent years. As simple evidence google "condo glut." Also, you're
right - these business loans are fundamentally different. Unless I'm missing
something, they're fundamentally riskier - there's no collateral (overvalued
collateral is better than none), and the entity you loaned money to is FAR
more likely to simply disappear.

As to whether they'll go to better uses - hey - I hope you're right. I hope it
helps create more value / helps the economy, etc. However, plenty of people
took money "out of equity" in loans and spent it on stuff that created value
in a similar manner. For instance, there used to be quite a burgeoning
business in selling solar panels to homeowners.. many would argue it's good
for the environment, adds value to the home, etc. The interesting part here
though is that the salesman weren't really just selling solar panels. Their
job was to walk the homeowners through how to get the money in a mortgage "out
of equity" on the always-rising value of their home and collect any tax
credits available.

~~~
calambrac
Condos built at breakneck pace to satisfy demand driven largely by spec rather
than need, it's kind of hard to think of those as assets right now
(figuratively speaking, of course). The biggest problem is that 'always-rising
value' part - that was a complete myth, at least at the pace that was being
seen and assumed would continue.

Businesses probably are fundamentally riskier, but there's probably a power
distribution in there somewhere, where a few pay off like mad and offset
everything else. I'm not advocating irresponsibly handing out business loans
or anything like that, but if a bank has the choice between investing in a
risky mortgage or a risky business, I guess I would hope they'd pick the
business. Then again, I'm not really interested in buying a house anytime
soon.

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wustl07
So he must have put all of this in the "stimulus" bill since he cares so much.

