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RE: Spend, spend, spend

Being a lay person, I struggle to see how spending money, in bailouts and stimulus, save money.

I may be way off, so all corrections are welcome, but I didn’t think the main point of the stimulus was to save money (though this article does include that idea as one of the many goals of the 2009 stimulus bill). I thought it was to save the banks/auto companies/economy (depending on the time the argument was being made). From what I have read, our current economy (and corresponding economic policies) is driven by spending, not saving. Keynes popularized the idea of the paradox of thrift which said that collective saving in the face of a recession actually hurts the collective economy because there is less money moving around. An argument/explanation of this can be found here. The Wall Street Journal featured an article about it a year ago, saying that families finally beginning to save was aggravating the countries economic woes. Now whether that is a valid idea or not is something for Austrians and Classics and Keynesians to debate (for example a counter argument is presented here.

But I honestly never thought that spending was supposed to save money, except in terms of saving businesses → jobs → wages. For the past {insert #} of years, the US economy has been largely ruled by the idea of spending and growing and spending some more, as opposed to really encouraging savings as some East Asian countries (can’t find a good link just now) did in the 90s.

The idea has been to boost the economy, but I don’t see a boost.

When you say “boost” do you mean from 2007 levels, 2008 levels or 2009 levels? The economy is better off now than it was 6 months ago, perhaps a year ago. Unemployment has at least stopped growing at the rate it was a year ago. Of course, the argument can be made that this would have happened anyways, but like you said, we just don’t know. It maybe just another side of the same coin, but I thought the stimulus was to prevent a more major bust, not create a boost, for the economy.

he wants to spend even more money reforming heath care.

While this likely won’t benefit you or me or many of the members of this site in any large way, I believe it is a worthy venture to provide better health care to those who currently cannot afford it. Some see it as socialism, and automatically think Stalinist/Maoist communism. I see it as a responsibility for a modern country to look after its own. It’s easy to throw other people under the bus (the people who desparately need healthcare reform) but more difficult to jump under yourself (except for, maybe, Brandon, who has experience).

Some possible solutions that have been offered by Senate Finance Committee Chairman Max Baucus

As for proposals to pay for the healthcare reform, I have no problem with #2 or #3. I don’t like #1 because it negatively affects me (I’m no idealist), but I could live with it. I would, however, like some explanation on why owning more insurance drives up costs. I can see how overusing insurance (i.e. going to the ER for a runny nose) can inflate costs but not having the protection in place in case of catastrophic instance, which can be set up with either high premiums-low coinsurance or low premiums-high coinsurance. I am sure there is an explanation behind that idea, I just don’t know what it is.

With #4 and #5, why the focus on these? I used an FSA when my son was born and it saved me money. Is there a trend of misuse or overly large costs associated with FSAs? I really hadn’t heard anything about that. I guess the same goes for HSA, though I don’t have any personal experience with those. Has fraud been identified in any meaningful amount in those programs? Just curious.

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Unemployment has at least stopped growing at the rate it was a year ago. Of course, the argument can be made that this would have happened anyways, but like you said, we just don’t know

While not a slam dunk, I found a useful link talking about the effects of the ARRA’s effect on the economy from the Congressional Budget Office, and how it would have been without the bill.

I may be way off, so all corrections are welcome, but I didn’t think the main point of the stimulus was to save money

You aren’t way off. Paint it this way: If the government didn’t give money to those companies/banks, they would have failed. MANY people would have been out of work and MANY people would have lost money. The indirect psychological effect would have hampered not only our market economy, but also foreign markets and investors. In the long run these bailouts would save money, but in the short term they saved the face of capitalism.

BTW, I highly recommend reading John Maudlin and “Outside the Box”

When you say “boost” do you mean from 2007 levels, 2008 levels or 2009 levels? The economy is better off now than it was 6 months ago, perhaps a year ago

Boosting the economy I think should also be reflected with declining unemployment, not the inverse.

While this likely won’t benefit you or me or many of the members of this site in any large way, I believe it is a worthy venture to provide better health care to those who currently cannot afford it.

As I have mentioned previously I think it’s a worthy venture, just not right now. True it’s not going to benefit me very much, but it will make my job more difficult, and affects me directly.

With #4 and #5, why the focus on these?

Some people use these for medical procedures that are not essential, which seems to be what they want to eliminate. I know people who have used it for plastic surgery (cosmetic), Lasik eye surgery, straightening teeth, and teeth whitening. As long as it falls under the “medical” umbrella you can use those funds for that. I’m confident there are more things to use it for, but those are just the few that I am personally familiar with. These type of expenses are the ones they would like to eliminate because the claim is that it drives up the cost of health care and is unnecessary.

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