Tuesday, July 31, 2012
Do you remember the 800 Billion Dollar Stimulus Bill? I do. And I did some math--well, simple arithmetic actually. Here is the way to create four million jobs in about four weeks. This is not a joke:
An $800 Billion dollar stimulus bill, when divided by 5 (years) will work out to $160,000,000,000 a year for 5 years. My original thought was that the initial legislation would take us to 2013--the year following the election. Now, I am looking at the issue from a different perspective.
4 million people and $40,000 per year.
People who earn $40,000 a year, spend $40,000 a year. Now, we can quibble about the taxes: for the purposes of discussion only, let's say 20%. Do we pay people $40,000 and tax then 20% or pay them $32,000 a year? (Now you know why I don't discuss, debate, or defend my viewpoints.)
4 million people making $40,000 a year will cost about $160,000,000,000.
I suggest this because it is flexible. You can plan the programme for 2 years, 3 years, 4 years, or you can adjust the number. More people in the programme for fewer years, for example.
What those people who have been hired by Uncle Sam will do is subject to debate. Certainly, companies looking for trained employees can train the "new hires" at a very reduced--temporary--wage. People could go to school; start a blog; do volunteer work; or sit in front of the television set all day watching CNBC thus answering the question, "Who is CNBC's target audience?" One would like to think that professionals in the finance industry are at least watching their money if not ours.
This then leads to the multiplier effect. This was mentioned--only in passing--by Madame Lagarde in her interview with Maria Bartiromo on CNBC. The topic was the European Economic Crisis. This is the crisis that the European Leaders are attempting to solve without any attention to Capital Investment or Economic Development which leads to growth, employment, increased revenue, reduction of Government spending (through the divestiture of State owned assets), and the improvement of the economy. But don't bother listening to me, everyone always doesn't listen to me. But I digress.
To play out the math of the multiplier effect serves no useful purpose. Therefore, I have included a link to an illustration of the multiplier effect--this being more easily understood than an explanation of the multiplier effect. Keynesian? Perhaps--but only just a bit.
The Multiplier Effect--Illustrated.
Economic Stimulus--by Metaphor
(Please read them both. It builds character.)
Copyright (c) 2012 Slim Fairview
All Rights Reserved.
PS. An attempt was made to post this monograph in the comments of the New York Times online. (Probably on Dr. Krugman's blog.) I assume the reason the monograph was not approved for posting was that the relativity to the topic was tenuous. Slim