I live in New York City. I talk to a lot of businesspeople, investors, and Wall Streeters. I don’t talk to all that many ordinary people.

But I enjoy being interviewed on live radio in other parts of the country. And when I do that, I get the chance to hear what local callers think about the economy, and more importantly, what they want.

They want to save a lot more money. This answer comes up automatically, without qualification, and without exception when you talk to ordinary folks.

When did this desire to save materialize? It was pretty sudden. If you look at official statistics (both the Commerce Department and the St. Louis Fed publish relevant ones), the personal saving rate suddenly ticked up to between 2 and 3 percent about four months ago. Remember, it had been running nearly zero before the financial crisis started. We had one month when personal savings jumped over 5%.

Curious? Sure enough, it was May 2008. That’s when the tax rebate checks went out.

Read More →

Read More →

Say, has anyone noticed that the stimulus projects which are getting the most negative attention from the press and the public, actually are the ones that orthodox Keynesianism suggests are the best ones to do?

I admit that striking the $600 million for condoms hurts no one but the people in China who would have manufactured the condoms. That one is a good strike, because it’s transparently a giveaway to the pro-abortion lobby.

But spending $21 million to re-sod the National Mall is exactly the kind of make-work that fiscal stimulus is all about. The objective isn’t to create a capital asset that will pay off in increased productivity later on, although that’s often adduced as a bonus. The idea, as someone like Paul Krugman will readily tell you, is simply to reflate the economy by putting money into circulation and causing it to have a little velocity.

If you were to state this case baldly to the people, they’d probably laugh at you. What consumers want to do more than anything in the world at this point in time, is to SAVE A FEW BUCKS. But orthodox economists hate this idea because it creates no velocity, no additional GDP, and thus (according to orthodox theory) no additional employment. What all the smart people are missing is that you can’t work your way out of a depression led by impaired consumer demand unless you increase consumer confidence. A major tax cut is what the people need. And it would have to have radical features to be effective, chief among them a sharp reduction in the payroll tax, not just the income tax as proposed weakly by Congressional Republicans.

Read More →

News stories are now rampant that Obama is looking to “compromise” on the fiscal stimulus package. He has no need to do any such thing.

Obama has solid Democratic majorities in both the House and Senate, and can pass his legislation without so much as a single Republican vote. I can guarantee you that the Republicans won’t filibuster the bill in the Senate. We have a reboot of the automaker bailout coming up next month, or in March at the latest, and we need to keep our powder dry for that.

What Obama is showing, rather, is a sincere desire to be perceived as bipartisan. That after all was one of the key rationales on which he sold his presidency, the other two being Hope (”you’ll get rich if I’m elected”) and Change (”have I mentioned that I’m black?”).

To this end, he’s met with Republican lawmakers on several well-publicized occasions. (This leaves me wondering whether he’s met with Democratic lawmakers at all, and why that doesn’t make news. Dog bites man, I guess.) The most substantive thing that’s come out of Obama’s meetings with the opposition, can be summed up in his pithy phrase, “I won.”

Remember that, for the next four years, when Obama tells you that his initiatives are fully bipartisan and supported by people on all sides of the aisle: “I won.”

Read More →