Sunday, September 5, 2010

Stimulate me.

My liberal political inclination is to agree with Krugman that the original stimulus wasn't big enough, and we need another one.

My store based experience tells me something different.

I don't know how many parallels one can draw between a small Mom and Pop and the national economy. Maybe it's just not comparable.

But the principle seems the same to me, just much bigger in size.

So what happens when I have a downturn in the store?

Well, I could borrow money and spend it on inventory and infrastructure. There isn't much doubt that would spark higher sales -- maybe even to the point that I might increase employees hours, etc.

But, more often, the correct thing to do is to take my lumps, work my way through the problem, CUT spending and wait for a turn around.

By all accounts, such a response is largely responsible for Great Depressions, and may result in a continuation of the Great Recession.

Still --- Like I said, as a small business owner I'm leery of trying to spend my way out of trouble.

I will say this, though. IF I were to decide to got that route, to try to stimulate business -- I would go BIG. I wouldn't just double the size of my store, I'd quadruple it. I think I'd be much more likely to get the response I need from that, than from smaller, incremental increases. Even doubling in size probably wouldn't achieve the results I need.

So, while getting way BIGGER, and spending considerably more money to get there, would be a huge risk, it might very well work.

Whereas, I think increasing spending tentatively would just be a waste.

8 comments:

rotorman said...

The problem with most stimuli the government comes up with is that they are short term and they create debt. Examples include cash for clunkers and first time home buyer payouts. Only long term fixes that do not add to debt can change consumer sentiment which in turn stimulates the economy. Examples are permanent tax incentives and pro business legislation.

Duncan McGeary said...

No, no. I'm saying businesses should get their act together within their businesses, and not plead for tax incentives and business "legislation."

This constant "don't spend any money, but oh, please give business more breaks" is hypocritical and demeaning.

At least I'm being consistent. No help, no stimulus, no tax breaks, no "pro" business slant.

Just get your OWN house in order and quit begging for help.

blackdog said...

Robert Reich had an excellent analysis of our economic mess in the NY Times on Thursday. The basic problem is structural: "[C]onsumers no longer have the purchasing power to buy the goods and services they produce as workers; for some time now, their means haven’t kept up with what the growing economy could and should have been able to provide them."

It all started with technological and political changes that "made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago."

American families were able to sustain their level of consumption by increasing their earning power by, first, sending the wives to work ("By the late 1990s, more than 60 percent of mothers with young children worked outside the home (in 1966, only 24 percent did)) and then by working more hours ("By the mid-2000s, the typical male worker was putting in roughly 100 hours more each year than two decades before, and the typical female worker about 200 hours more"). When those coping mechanisms still weren't enough they went into debt, which "seemed painless — as long as home prices were soaring. From 2002 to 2007, American households extracted $2.3 trillion from their homes."

And then, of course, the bubble burst.

Full text: http://www.nytimes.com/2010/09/03/opinion/03reich.html?pagewanted=1&_r=1&sq=Robert%20Reich&st=cse&scp=1

blackdog said...

"This constant "don't spend any money, but oh, please give business more breaks" is hypocritical and demeaning."

Amen, Dunc.

And trickle-down tax cuts don't work because the people who get them are less likely to spend them or invest them in things that produce American jobs. If trickle-down worked, the American economy should be booming after three decades of it.

But I have to add that your advice -- hunker down, pull in your belt and wait for things to get better -- while good for a small business, is deadly for a national economy. Japan tried that approach and ended up stagnating for 40 years. People like to draw analogies between government and small business, or between government and a family ("My family has to tighten its belt, so the government should too") but they're very different economic animals.

Anonymous said...

ok girls I'll add my two cents,
We all know about bubbles, there was the dot-con, and housing, ...

There was the post ww2 bubble, which left usa manufacturing intact, before that the USA was an AG colony.

Then jump to the fat 60's, then the USA went off dollar in 70's and became a print the paper economy. Ever since there have been continual bubbles engineered. IMHO opinion the USA should have gone down in the early 1980
s, but RAYGUN created a mega-bubble which led to the S&L crisis. We don't make anything, and nobody wants our stuff, everybody became a builder, and now there are too many homes.

Then there are the majority here that see we're now a fascist colony ruled by the corporation, but the government is the largest employer.

So now where? Print more paper money to fuel another bubble? Or confiscatory taxes to keep the majority ( gubmint ) worker employed?

It's been a long fall going back to the 1970's and I would have never guessed the USA last this long.

Nobody can fix the fucking mess, but time, probably the best to be said is the USA returns to a post peak-oil horse&buggie AG community, in any case all the KRUGMAN spending will do nothing for the future AMISH. ALL is just a case of the FASCISTS fearing that there paychecks may soon bounce at the bank.

Anonymous said...

I think this talk about 'business' is quite funny. You all know that CORPORATE BIG BIZ rules the USA.

SMALL BIZ stimulus has never happened, and if it does its only in the form of penury debt, which is designed to kill off small biz, make no mistake the demise the small hw store the sole presence of HDepot is not an accident.

When you hear about BIZ-STIM remember your only going to see CORP-WELFARE.

So the 4th estate tosses some feces in print and DP bites the BULL and so does HP. Its quite funny that both DP&HP are proponents of GUBMINT being the majority employer. Not unlike Nazi Germany post 1930.

Bend will downsize, and folks will survive viz-a-viz 'marge'. DP ought to stock shit that illiterate trailer trash wish to purchase, waiting for the golden-knight tourist in the future could very well be a 'cold day in Bend'

Anonymous said...

KRUGMAN is a fucking FASCIST ASSHOLE, those that quote KRUGMAN should be considered traitors to the cause. An apologist for the WASH-DC status quo. Or is it simply that Pussy's embrace all rhetoric from WASH-DC?

"The finest history of the Great Depression ever written," raved Steven F. Hayward of the National Review[11] It was a New York Times Bestseller for 19 weeks.[12] However, fiction author John Updike, criticized the book as "a revisionist history of the Depression", [13] and economist Paul Krugman accused her in his New York Times op-ed column of disseminating "misleading statistics";[14] [15] Shlaes responded to Krugman in the Wall Street Journal, saying she used the official Lebergott/Bureau of Labor Statistics series. She wrote that Lebergott "intentionally did not include temporary jobs in emergency programs -- because to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects".[16] Shlaes said that if the Obama administration "proposes F.D.R.-style recovery programs, then it is useful to establish whether those original programs actually brought recovery. The answer is, they didn’t."[16][15] Writing in Forbes, Hudson Institute fellow Diana Furchtgott-Roth endorses Shlaes' view that the "federal spending during the New Deal did not restore economic health."[17]

blackdog said...

"Shlaes said that if the Obama administration "proposes F.D.R.-style recovery programs, then it is useful to establish whether those original programs actually brought recovery. The answer is, they didn’t."

It's a truism that the Great Depression didn't end until WWII (or, more accurately, the buildup to WWII, when US factories started churning out ships and planes and tanks for the Allies prior to Pearl Harbor) but the New Deal programs did mitigate the suffering, and a pretty good case could be made that without them -- i.e., if we had continued Hoover's do-nothing approach -- a Bolshevik-style revolution might have occurred in America, or at least a violent attempt at one. And the New Deal-era regulations did a pretty good job of preventing future financial meltdowns until the Republicans (and some Democrats) in their "wisdom" decided we didn't need them anymore.