Inside the Meltdown Impression & the Stimulus

I just finished watching Inside the Meltdown, a news documentary by PBS Frontline, which examined the meltdown of the financial markets late last year. Frontline’s report had a major theme in it that continues into this brand new presidential administration. Essentially, that theme is that of systemic risk trumps moral hazard.  Ben Bernanke knows this and is doing what he has to do. Henry Paulson struggled with the decision and actually gave in to the free market ideology only for it to not pay off. So Paulson, Henry, and Democrats know that the situation is not going to fix itself. About the only people not on the same boat are the Republicans in Congress. Sound familiar?

Now for the past month, I have seen the Republicans try their hardest to offer their cure for the problem. Their solution is tax cuts. Tax Cuts? Tax cuts are flat out not going to work. Ask the opinion of prominent economists and they will tell you the same thing. At least not the same type of tax cuts that the Bush administration gave out last year. Essentially the problem with tax cuts in a situation like this means people will either save their money or pay off their debt. They essentially will not spend money to get the economy moving. Now a type of tax cut that might work is a tax cut that pays it in portions. Well this guy spells it out for you:

Don’t just his word for it, here are Paul Krugman’s words.

So guys, c’mon! Lets spend some of that money! Why not go to the movies? Get the large popcorn. I recommend Slumdog Millionaire.