This American Life presents an excellent primer on the current economic crisis.  If you haven’t already listened to this episode of This American Life, listen to it right now!

 

From the show website:
The collapse of the banking system explained, in just 59 minutes. Our crack economics team—the guys who explained the mortgage crisis, Alex Blumberg and NPR’s Adam Davidson—are back to help all of us understand the news. For instance, when we talk about an insolvent bank, what does it actually mean, and why are we giving hundreds of billions of dollars to rich bankers who screwed up their own businesses? Also, two guys go to New Jersey to look at a toxic asset.

Link: This American Life # 375: Bad Bank

There seems to be three popular plans for dealing with the current economic situation. The plan coming from the right calls for lots of tax cuts. The idea is that the people who receive the tax cuts will use this savings to invest and these investments will spur business growth and this growth will create jobs and generally help the economy. It seems to me that the savings we are talking about is really money that people already have and that there's nothing preventing them from investing it right now. Also, let's assume that some people are reluctant to spend this money because they might need it to pay their enormous tax bills. If we lower those tax bills there is no guarantee that they will go out and spend that money. They could sit on it just like they are doing right now. Obviously, I am not a big fan of this plan, so I will leave it to others who do support it to explain it better.

The plan coming from the left calls for lots of government spending. The idea is that the government, instead of lowering taxes, takes the money it gets from taxes and spends it in all kinds of ways. I like this plan because it guarantees that the money is actually spent. Now there are good ways to spend money and there are bad ways to spend money. It seems to me that the government could very easily spend lots of money without creating very many jobs. However, that could easily be said about any investments made by those receiving tax cuts. In fact, as I've already noted, there's nothing preventing the recipients of the tax cuts from sitting on the money, or worse investing it in foreign business where it would create few if any jobs at home. By having the government spend the money directly, we have a chance to legislate how the money is spent. It seems to me that rather than arguing whether the government should spend money or arguing how much it should spend, the congress would be much more effective if they spent their time arguing about how to spend the money. They can argue over whether the money is spent on infrastructure or construction, or on education or energy independence, or anything else. Pick something. Pick them all for all I care, just get the money out there.

More...