Cheat Sheet Q & A:
Keynesian economics holds that there is a multiplier effect with government spending. The theory is that for every dollar spent by the government, there is a $1.5 to $2.0 increase in economic activity. So if the government spends a $1 trillion as stimulus, you ought to get at least 6% growth more like 12% with the multiplier. So why aren't we just humming along?
Bottom Line: It’s a question that the current administration is probably asking itself as well. After all we recall the myriad of promises about economic outcomes as a result of the Economic Stimulus plan of 2009 (none of which came to pass). We still haven’t reached the economic growth rates promised in 2009. So why isn’t the Keynesian economic model working? This can get complicated and drawn out so I’ll keep it as simple as I can.
First the cash vs. debt spending… If an entity or person doesn’t have debt and spends money it’s going to be accretive to the economy regardless of how the money is spent. If an entity or person is debt spending that’s not always going to be the case. Think of debt spending by the Government as it pertains to your own life. As you are debt spending (spending on credit cards, lines of credit, etc.) you’ll have an immediate impact on the economy as those you’re doing business with will benefit. What happens over the longer run though? You have to service that debt right? So that means that your future free cash flow is restrained as you have to pay more each month to meet your debt obligations. So the economic tradeoff is short term economic benefit with restrained economic potential in the future. The Federal Government is a much larger version of that example.
Now for how Government spends money… While there is still some debate about what type of Government spending has the biggest economic impact historically it’s quite clear. The two areas of Federal Government spending that have provided the biggest sustaining economic impact are infrastructure and R&D/technology. The reasons… Sound infrastructure spending allows improved commerce, growth of communities, efficiencies for businesses, etc. Effective technology spending allows growth of innovation in the private sector. NASA has actually provided the best long term ROI on the technology side. There are a myriad of everyday technologies made possible due to the space program here is a link to some of them: http://www.businessinsider.com/everyday-items-developed-by-nasa-2012-8
So how much of our current Federal Government spending occurs within the two areas of greatest economic impact? About 4%. 3.1% in infrastructure and less than 1% in technology.
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One thing you can do if you're worried about the debt ceiling:
Bottom Line: I’ve read, heard and even shared examples of what I view to be bad personal finance advice based on the Government shutdown and looming debt ceiling deadline. Generally speaking the biggest issue for most people, who have personal financial goals, is that they deviate from those plans based on an emotional reaction to adversity. If you make dramatic investment changes, etc. as a result of the noise in
Exchange sites aren't experiencing glitches - its critical failure that could derail ACA:
Bottom Line: By now the name Henry Chao is a household name. What it’s not? How could that be? After all he’s the chief digital architect for the ACA online marketplace and he spoke publically to insurance companies that had grown frustrated with the inability of 99%+ of people who were trying to obtain insurance through the exchanges but have been unable. So what did Mr. Chao say about the issues? Quite a bit that the administration is apparently trying to keep quiet.
Over the weekend Henry Chao explained to insurance companies that information he asked the administration for in 2011 wasn’t provided until this year. In March he told administration officials that they weren’t going to meet the October 1st deadline and were setup for failure. And about a resolution to these issues? He said that these aren’t glitches. In his estimation only about 70% of the needed work has been done on the exchange sites and he says it will be a matter of months, not days or even weeks before this is all resolved. This leads me to wonder if part of the reason we don’t have a deal in Washington is in part a “wag the dog” to keep the focus on the shutdown and debt ceiling (which Democrats view as a winning issue for them) and off of the enormous debacle of the exchanges so far.
Using cash now costs us more than $200 billion per year:
The businesses expense in incurred by: Shrinkage of cash (miscounting or theft), the time spent to manage, account and deposit cash.
Personal cash expense is incurred by: ATM and bank fees (only 38% of banks offer free accounts currently)
The lost tax revenue is evident.
How much impact the Government shutdown has had on
Bottom Line: So how has the partial Government shutdown impacted
The folks at Wallethub.com came up with an eight part formula to determine which states have been the most impacted per capita. Highlights:
So on balance we’re less affected then the average state. For the complete breakdown click this link: http://wallethub.com/edu/wallethub-shutdown-report-most-least-affected-states/1111/#methodology
Bottom Line: Our postal service isn’t the only one with issues.
The responses with More than 100,000 people responding:
As for me I’m a big fan of this idea. Unlike a Fannie Mae or Freddie Mac model which was part public but backed by the Federal Government, the USPS is self funding. That means that tax payers wouldn’t be any more on the hook then they are currently. Privatizing the USPS would likely be a way for billions of dollars to pour in and aid the Postal Service in restructuring.
SunTrust latest to settle with $500 million in relief on the way to customers:
Bottom Line: Even if you’d already received money earlier this year through the Federal Group settlement over improper mortgage practices in years gone by, you may still be eligible for additional compensation as SunTrust has just settled all remaining unsettled activity with the Federal Government for $1.2 billion. The breakdown is as follows:
So if you receive notice from SunTrust that you may be entitled to compensation it very well may be legit. I’ll provide an update once we know how the money will be issued.
RIP Google TV - Welcome Android TV:
Bottom Line: If you’d envisoned having the option of Google as a traditional TV service for your home you can now scrap those thoughts. As of today Google TV is over. They had tested the service in a few markets (
Google will focus on mobile TV viewing in which YouTube (Google company) will surely big a prominent piece of going forward.