Obama's Stimulus Package is Morphing Into a Monster

While the $50 billion economic stimulus package proposed during his presidential campaign now looks almost laughable after the events of the last few months, the size of the plan now thought to wind up on President Obama's desk come inauguration day is anything but.

As there are no real numbers to report since legislators have yet to sharpen their pencils and get to work, all that is available at the moment are informed guesses as to the total cost, and these estimates seem to grow by the day.

Some time ago, conventional wisdom had it that something in excess of $300 billion would be needed. Then Senator Charles Schumer (D-New York) got on one of those Sunday morning talk shows and cited $500 to $700 billion as a reasonable size - about five percent of GDP.

But, with the recession now believed to be of a longer duration than first thought, this seems to have morphed into $500 to $700 billion for each of the next two years bringing the total to at least 20-times the size of President-elect Obama's original figure.

And it could go even higher.

This report from Bloomberg fills in some of the details:

Calls for $1 Trillion Stimulus Package Grow as Economy Tumbles
By Rich Miller and Matt Benjamin

Dec. 4 (Bloomberg) -- The one thing that isn’t shrinking in the U.S. economy these days is the size of the stimulus package that financial experts say is needed to turn it around.

With automobile sales dropping, payrolls plunging and manufacturing contracting, economists from across the political spectrum are raising the ante on how much the government should lay out. Some are now calling for at least a $1 trillion boost.

Kenneth Rogoff, a Harvard University professor who was an adviser to Republican presidential candidate John McCain, and Joseph Stiglitz, a Nobel Prize winner who served in President Bill Clinton’s White House, are among those who say President- elect Barack Obama should push for a package of that size.

“They need a stimulus of $500-to-$600 billion a year for at least two years to counter what is going to be a collapse in consumption,” said Rogoff, a former chief economist at the International Monetary Fund.

You mean consumption has yet to collapse?

That's a scary thought.

Well, actually, the scariest part of all is how this is going to get paid for. Surely, more than a few people already realize that, with what's going on around the rest of the world these days, it is unlikely that foreigners will plow another few trillion dollars into U.S. Treasuries in the years ahead in addition to financing all the debt that is rolling over.

At current yields?

Of course, credibly threatening to monetize this new debt would send interest rates soaring, which would then attract buyers from all over this Zero Interest Rate world.

Maybe that's the plan.

Comments

[AlexS:]

Maybe there is no plan. Bread and circuses. That's what the Roman leaders would throw to the mobs. We just have the equivalent of Nero and Caligula right there in Washington, D.C. And they can't even blame it on lead poisoning from the drinking cups.

2008 Dec 04 04:35 PM

[MarvinMBA:]

Yes, the next play will be an inflation play. Keep you money handy because there will be some great CD rates going forward...looking for 10 to 15 percent a year or two out in duration sometime in the future...MarvinMBA

2008 Dec 04 05:49 PM

[ohioconsumer:]

unless some of this money makes it into the hands of the consumers - none of the bailouts are going to work...WE THE PEOPLE



BAILOUT THE CONSUMERS!



The only thing the mortgage lenders are doing with the bailout is putting homeowners late house payments & fees back on to the principal - they are not using the money to help homeowners so where is it going?



This country needs a large bailout to CONSUMERS.
People no longer have money to buy houses, cars, furniture, stocks, and most no longer have money for gasoline to get back and forth to work or groceries.



If the consumers were given a large bailout immediately - the impact on the economy would be a major upswing.



Why is it that no one with the power for these decisions has realized this? When do the American people who ultimately foot the bill for the bailouts count? When have they suffered enough that they matter to our government??



If they would have split that same amount of money up between all the taxpayers - CONSUMERS could have caught up their houses and probably re-financed, purchased houses and cars for the ones that needed to, bought stock and so on and so on.



It would have been an immediate jump-start to the economy (nearly overnight) and would have affected every sector that is experiencing problems including banks, automakers, retail, Wall Street and everywhere else. WHY DOESN'T ANYONE IN POWER SEE OR UNDERSTAND THIS???

2008 Dec 04 06:42 PM

[investor88:]

There is a view in governments and experts that there is a magic wand, just print, flood , bailout , run deficits etc , it will solve all problems. Damn the consequences of such actions, let's hope they are right.

2008 Dec 04 06:43 PM

[Alan von Al...:]

Hope they are right ?? -- more borrowing, spending, monetizing and devaluation, therefore destruction of savings is <i>right ??</i>

2008 Dec 04 07:12 PM

[ohioconsumer:]

bail out the auto makers????? how 'bout this? get rid of the corporate jets, the six figure execs, the golden parachutes and finally the union who's only purpose is to protect the slackers. offer a "liveable" wage and you'd have people beating down the doors wanting to work. make "american" cars once again affordable to the general public and i'll bet they could bail themselves out!!!

2008 Dec 04 07:58 PM

[debtacid:]

These poor fools must be suffering from some kind of mass psychosis. They stubbornly refuse to face reality and continue with the same dysfunctional behavior that got them in to this mess.

2008 Dec 04 08:00 PM

[rber:]

How 'bout this. Stop all this nonsensical bailing and let these credit bloated hogs (economies) live off their own fat for a while. We can only hope that foreign creditors keep their wallets closed when the mother of all bloated hogs tries to sell 2 trillion worth of tresuries in 2009! They can't realistically believe that there going to get there $ back, can they?

2008 Dec 04 08:10 PM

[sheople:]

I completely agree with the last three comments. Bailouts are only more spending that got us into this in the 1st place. Americans didn't realize that when the jobs left, they were supposed to spend less. The wall street/fed crowd sucked up money on that deal and are sucking up more of the taxpayers borrowed money now. Jobs should be job one. The government can't create substantial jobs. They should be creating an environment friendly to manufacturing instead of spending money we don't have. The FED RULES!!!

2008 Dec 04 08:41 PM

[Bobco23:]

At first I was for the bailouts, figuring they would be more cost effective. Now they don't seem effective, let alone cost effective. The concept of a "comsumer bailout" makes more sense than it did at first pass.

Lets run the numbers: A trillion dollars is roughly $3,500 for every man woman and child in America (legal). Assumming 4 persons per family unit, a trillion dollar "consumer" bailout would translate to $14k per family unit. If this thing gets to be $5T, then you are talking about $90k per family.

You lay $90k on each family in America and the recession is over tomorrow.

2008 Dec 04 08:41 PM

[zanardm:]

To show you what we are dealing with (lawyers) : how cone it is always 'stimulus package' , and not a debt package? Only the (historical rapid?) gasoline drop off was a true debt free stimulus package; courtesy of perhaps a depression.

2008 Dec 05 02:10 AM

[Moon Kil Woong:]

Well it can't be much worse than Bush Jr. dumping TARP on us and then letting the Fed take 1.5 trillion onto their balance sheet and then finally allowing the Fed to pay interest on their deposts making them like a bank and the treasury who can print as much cash and take as much debt as they want without any Congressional oversight. I'd like the Supreme court to rule on that if you please.

So far bush's Administration and Fed's actions effectiveli blew 7.5 trillion dollars and are backing even more liability without helping anyone but inept banks, brokerages, and insurance companies. Obama's stimulus package sounds modest compared to that don't you think?

2008 Dec 05 03:07 AM

[Robert Nabloid:]

The government doesn't have a plan except to do ANYTHING in their power to keep the current systems in place. The centralization of power into the hands of a few is wrong but they don't want to let that go! Private banks connected to the Federal Reserve shouldn't have this much power over government.

Mr. Obama, please save us. Save us, save us. Mwhahahahaha. Sheep.

This is capitalism? No.

What we have here is a country that now begs for handouts from their master(s) (I'll give you a hint: Obama isn't the master but the figurehead or puppet - the front PR guy so to speak). They [the real masters] control the entire system from the creation of money to the way our economy now depends on debtors. Why is it that people work 30+ years to pay off a mortgage for a simple home? In the old days, Americans saved up some money and then bought one or built one. There weren't 30 year mortgages... What we have here is a modern form of slavery by mass indebtedness. The system is predicated on people taking on more and more debt to sustain itself - why else do you need economic growth every year? Why can't economic growth be zero? If we grew for the last five years and unemployment is low, why do we need it to grow again? (I'm talking hypothetically - when times are good, why is further growth needed?). Why do we allow so many immigrants to come in? Answer: We need growth and we need more debtors to sustain this system. It's a shame really that the entire system has been altered to become what it is today.

2008 Dec 05 03:23 AM

[Robert Nabloid:]

Obama has promoted many from "the Fed" to be his top advisors. The same guys you just dissed so harshly for their previous failures are now on Obama's team. Bush has been no saint - but he ain't the sole perpetrator either. Funny how Obama gets a free pass and benefit of the doubt despite his actions.


On Dec 05 03:07 AM constructe wrote:

> So far bush's Administration and Fed's actions effectiveli blew 7.5
> trillion dollars and are backing even more liability without helping
> anyone but inept banks, brokerages, and insurance companies. Obama's
> stimulus package sounds modest compared to that don't you think?

2008 Dec 05 03:26 AM

[Steven Hansen:]

is the government really thinking about stimulating this economy with trillions of toxic debt imbedded. let it work its way out of the system first.

i am just waiting for the next unintended consequence of what is going on.

2008 Dec 05 03:58 AM

[Mowog:]

Rather than slash execs' pay, slash government workers' pay and pensions. Slash entitlement spending. End bailouts. Be Darwinist.

2008 Dec 05 08:12 AM

[tginomorebush:]

robert nabloid ............ dumbazz ........ your king george iii bush-it is still the president ....... Obama has not taken ANY actions ......Obama will BE THE President Jan 20th 2009!

2008 Dec 05 09:11 AM

[standingtall:]

show me an exec who's worth his 6 figure paycheck and i'd be the first to say let him keep it. it's the people in power that make the money and the decisions and god forbid any one of them would give up a nickle. what it comes down to is greed in every sectar. that's the bottom line and until that changes, nothing else will!! all they concern themselves with are quarterly profits and their year end bonus. if it means a few more in the unemployment line then so be it. continuously cutting the overhead is the easy way out but it just feeds the decsending spiral we're caught up in now!

On Dec 05 08:12 AM Mowog wrote:

> Rather than slash execs' pay, slash government workers' pay and pensions.
> Slash entitlevisiousment spending. End bailouts. Be Darwinist.

2008 Dec 05 02:26 PM

[Robert Nabloid:]

Perhaps you should look in the mirror TGI. George Bush is an idiot - but he is not the only idiot. He is getting all the blame... he is the fall guy - many others made big mistakes.

Obama has taken actions - First he endorsed and URGED the bailout bill to be passed!! Did you forget?

Second, he has already appointed many of the Federal Reserve guys to be his top economic advisers - the same people that created the mess we are in and now require "bailouts" or they will fail. Sheep like you will give Obama a free pass and not question anything - when our system was founded upon freedom and transparency and requires critical thinking and questioning EVERYTHING ANY leader does.


On Dec 05 09:11 AM tgi nomorebush wrote:

> robert nabloid ............ dumbazz ........ your king george iii
> bush-it is still the president ....... Obama has not taken ANY actions
> ......Obama will BE THE President Jan 20th 2009!

2008 Dec 05 04:25 PM

[standingtall:]

when are they gonna open their eyes and realize that the key to this is putting money and confidence back into the hands and minds of the consumers? i make a decent wage. i'm not up to my armpits in debt, my credit is impeccable and yet, i would not go out and buy a new car, tv, new appliances, etc. but if i needed to i could. that's the kind of confidence the american people need to feel once again. if john doe has an arm with an $800 a month payment and it matures. now his payment jumps to $1200 a month. due to circumstances beyond his control, he can't do $1200. rather than working with john doe and freezing that rate {even if temporarily} so that he can make this payment, they throw him out, forclose on the property and sell it for pennys on the dollar. {if they can} the end result is, another empty house, another family on the street and the lender is not only "not" getting the $1200 payment, now they won't even get their $800. 75% of something is better than 100% of nothing. wake up AMERICA!!!!!

2008 Dec 05 08:22 PM

[closedbooks:]

I like to call myself frugal - my wife says stingy - and I hoped to be long gone before the bills from a half century of liberal idiocy came due. But now that I'm on a fixed income, it doesn't look like I'm going to make it. This ponzi scheme house of cards - taking wealth from future generations is collapsing and no amount of stimulus will put the egg back together. One rainbow: better to face this crisis while we are still a great nation and not 50 years from now. End of Rant.

2008 Dec 06 03:28 PM

[nova:]

"This country needs a large bailout to CONSUMERS.
People no longer have money to buy houses, cars, furniture, stocks, and most no longer have money for gasoline to get back and forth to work or groceries"

May be it is the time for consumer to
- work hard
- save
- pay taxes
- become responsible consumers

There is no a single reason to lend more money to consumers who already are incapable of paying for their present obligations.

As for bailouts, they just reward for bad behaviors and bad decisions keeping losers longer in a game.

======================...
On Dec 04 06:43 PM investor88 wrote:

There is a view in governments and experts that there is a magic wand, just print, flood , bailout , run deficits etc , it will solve all problems. Damn the consequences of such actions, let's hope they are right.

2008 Dec 07 07:52 PM

[buddman342:]

The gas price drop was just to make us feal good for about a month before they closed down several refinerys in the very near future. In Iowa gas prices are already starting to climb again as they took a 10 cent jump yesterday and talk of another jump of 10 cents tomorrow. The WHOLE problem will not be solved until we the people actualy get to pick who goes into what office. Personaly i believe that if you own stock in a major industry or company ( ie fuels) you SHOULD NOT be able to hold a high ranking office ( president, senate, and congress). We the people still have the right to remove all goverment official and replace them. If you dont believe me look at the constitution and the Declaration of Independence. The begining says it all.

Here is what im talking about:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness"

The begining of the constitution:
" We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America"

this is the way i feal and I know that there are people out there that agree and would like to put things the way they should be.

2008 Dec 14 08:50 PM

[Jose D. Roncal:]

What exactly was all this U.S. Federal bailout money—the Temporary Asset Relief Program (TARP)—supposed to relieve?

Let’s review the highlights

First of all, remember back when there was a housing bubble—the one that burst? That was followed by mortgage defaults and foreclosures, which then led to major losses for financial institutions that were dealing in mortgage-backed securities. When those losses caused their balance sheets to crater, they tried to stop the bleeding by bringing lending to a screeching halt. And that resulted in a freezing up of the credit markets.

Thus the whole financial bail out plan was supposed to thaw out the frozen credit. But did it? No. Why not? Because nobody knows where the money went. Even the bailed-out banks say they can't track where they're spending the money, but even if they could, they aren’t telling us.

Then there’s the auto industry. Bush has left a $13.4 billion parting gift to G.M. and Chrysler and they have until March 31 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers. In February, another $4 billion will be available for G.M. if the rest of the $700 billion bailout package has been released. But then what?


Toyota and Honda, long considered to have the state of the art manufacturing facilities, not to mention the most appealing designs and reliable technology, are also in trouble. Toyota just announced its first operating losses in 71 years. If these two giants are faltering, one wonders how GM and Chrysler expect to bounce back. Meanwhile, where will all the bailout money go?

It’s not just the U.S. economy that needs bailing out

Ireland's finance minister just announced plans for a $7.7 billion bailout of three leading banks because of reckless property lending practices during Ireland's recent housing boom. With Ireland facing a deepening recession, Allied Irish, Bank of Ireland and Anglo-Irish all need a boost to their cash reserves just to stay alive. The banks now face government control. But will it be enough to stimulate a healthy economy for Ireland?

China’s economy, which has been affected by a sharp decline in demand for exports to the U.S. and Europe, is teetering amidst job losses and worker protests. They’ve cut interest rates for the fifth time in four months and in November they announced a $586 billion stimulus package. That may help boost the economy, but only if the country can survive long enough for their planned infrastructure projects to get moving sometime in 2010.

Why TARP failed

Excuse our naiveté, but we thought bailouts were supposed to come with defined preconditions and oversight and that the benefits would filter down to the pockets of the consumers. We were also under the impression that stimulus packages were supposed to put cold hard cash into the hands of consumers so they could start spending the economy back into motion.

We’ve all witnessed the results of having little or no bailout preconditions and the oversight that never was—failure and vaporized money. We won’t know the details of Obama’s stimulus package for a while, but whether or not consumers can be encouraged to actually spend the money is unknown. A stimulus package may also end in failure.

There is simply no confidence left in the markets, in financial advisors or economists. And just as we were mending our wounds and thinking maybe we’d seen the worst, the Madoff scandal broke, and with it, the sinking feeling that the worst may still be coming.

Even though Obama seems to represent change and optimism, it’s going to take some time for us to be able feel confident in governmental decisions again. So far, none of the bail out and promises of stimulus packages have had any effect on turning the world’s economy.

This comment was posted by Jose Roncal, co-author of "The Big Gamble: Are you investing or speculating?" - For more information, visit financialspeculation.c...

2008 Dec 30 05:24 PM

[Dr BLT, Com...:]

More important than simply throwing money at the problems, the package must be successful in psychological terms, reducing fear, and instilling hope.

The ideal stimuls package would instill hope, and the hope would be based on realistic outcomes. I like any perspective on the economic crisis that introduces an element of hope. As a psychologist, my take on this phenomenon is that it is psychological, based on fear.


The loss of the economy, as we knew it prior to this recent crash, involves a grieving process that I believe will culminate with recovery.


The catalyst for that recovery is hope. Follow the message contained in these songs and you'll understand what I mean.


Everything is Fallin’ Apart

Dr BLT

words and music by Dr BLT copyright 2008

www.drblt.net/music/Ev...


Dr BLT altered cover of Blue Oyster Cult classic

www.drblt.net/music/Do...



BTW, great predictions for a...


Future 2 Behold

Dr BLT

words and music by Dr BLT copyright 2008

www.drblt.net/music/fu...

Jan 14 11:03 PM