The Non-Stimulating Stimulus Bill 53 comments
September 01, 2009
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Forgive me if I'm a bit late with this top-down analysis of last February's faux-Stimulus Bill (aka The American Recovery and Reinvestment Act of 2009), but I have been worrying a lot of late about the gargantuan deficits that are being projected not only by the White House but also by the Congressional Budget Office.As I detailed in an earlier post, they are talking about 10-year deficits of about $10 trillion, and you've got to believe they're putting all the positive spin on the numbers that they possibly can. Plus, no one is yet talking about what would happen to the numbers if healthcare reform or cap-and-trade passes. Some folks (e.g., The Concord Coalition) are saying the 10-year deficit could be $14 trillion or more. If the deficit is anything even close to $10 trillion over the next decade, this puts us in largely uncharted waters, since it would represent the biggest deficit, in both nominal terms and relative to GDP since World War II. Deficits could range from 6-10% of GDP annually, far out of the range of anything we've seen in the post-war period.
So I began asking myself some tough questions, especially since I've been saying that the economy can grow 3-4% a year in spite of the ugly fiscal policy environment staring us in the face. Just how easily are these deficits going to be financed? Could they effectively absorb all or most of the savings of the private sector, leaving the economy with little or no private-sector investment? Could this be the real "crowding-out" of private borrowers that became a fashionable concern during the Reagan years but in the end proved overblown? How can the economy grow if the government—a chronically inefficient spender and investor—is commandeering nearly all the economy's savings? Annual deficits on the order of 10% of the GDP are reminiscent of Japan in recent decades, and haven't they led to a moribund economy and a crippled stock market?
As a supply-sider I have learned that deficits aren't necessarily bad things. Art Laffer years ago taught me that if the government is faced with a shortfall of revenues, of the two alternatives to plugging the gap—higher taxes or increased borrowing—taxpayers should always prefer the latter, since that gives them at least some hope of getting their money back in the future. If taxes rise, however, then the money is lost forever. Milton Friedman taught us that the burden of government is best measured not by the level of taxes or the deficit, but by the level of spending, since the government uses the economy's resources less efficiently than the private sector.
But these trillion-dollar deficits for as far as the eye can see are being driven primarily by a big increase in goverment spending. So that leaves us with the worst of all worlds, doesn't it? How can one be optimistic in the face of this impending disaster?
My former colleague at Western Asset, Mike Bazdarich, helped me come to terms with this apparent dilemma, by reminding me that most of the additional spending we're talking about is not really new spending. To illustrate this, the Stimulus Bill can be broken down as shown in the pie chart above. (Data based on the CBO's analysis of the bill.) As should be quickly apparent, only a very small part of the spending involves government purchases of goods and services. This is the part that will commandeer the resources of the private sector inefficiently. As Mike noted in a paper last March, of the $88 billion in federal purchases of goods and services, "only about $12 billion will be spent in the current fiscal year, with only an additional $26 billion slated to be spent in 2010." So we're really talking small potatoes here.
The vast bulk of the "spending" will just amount to reshuffling the distribution of income: $377 billion will be "spent" on transfers to state and local governments and individuals, and $284 bilion will be "spent" on tax breaks to individuals and corporations. Excerpts from Mike's paper:
From my supply-side perspective, 88% of the stimulus bill (transfers and tax breaks) will amount to taking money from one person and giving it to another, while only 12% (spending on goods and services) will involve new government spending that absorbs (inefficiently) resources from the private sector. And I should add that as of not too long ago, transfer payments (e.g., social security, medicare, unemployment insurance, welfare, subsidies) already accounted for over half of total federal spending. These transfer payments don't show up in the GDP accounts because they are not direct government payments for goods and services.In analyzing the spending initiatives in the 2009 stimulus plan, it is important to distinguish between direct purchases of goods and services by the government and transfer payments to individuals, firms or state/local governments. Increases in purchases—procurement, hiring and the like—directly boost aggregate spending. Transfer payments merely disburse funds to recipients, where they may or may not be spent. Transfers are little different in effect from tax rebates (but with incentive effects reversed), and as the transfers in the stimulus package are also one-time payments, their prospective impact on spending is similarly small.
The bulk of these transfer payments will go to state/local governments in response to the fiscal emergencies these governments are experiencing. The best this aid can do will be to prevent declines in state/local government spending. Even those prevented declines would occur only if other financing sources were utterly unavailable. If other financing avenues were available to the local governments, then the aid would merely substitute federal debt for the state and local indebted- ness that would otherwise be incurred, with no net impact on GDP at all.
The story is much the same with about $100 billion of transfer payments to persons over the next two years. These are also one-time boosts and will likely elicit only slight changes in spending behavior, mostly affecting destitute households that would have no recourse to other financing sources without the temporary aid provided in the bill.
Transfer payments are awful things, of course, since they can and do create perverse incentives. Taking money from Peter who makes a lot and giving it to Paul who either doesn't earn much or doesn't work much is likely to result in Peter working less, while giving Paul an incentive to work less. That's a lose-lose proposition, but it's not going to shut down the economy. It's simply going to result in a slower-growing economy than we might otherwise have enjoyed. Keynesian economists fail to appreciate this, however, since they think that demand drives growth, whereas supply-siders insist that work and investment drive growth.
Almost all of the tax breaks in the stimulus bill are of the rebate variety, and that makes them not too unlike a transfer payment, since one group of taxpayers is favored with a reduced tax bill while another group will have to shoulder the burden of higher taxes in the future. The rebates are one-time, not permanent, and as such they won't do much to change behavior on the margin. Plus, a lot of the tax "rebate" money will go to those who haven't paid any taxes to begin with, so if anything, a windfall tax check could result in them working less. As supply-side theory emphasizes, the only tax cuts that can make a difference to the outlook for the economy are those that result in a positive change in behavior on the margin. Cutting the income or corporate tax would directly increase the after-tax incentive to work and invest, and likely result in more work and a faster-growing economy. Unfortunately, the stimulus bill makes no permanent cuts to income or corporate tax rates.
If I had to restate the above in economic jargon, I would be saying that the "multipliers" used by the White House and the CBO are way too high. Instead of boosting economic growth by a percentage point or two per year on average, the net effect of the bill's spending will be to reduce economic growth by one or two percentage points per year compared to what it otherwise might have been.
So, think about the trillion-dollar deficits mainly in terms of transfer payments. The government is not really going to be consuming a trillion extra dollars of the economy's resources every year that might otherwise be put to better use by the private sector. The wasteful spending is likely to be only a fraction of a trillion per year. There's still some room for private saving and investment, albeit less. Again, this is not going to kill the economy, but it is likely to slow it down.
I've always thought Obama was a socialist at heart, and he has made it very clear that income redistribution is high on his list of priorities. As these numbers show, that is exactly what he has achieved with his stimulus bill. If he manages to get universal healthcare and cap-and-trade passed, then the redistribution will be even larger and more intrusive, while wasting some additional portion of the economy's resources in the process. It's all very unfortunate from a supply-side perspective, but it's not the end of the world.
Look on the bright side: to the extent that Obama's policies lead to positive change on the margin, it will be by increasing the opposition to his policies and subtracting from the Democrats' majority in Congress in next year's elections. And that, in turn, creates more favorable conditions for positive policy changes on the margin in the future.
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This article has 53 comments:
All this false hope only to result in things being far worse than they would have been.
This transfer of income and wealth, as the author notes, distorts incentives that guide behavior; if you continue to tax a producer, he will eventually reduce production. And if you keep giving money to the disadvantaged, you reduce their incentives to improve their living standards and quality of live through initiative and their own efforts.
Deformed social programs, designed around income transfer programs, have led to successive generations living on public assistance and in relative poverty. Daniel Patrick Moynihan in the late 60's feared generational poverty; his vision has been fulfilled.
1. Rapidly collectivize the economy
2. Further concentrate wealth, income and power
3. Compress the Middle Class, which may be aroused to open rebellion against the subversion of the Constitution----- unless it is swiftly and decisively intimidated and demoralized
4. Squeeze and bankrupt small and medium enterprises: the locus of the opposition to collectivization and the principal obstacle to the concentration of income and wealth
5. Totally co-opt the incompetent, deceitful and avaricious top executives and Boards of the biggest financial and industrial companies in the US
6. Transform the MSM into the subservient propaganda arm of the State
7. Instigate and institutionalize class warfare by expanding the lower class at the expense of the middle class via coerced downward social mobility
8. Discourage useful innovation because innovation can bypass bad Government; thwart real talent because real talent can be a threat to entrenched Bosses ; exile risk capital because risk capital leverages innovation and talent
What I don't like to hear (which I have heard) is that state and local governments have been "saving" jobs with the transfer payments.
Until when? Does anyone think that tax revenues are popping up next year? We are just delaying the pain when those governments should be beginning radical restructuring for a lower tax revenue future.
But something stinks about this article, and I have a few things I think should be clarified:
"Taking money from Peter who makes a lot and giving it to Paul who either doesn't earn much or doesn't work much is likely to result in Peter working less, while giving Paul an incentive to work less."
I question this argument. We've had welfare and unemployment for years, and yet I don't see any "Peters" staging sit-ins or "going Galt". We have seen what supply-side economics, trickle-down theory and tax cuts for the rich have done. I agree that free handouts don't work, but how can Paul work if there are no jobs? And why are there no jobs? Not because Paul is lazy - you're crazy if you think Paul doesn't want to work. Trying to sell that whole "Paul is a bum" argument in the midst of the Second Great Depression is a bit lame. As you said, these are one-time rebates not for Paul to sit around, but to replace what the corporate world _would_ have done if it were not in total shell-shock. Also, Obama has cut the income tax, I get about $20 extra per pay check (Woo Woo) instead of a one-lump sum.
Please correct me if I am wrong but how do you reconcile these statements:
1. "Unfortunately, the stimulus bill makes no permanent cuts to income or corporate tax rates."
with
2. "I have been worrying a lot of late about the gargantuan deficits"
You think permanent tax cuts won't add to the deficit? Did you just wake up from an 8-year coma? We already have those - didn't work. Also, who needs corporate tax rates when you have that abandoned 4-story building in the Cayman Islands that you (and 30 other Fortune 500 companies) can register as your corporate HQ?
and even more so:
3. "The wasteful spending is likely to be only a fraction of a trillion per year."
with
4. "[Obama is] wasting some additional portion of the economy's resources in the process."
Which is it? Down-play, or fear-monger? And, what are these "resources" by the way? I think I know....
I guess your argument is that government spending of ANY kind is bad because it is less efficient. Let's be honest, this is not really an economic analysis of the Stimulus. This a political analysis of WHY you think the Democrats and this administration's policies will fail. This is a Wolf-in-Sheep's-Clothing argument. We have heard ALL of this before, and I am especially tired of the "redistribution" argument (Waaaahhh, no more tax cuts for the rich). Have you SEEN the latest Income Disparity charts? Have you? It is at historical high's. Historical.
Don't get me wrong. The stimulus is crap; but don't use it as a Trojan Horse for your largely discredited Friedman-esque, trickle-down economic theories.
You want to give MORE tax cuts to companies like Goldman Sachs who already only (somehow) manage to pay something like a few million in taxes while giving out billions in bonuses?
You don't seem to get it - these corporations who (for God knows what reason) you think are so generous to the workers only put those bonuses in un-taxed, un-touchable offshore tax havens. In the real world, Peter doesn't take that bonus and go out to Paul and say, "here's a job". They take that bonus and go buy a Diamond-encrusted, Swarovski crystal star for their Christmas tree (made in China).
This is NOT socialism. It's just crap politics. We go from Macro Theory A to Macro Theory B when A fails, and when B Fails we go right back to A and then from A to B ad infinitum. If we had a real leader, he would stop letting people push him around. And he wouldn't let people keep repeating the same mistakes over and over and over again. I don't want socialism, but this a far cry from it. Tell me, how happy were you when your glorious supply-side Bush crashed the economy?
Pick your poison - glass-jawed Obama or knucklehead Bush, but don't pretend you've actually got something economically invigorating.
In the end it is all about excess. You have excess regulation, it chokes innovation and business (ie. USSR crumbles). You have no regulation and capitalism takes a dive off the cliff (current crisis) or you get 10 year old child working 14 hours a day in a factory (ie. current China) or (ie. 1930's US). The crap arguments about Socialism are disingenous. Socialism produced the atomic bomb (Manhatten Project) and put a man on the moon, so let's talk actual facts and not thinly veiled political arguments that are just as pointless as 99.9999% of all tweets on Twitter.
It is all about excess. Way too much ideology involved the writing and not enough discussion of the actual facts of the matter. On another point (got to throw it out there), the current lobbying system means that the money-for-influence with lawmakers spins policy to favor specific interests rather than the common interest. These lobbying dollars are spent to obtain specific results, which is typically never the best result.
The addition of the buses will mean that the companies involved will be able to hire 4 or 5 new drivers. Let's think about that for a moment. 4 or 5 new jobs at the cost of $2M; that equates to $400K or $500K per job. It would seem to me that it would be a better idea to find 4 or 5 entrepreneurs, lend each of them the $400K or $500K at a low interest rate for a long term, let them each buy a reliable used bus, and go into the business. I would bet that it wouldn't be too long before their business had grown (in the absence of excessive government interference and taxation) to the point where each of them had been able to buy another bus or 2 and hire more drivers. That is what the stimulus should have been, but instead it winds up paying for increased bureaucracy and providing minimal benefit.
Much of the criticism of the stimulus plan is the few jobs that have been saved (not created) all seem to lie in the public sector at the state and local level (police, fire, teachers, etc.). While these are certainly necessary and beneficial, there is no real impact upon the economy. For those who decry the lack of job creation, the plan is designed to have its maximum impact in 2010. Gee, that's odd. There's an election in 2010. Am I the only one who sees a connection here?
But instead of looking at America as IOUSA I choose to see it as in a state of profound imbalance. Such imbalances, like bubbles and black swans are inevitable in a credit based economy predicated on continued expansion to prosper. For good or ill, we can thank Keynesian economics for some of that but also growth in developing countries and globalization itself together with over-indulgent domestic consumerism and corporatism to feed it. So, what the economy needs is a "means" to expand and therein lay the green potential if not shoots quite yet. But and a big BUT it is .. "expansion and/or growth" need not lie in the same direction presently taken. Sure, that which is good and can be saved of the past should be prserved and cherished, while different paths which are available should be explored as well. In my opinion the "means" will come from "We the People" not Washington.
I've read that household savings are up, some say as much as 7%. Some say that is bad because we need to spend ... but on what? More goods from China, India etc.? Sure they service the U.S. markets on a Most Favored Nation basis or not and should not be faulted for it, even though many see it as dumping cheaps goods into an unquenchable appetite for such. (Hell the cocain industry would be nothing if not for America.) The chaos which attends grappling with the unknowable will pass with time as our knowledge grows and with lessons learned, but health will return unless you collectively are buying into a loser like The Titanic or maybe widgets. Such huge problems will likely outlive the Obama administration. ... But we see that people with money are spending more wisely and as needed not in such a profligate manner. Is that a good thing?
The bottom line is, if you live in a widget economy vested in widgets and want to manufacture widgets cheaper than it can be done in a hyper-populated highly unemployed nation like China or India then you must have pay your own workers much less. But how to do so in an economy where it is all the more expensive for those workers to live? Well .. housing is becoming cheaper but has a way to go yet to rid itself of the over-exhuberance of the past. Speaking of housing who really likes small lots lined up like tombstones in filthy criminal infested neighborhoods anyway? Maybe a new model for human habitation will come from this. But can that come, can anything really progressive and healing and productive and sustainable come if we commit ouselves soley to maintaining what has brought us to this point?
The unspeakably draconian legislation to promote this would have Washington Senators at war with each other not to mention those others vested in the status (widget) quo. So back to widgets. Maybe we can make better widgets than the competiton and justify a higher price and thus afford to pay our American workers what they need to live well and prosper. But wait .. are we not the main users of widgets? Maybe we can do away with widgets altogether if we really try and make something more ingenius in terms of functional utility. The signs of great change are all around us and "innovation" has always been the hallmark of Americans. Nothing less will do. No President can do it. This is a challenge for the American people not Congress. Ask yourself what happened first, America or the American government? The people created the nation then the government. America expanded and prospered, now it approaches the limits of growth but government sees no such boundaries. Government will, with all the best intentions I'm sure, turn America into a vast trailor park or welfare state. Why? Because they don't know (nobody does know) how to restore America once it is lost.
Restoring growth means allowing sufficient time to properly diagnose the extent of the malady then each patient making his or her own decision. Recall that when the Industrial Revolution, after considerable chaos, finally put paid to the feudal system it involved much pain and suffering. But progress would not be denied and in the end, arguably, more people benefitted than lost in the bargain. Here and now we at least see the impending change which will soon be upon us. Yes there are tough choices to be made. And this time your government Leviathan as it is, can cushion you a bit. The government wont say it - they can't - but you can all on an individual basis make those changes to your lives that will at least lead you to the terra firma of knowing your own viability. Then you will prevail. Yes you can.
It is a bit like the old joke about : "How many Psychiatrists does it take to change a lightbulb? The answer: Only one ... but the lightbulb has to really want to change."
Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.'
It would seem at a glance we are at the dependence phase. Empires such as the Romans and British outlived the 200 years as has the USA so far. The common thread is the strict adherence to the rule of law. The constitution being talked about in Washington as a 'living document' is not a good sign.
On Sep 01 08:35 AM CautiousInvestor wrote:
> I agree: the government stimulus package does little more than shuffle
> money about with the bulk being transferred to hopeless hostages
> of state funded largesse.
>
> This transfer of income and wealth, as the author notes, distorts
> incentives that guide behavior; if you continue to tax a producer,
> he will eventually reduce production. And if you keep giving money
> to the disadvantaged, you reduce their incentives to improve their
> living standards and quality of live through initiative and their
> own efforts.
>
> Deformed social programs, designed around income transfer programs,
> have led to successive generations living on public assistance and
> in relative poverty. Daniel Patrick Moynihan in the late 60's feared
> generational poverty; his vision has been fulfilled.
The founders realized this, and that's why we do not have a Democracy. That's why the founders created a Constitutional Republic, where a very LIMITED portion of the population selected representatives, and STATES selected senators. These early legislators did not create a system of graft, run by lobbyists, banksters, and opinion polls. They tended to be elites- rich, highly educated, and above (more or less) corruption. Perfect system? Far from it. Better than the current one? By light years!
Now, we have de facto Democracy- Mob Rule. Any idiot with an ID can vote. And this is a great thing? This leads to Republicrat Kongressmen who follow spot polls and lobbyists on policy decisions, and Presidential races that are a choice between Wendy's and McDonald's, every election cycle. Since the Amendment for the direct election of Senators, that once noble body has become a parade of "Maryland Idol", "Pennsylvania Idol", and "New Jersey Idol" winners. (And Klansmen, murderers, and adulterers on another note).
White and male- not qualifications for voting. This much change has been a success of America. But property owner- closer to the point. STAKEHOLDERS. The original voters in America. The ones who died for the right to vote. If you don't pay a certain amount of Federal taxes, you don't vote. If you collect welfare, or any other handouts, you don't vote.
You want fiscal responsibility- that would get us somewhere.
On Sep 01 03:51 PM Jason Rines (iThinkBig) wrote:
> Another way to put it: 'A democracy cannot exist as a permanent form
> of government. It can only exist until the voters discover that they
> can vote themselves largesse from the public treasury. From that
> moment on, the majority always votes for the candidates promising
> the most benefits from the public treasury with the result that a
> democracy always collapses over loose fiscal policy, always followed
> by a dictatorship. The average age of the world's greatest civilizations
> has been 200 years.
> Great nations rise and fall. The people go from bondage to spiritual
> truth, to great courage, from courage to liberty, from liberty to
> abundance, from abundance to selfishness, from selfishness to complacency,
> from complacency to apathy, from apathy to dependence, from dependence
> back again to bondage.'
>
> It would seem at a glance we are at the dependence phase. Empires
> such as the Romans and British outlived the 200 years as has the
> USA so far. The common thread is the strict adherence to the rule
> of law. The constitution being talked about in Washington as a 'living
> document' is not a good sign.
Many large cap multinationals are cheap and worth buying
-AM
The "robbing Peter to pay Paul argument always bothers me a little. It assumes that Peter is rich, Paul is poor and therefore there is some social utility in this organized theft. One can argue that proposition, but what if Peter is poor or middle class and Paul is rich. Isn't that the cash for clunkers story as well as the Wall Street bailouts?
10 trillion is a lot.
10 trillion in taxes and future inflation is a lot.
I agree with the Friedmanite maxim that it's better to have a government that spends, say 300 billion, and raises no taxes, i.e. borrows the entire 300 million and runs a deficit, than a government that spends 1 trillion and crushes the economy with ruinous taxation not to mention the squandered wealth in the 1 trillion.
Keep going Calafia Beach.
I think if the editors of Seeking Alpha have a political point they would like to make, they ought to make it themselves.
On Sep 01 09:22 AM User 353732 wrote:
> The Stimulus Law(its a law, not a bill once its been enacted) is
> succeeding very well in all its covert objectives, which are :<br/>1.
> Rapidly collectivize the economy
> 2. Further concentrate wealth, income and power
> 3. Compress the Middle Class, which may be aroused to open rebellion
> against the subversion of the Constitution----- unless it is swiftly
> and decisively intimidated and demoralized
> 4. Squeeze and bankrupt small and medium enterprises: the locus of
> the opposition to collectivization and the principal obstacle to
> the concentration of income and wealth
> 5. Totally co-opt the incompetent, deceitful and avaricious top executives
> and Boards of the biggest financial and industrial companies in the
> US
> 6. Transform the MSM into the subservient propaganda arm of the State
>
> 7. Instigate and institutionalize class warfare by expanding the
> lower class at the expense of the middle class via coerced downward
> social mobility
> 8. Discourage useful innovation because innovation can bypass bad
> Government; thwart real talent because real talent can be a threat
> to entrenched Bosses ; exile risk capital because risk capital leverages
> innovation and talent
Seriously!?
On Sep 01 10:07 PM huntlakeswim wrote:
> I don't mind a differing view and I don't blame Calafia Beach for
> his opinion. Clobbersaurus is right on with his criticism of it.
> Regardless of your argument, it should be a good one. This article
> is a political argument thinly veiled with economics and it's not
> a very good one, so I'm not sure what qualifies it to be an "editor's
> pick".
>
> I think if the editors of Seeking Alpha have a political point they
> would like to make, they ought to make it themselves.
On Sep 01 01:29 PM Howard_T wrote:
> Today's news included an article about $2M in stimulus funds being
> used to buy 4 new coach style buses that are to be given (!) to the
> companies that provides bus service between southern NH and Boston.
> One will be used on the US Rte 3 corridor from Nashua, one on the
> I-93 corridor from Manchester, and the other 2 on the I-95 corridor
> from Portsmouth. Before I go off the deep end, I need to say that
> I have used this service, and it is an excellent way of getting to
> and from the city. Also, in fairness, I have to say that the buses
> don't actually belong to the companies involved, but belong to the
> NH Department of Transportation.
>
> The addition of the buses will mean that the companies involved will
> be able to hire 4 or 5 new drivers. Let's think about that for a
> moment. 4 or 5 new jobs at the cost of $2M; that equates to $400K
> or $500K per job. It would seem to me that it would be a better idea
> to find 4 or 5 entrepreneurs, lend each of them the $400K or $500K
> at a low interest rate for a long term, let them each buy a reliable
> used bus, and go into the business. I would bet that it wouldn't
> be too long before their business had grown (in the absence of excessive
> government interference and taxation) to the point where each of
> them had been able to buy another bus or 2 and hire more drivers.
> That is what the stimulus should have been, but instead it winds
> up paying for increased bureaucracy and providing minimal benefit.
>
>
> Much of the criticism of the stimulus plan is the few jobs that have
> been saved (not created) all seem to lie in the public sector at
> the state and local level (police, fire, teachers, etc.). While these
> are certainly necessary and beneficial, there is no real impact upon
> the economy. For those who decry the lack of job creation, the plan
> is designed to have its maximum impact in 2010. Gee, that's odd.
> There's an election in 2010. Am I the only one who sees a connection
> here?
Nor is it true that people who work harder earn more money. Does anyone believe that investment bankers work harder than firemen? The investment banker gets paid for his sales ability. We can't even say he is paid for his productivity because we don't know if the securities he markets or the derivatives he sells are toxic until after the fact.
If you were to subtract the toxic assets that the fed has absorbed from Wall St. and backed out all the other aid, you would find that now matter how profitable the banks were last quarter, they were had negative producitvity. They were, in fact, economic parasites.
When Bush left office, we had a $10.5 trillion deficit over the next decade. President Obama's budget reduced that to $7.8 trillion. Now tax revenues are down and the budget deficit projection is up. As the economy recovers, the deficit projection will decrease.
President Obama and the Democrats have endorsed returning to pay-go once we are out of the recession. The health insurance reform bill is self-funding through savings and taxation. Contrast that with Bush who cut taxes and borrowed money to fund the Iraq war. That was supplyside: give to the rich, while saddling the country with enormous debt.
Local Jobs = 95% Private Jobs
State Jobs = 85% Private Jobs
Fed Jobs (non-military) = 75% Private Jobs
I do not believe anybody believes the entire public sector is worthless.
-AM
On Sep 02 03:24 AM storm999 wrote:
> I disagree with this weird notion that government service jobs are
> less valuable than private sector jobs. When the police or firemen
> or teachers do their job they produce real benefits to society, benefits
> that certainly excede that of a burger flipper, or a telemarketer.
> There is a false notion in this country that only private wealth
> is real, that somehow public wealth, like having a good school system
> is not real wealth and yet everyone knows real estate values are
> directly affected by school district scores, for example. It is
> same thing with police response times, well maintained roads and
> so on. The level of public wealth adds value to all the private wealth
> in the surrounding area.
>
Not sure if you're referring to me or Calafia Beach with your comment. If it's me, I didn't state my political affiliation or opinions in my comments and didn't say I've got anything figured out other than, this is a bad argument. (And I didn't even take credit for figuring that out) It's hard to tell how much of it is good criticism and how much is just posturing. I can't read everything here, so I rely on the editors' picks. They goofed this one up.
On Sep 02 02:42 AM C L Freeman wrote:
> After all this, there are still people who view the world in terms
> of Republican vs Democrat and think they've got it figured out?<br/>
>
> Seriously!?
>
> On Sep 01 10:07 PM huntlakeswim wrote:
Quoting the Bush Administration's Comptroller General in his report on the US financial statements in 2007.
Of course we will have huge deficits in the future. The $50+ trillion in unfunded obligations for federal medicare, medicaid, federal pensions and social security become due and payable. Those unfunded obligations -- which are not reported as part of the federal budget deficit as the obligations build (let ENRON try that trick) -- have been growing like topsy during the Bush administration.
Obama's attempt to rein in future healthcare costs is the first presidential action in the direction of addressing this fundamental imbalance that I can recall, and he's allegedly not a fiscal conservative.
The difference in "stimulus" for Democrats and Republicans was spend on programs and increase the deficit (Democrat) or cut taxes and increase the deficit (Republican). Both approaches were destined to have virtually the same effect on the federal fisc -- increase in the current federal budget deficit.
----------------------...
Given that 5 of his 8 points are demonstrably taking place I'd say he is not doing too badly. You, on the other hand, in your next post made some of the same points extolling the glories of socialism/Alinsky'ism.
Twice the supply siders had their day, first with Reagan and then with George W. Bush. Both times the deficit soared. To paraphrase Voltaire, "Once a philosopher, twice a pervert."
Diogeron,
Why do you equate being a supply-sider with supporting the Iraq war and being a Republican? Please understand that the world (and especially SA) is not so easily summarized. One can hate deficits, hate wars, hate perverts, hate Voltaire, and hate dead young men and women (most notably that number is closer to 400,000 unless you are so disconnected as to not count dead women and children unless they happen to be born in one of the 50 states of the USA), and be neither a Democrat nor a Republican. A comment which is anti-Democrat policy doesn't mean that you are immediately a Republican or that you even supported Republican policy. Jeesh.
Your correct assertion about socialism aside, stimulus is meant to create permanent jobs not merely increase the circulation of money. So far, it has done the latter and may never achieve real lasting economic growth. Synergies like in Econ 101, one plus one equal three, are no where in sight.
A very appropriate cartoon appeared in a recent publication depicting an average person on the street throwing money into the air and a bypasser yelling, "Hey, that's my wallet!"
Let's see: Obama's been in office 7+ months and he's been blamed for everything from global warming to government sanctioned suicide. Where, in the name of God, is society's collective memory of the last 8 years?
What is going on in this country?
Mr. Calafia needs to de-emotionalize him(her?) self and start uncovering some facts.
I would like to sieze your paycheck and decide myself what you need and what I should do with the rest, good sir. I might also find some utility if your wife were to give out kisses at the fair.
On Sep 01 03:51 PM Jason Rines (iThinkBig) wrote:
> Another way to put it: 'A democracy cannot exist as a permanent form
> of government. It can only exist until the voters discover that they
> can vote themselves largesse from the public treasury. From that
> moment on, the majority always votes for the candidates promising
> the most benefits from the public treasury with the result that a
> democracy always collapses over loose fiscal policy, always followed
> by a dictatorship. The average age of the world's greatest civilizations
> has been 200 years.
> Great nations rise and fall. The people go from bondage to spiritual
> truth, to great courage, from courage to liberty, from liberty to
> abundance, from abundance to selfishness, from selfishness to complacency,
> from complacency to apathy, from apathy to dependence, from dependence
> back again to bondage.'
>
> It would seem at a glance we are at the dependence phase. Empires
> such as the Romans and British outlived the 200 years as has the
> USA so far. The common thread is the strict adherence to the rule
> of law. The constitution being talked about in Washington as a 'living
> document' is not a good sign.
What stands in the way is the corrupt entities entwined with government. They essentially pay for protection. They are the opposites of Robin Hood. They leverage bribes to turn the spigot of subsidies on for themselves. Then government officials follow government rules in not exposing who they are or how much they have taken.
Let's take a large agricultural lobby as an example. It owns the agriculture bureau and the FDA at the federal level and in many state governments as well.
Subsidies ensure that food animals will be fed in inappropriate ways. For example, cattle fed with corn that is known to harbor dangerous forms of bacteria in the cattle guts.
This produces fuel for our medical-industrial complex.
People who go on TV to warn the public may be lawyer-bullied.
Say you plant a bean from a company. The bean company wants the government to say it can send interns on your property to see if its bully pollen has been present on your land. If so, it wants to use the fine print in a federal law to supersede trespass law.
Say a college bookstore wants to sell software from a famous software company. It has to agree to audits of clerk records of checking ID's for purchasers, to make sure they were paying student fees to get a discount on the software.
Then, when an individual uses the software required by the instructor, he has to consent to wild fine print that essentially makes him a serf of a product.
In the meantime, the Obamas will be eating organic food from their cute garden. They are smart. They likely understand the perils lurking in the food supply.
Obama likely had to appoint protection-racket people as pay-off for the lifestyle he now has. At least it keeps these characters in the limelight where they can be watched and tracked. This is the most charitable way to characterize this, the old keep-your-enemies-close argument.
I agree it is not right/left D/R or assorted labels of that kind any more.
It is inform-yourself before you put things in your body. It's gotten to that point. My neighbor, a dentist, says people are now declining anti-biotics and pain meds. They are using herbs and alternatives from people they know and trust.
My financial consultant and his fiancee run marathons, and they avoid conventional medicine as much as possible also.
Of course, this is anecdotal info, so dismiss it if you want to scoff.
Disaffected people from all parts of a constructed political spectrum are increasingly looking for honest products and services. They are not seeking more expensive things and services, they are seeking authenticity, value, and sometimes even the notorious do-gooding.
Granted, this is now a micro-market. Fads start this way, though, so there are possibilities here.
People in the organics industry say it takes 8 years for changes in the field to show up anywhere official. I find this a bit optimistic, given the bribes given to universities, for example.
Nonetheless, hubris can go before falls. Paul Hawken has said the conversion from horses to cars caught some buggy-makers off-guard. Large corporations dependent on corruption could conceivably end up with perp walks and destitution if they persist in using the federal government in such hurtful and exploitive ways. The implications for the -industrial complex machines are interesting to me.
We will survive and yes a little redistribution of wealth won't destroy the Empire. Being generous 90% of the wealth in this country is controlled by les than 1% of it's population. Throw us a bone and we'll save your empire.
I want to point out that it was not too little regulation that caused the subprime blowout; it was too much. Far too much government intervention!
What does it take for statists to understand that the US Government in the 1990s sued and fined hundreds of lending institutions for "discriminatory lending practices," thereby forcing them to invent the subprime loan.
Which Fannie and Freddie then encouraged banks to make even more of these type of loans than the Feds demanded they make.
Although both Bush and Clinton agreed with the government forcing lenders to make these sorry loans because each one wanted to look as though they were champions of Blacks and Hispanics, they were merely in the background cheering others on.
Barney Frank, Janet Reno, Dick Schumer, and especially Andrew Cuomo were the main culprits in the 1990s. Bush encouraged this type of lending verbally, but did not otherwise promote it. His Ad half-way tried to rein in Fannie and Freddie, but could never get a bill to the floor of the Senate.
The whole government is guilty.
But here is an excellent piece to show how Andrew Cuomo went even further than suing lending institutions to carry out his leftist social enginering project.
www.villagevoice.com/c...
And some of you still want more government intervention? God help us!
And it's one they can't answer; only run away or call you names.
Thank you for it!
On Sep 02 12:02 PM Hot Richard wrote:
> "The transfers kept ten of thousands of teachers employed, enabling
> hundreds of thousands of students to continue their education. This
> isn't robbing Peter to pay Paul, it's redistributing wealth to make
> a public investment in our kids that pays huge dividends."
>
> I would like to sieze your paycheck and decide myself what you need
> and what I should do with the rest, good sir. I might also find some
> utility if your wife were to give out kisses at the fair.
Get government out of free enterprise. Then, things will work and fail as the free market dictates. Make a stupid investment, then you lose your investment. Bailout Subsidies = BS! We can try to get the correct outcome of reduced government interference to the point of almost none, but where do we get that power of the people restored?
Ron Paul gets it and can present it. He is looked on as a fringe politician, but he is the only correct one I see.
As was stated earlier, this is all about following the money. Government is paying back its campaign donors. That is all. The health care lobby and the American Bar Assn (just a company with its employees being lowyers and judges - think about that!) as the main contributors for both parties, so they can't lose.
I am glad that this was an editor's pick because we need to debate this topic. I do not agree with the OP, though.
Aid to state&local government is fast and quick and easy and involves a lot less manipulating than the alternative of government buying stuff.
Socialism is "give US your paycheck and WE will decide what you need (and what to do with your wife)," said by a bunch of chanting people in hooded robes.
both of them suck.
On Sep 02 01:08 PM ArtfulDodger wrote:
> Perfect reply to a wild-eyed leftist, Hot Richard.
>
> And it's one they can't answer; only run away or call you names.
>
>
> Thank you for it!
1. In our consumer-based economy, the stimulus should go for replacing non-existant DEMAND so that SUPPLY can keep going. Hence, the big subsidies for the two worst-hit sectors: housing and construction.
2. To create jobs by "pulling the switch" at the tracks ahead, i.e. our economy is on the wrong path and we need to have government set the agenda by making massive investments in part of society.
I would favor #1, as does this author, but its not easy to do without giving bailouts (evil) or giving the "commoners"/consumers money to spend (also evil "redistributions").
If you try #2, you're a socialist because that invisible hand becomes the government's very visible, clumsy wad of knuckles.
The problem is that they tried to both, and failed in all regards. Like Cash 4 Clunkers, a great idea that boosted demand, made the car companies some fast money and.....now what? We still have the same crappy roads and everyone who HAD money to spend on a car spent it. As for the rest of us.....we will just victims of that type of "market manipulation".
What really pisses me off is that it's being pushed as The New Way Forward, when we all really know it's just the politicians New Pocket Linings. So you're right about paying back the donors, but remember that the same type of malfeseance got us here by masquerading as "free-market liberation".
The point is that we have both extremes trying to clothe their villainy in our favorite bugaboo arguments, convincing you and I that we are both fighting for "America" when it's really for a few narrow interests.
On Sep 02 01:15 PM Oh come on now wrote:
> Supply side...demand side. What about the simple econ 101 supply
> and demand curve?
>
> Get government out of free enterprise. Then, things will work and
> fail as the free market dictates. Make a stupid investment, then
> you lose your investment. Bailout Subsidies = BS! We can try to get
> the correct outcome of reduced government interference to the point
> of almost none, but where do we get that power of the people restored?
>
>
> Ron Paul gets it and can present it. He is looked on as a fringe
> politician, but he is the only correct one I see.
>
> As was stated earlier, this is all about following the money. Government
> is paying back its campaign donors. That is all. The health care
> lobby and the American Bar Assn (just a company with its employees
> being lowyers and judges - think about that!) as the main contributors
> for both parties, so they can't lose.
>
> I am glad that this was an editor's pick because we need to debate
> this topic. I do not agree with the OP, though.
On Sep 01 08:05 AM Schweizer wrote:
> One of your best articles yet. Stimulus bill is a "Stumble-us" bill.
>
>
> All this false hope only to result in things being far worse than
> they would have been.
if you ant to stimulate the economy give each working person who has made over 10,000 per year a 3000 dollar voucher which must be used on ANY stock that pays a dividend and has to be held a minumum of 5 years or the credit +10% penatly are paid back
This will imporove the percentage that own stocks from 50% to almost 75%
Many of these working peopel who contribute to society can now take the money saving for an IRA and instead spend that money
Why should peopel who do not work and instead take resources from socirty be rewarded?
On Sep 02 02:13 PM bobbybutte wrote:
> 1 uncle has made an excellent point but in fact it goes deeper<br/>
>
> if you ant to stimulate the economy give each working person who
> has made over 10,000 per year a 3000 dollar voucher which must be
> used on ANY stock that pays a dividend and has to be held a minumum
> of 5 years or the credit +10% penatly are paid back
>
> This will imporove the percentage that own stocks from 50% to almost
> 75%
>
> Many of these working peopel who contribute to society can now take
> the money saving for an IRA and instead spend that money
>
> Why should peopel who do not work and instead take resources from
> socirty be rewarded?
The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. "There's a method to the madness. We're getting out of this," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.
Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.
Bloomberg News
U.S. Treasury Secretary Timothy Geithner speaks last month at the construction site of a new elementary school in Berea, Ohio.
Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action.
Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.
For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. "Without that extra stimulus, we would be somewhere around zero," said Jan Hatzius, chief U.S. economist for Goldman.
----------------------...
Well the number is actually about 45% or so, but it correlates fairly well with the fact that the top 1% pay about 40% of the total income tax collections. The top 10% pay around 72% of the total. Note also that the total collections from the top 10% have been increasing for about 30 years while the total from the bottom 50% has been decreasing even faster. The bottom 50% now pays about 3% of total income tax collections. The Bush tax cuts took more lower income people off the tax rolls than any Democratic President ever did.