Archive for category Stimulus/Bailout
“Stimulus” Obfuscation…or spinning to the dummies!
Posted by Tom in Economics, Fiscal Policy, Stimulus/Bailout on July 18, 2011
Thanks to Jim Clark who has penned a follow-up to Tom Cargill’s recent post, set out in full here:
In last week’s Bonanza Jeff Quinn wrote in a column titled: “Economic Advisors’ Bafflegab” that the just released Council of Economic Advisors report on the effect of the American Recovery and Reinvestment Act of 2009 (the “Stimulus” bill) stated that it: “raised employment relative to what it otherwise would have been between 2.4 and 3.6 million jobs . . .” Huh?? Jeff, ever the canny CPA, calculated that this would work out to a cost of just about $300,000 per “job”. Except there are no jobs. There are instead 2.4 million less people employed today than when Obama took office.
Two years ago UC Berkeley Economist Christina Romer chaired the Council of Economic Advisors and famously advised President Obama that unless a huge stimulus bill was passed unemployment would rise above 8%. She further advised that each dollar of government stimulus spending would produce a $1.60 increase in gross domestic product. When unemployment rose to nearly 10% she departed for her ivory tower in Berkeley. It has taken almost two years to discover her second big mistake which is where UNR Economics Professor Thomas Cargill comes in.
Writing in the July 13 Reno Gazette Journal Cargill points out that at the time the stimulus package was under consideration: “there was no empirical consensus on the size of the multiplier.” (that which would supposedly create $1.60 in economic activity for every $1.00 in federal spending). “Estimates ranged from a zero multiplier to $1.60 and higher.” But, he wrote, the “stimulus efforts lacked scientific support.” This “lack of a scientific consensus suggest(s) politicians have exaggerated the ability of government spending to stimulate the economy, especially in Japan and the US,” Cargill continued. “Politicians often rationalize any lack of success to the fact government spending was not large enough or that without government spending the economy would be in worse shape” An interesting observation because Cargill wrote this before release of the current Council of Economic Advisors “bafflegab” report cited above in which they do precisely that.
“The real issue” Cargill continued “is whether an alternative policy, such as cutting marginal tax rates and simplifying the tax code, would have produced different results. Some politicians continue to argue for more government spending to stimulate the economy. Perhaps they should do their homework before committing more taxpayer funds and further increasing the size of the deficit and debt” Cargill concluded.
Yeah but in this case the politicians (all of them Democrats . . . not a single Republican voted for Obamulus) had U.C. Berkeley Whiz Christina Romer telling them everything would be wonderful if they would just borrow all that money from the Chinese and spend it.
Had the politicians “done their homework” they could have ignored Romer and simply looked at history. In 1929, when the stock market crash that triggered the Great Depression, unemployment was 3.14%. By 1934, after the original Keynesian stimulator, Franklin Roosevelt, had been in office for a year unemployment was 21.6%; by 1938, after 4 years of stimulus spending to create jobs unemployment was 18.9%. In 1942, as the US industry shifted to wartime production, unemployment fell to 4.7%. These statistics could lead reasonable people to conclude that government spending does not stimulate the economy. But who ever said politicians are reasonable.
The Council of Economic Advisors’ obfuscation still persists, we are up to our neck in debt and the current red hot battle in Washington is whether we should raise the debt ceiling to borrow more money to pay the interest on the money we previously borrowed to finance the stimulus that didn’t work.
Oh well, maybe we’ll get bailed out by a world war again.
Jim Clark is President of Republican Advocates, a member of the Washoe County and Nevada GOP Central Committees; he can be reached at tahoesbjc@aol.com
Basic Political Divide: Faith in Government Spending to Create Prosperity
Posted by Tom in Economics, Fiscal Policy, Stimulus/Bailout on May 22, 2011
An interesting post today by John in Power Line, “REPENT! THE END OF KEYNESIAN ECONOMICS IS AT HAND!” His point is that given today’s doomsday prediction it is only right that it be applied to the Keynes multiplier effect. Instead of positive as Obama and his fellow leftists advocate, it’s really negative. Obama’s stimulus, coupled with his other leftists policies of government control, taxation, and redistribution, is a complete failure. A couple of charts illustrate:
A couple of take aways: “The most basic division between our political parties is their relative faith, or lack thereof, in the efficacy of federal spending.” “The reality is that inefficient government spending destroys jobs.” The final chart offers the evidence:
DOE…Carter’s Creation Provides Obama’s Cover
Posted by Tom in Deficit, Energy Facts & Policies, Environment, Government Regulation, National Debt, Stimulus/Bailout, Subsidies on March 7, 2011
Shika Daimia’s Reason.com post today, Global Warming By Another Name, points out that Obama’s bow to the environmental religion is coded in his promotion of “clean energy.” That global warming has suffered since Climategate, the East Anglica University disclosures, is obvious even to Obama. Ever the politician, he still must curry favor with the well ensconced global warming conspirators. After all, he gets them money, grant money, and they get him votes. To cement that support and yet stay away from that “global warming” fraud, Obama promotes “clean energy.”
Daimia argues that “clean” equals” cool” by virtue of the EPA’s mission to limit greenhouse gasses. Those, in addition to the air you exhale are mainly caused by hydrocarbon energy, coal, oil, gas. So what does our president propose in this year of a $1.6 Trillion deficit and $14 Trillion in debt? He proposes to increase the budget for the Department of Energy by 12%, $8 Billion in addition to the $30 Billion in the 2010 “stimulated” budget!
So our president doesn’t think seriously about the morality of stealing from our future generations. He neglects to treat the budget seriously. He won’t look at the unsustainable entitlements which he has just added to with Obamacare. No, he wants more votes, greater deficits, and more debt for our grandchildren to pay! SICK!
What’s he want to do with that largess? Something smart like nuclear power? No, sorry. He wants things your tax dollars and the tax dollars of your great grandchildren must go to subsidize. Things like, solar with a budget increase of 88% and wind with a budget increase of 61%. Something my grandchildren recognize in their youth is that the sun doesn’t always shine and the wind doesn’t always blow. Apparently Obama hasn’t gotten that message. He hasn’t driven through the Coachella Valley to Palm Desert to see the thousands of acres of still, silent wind mills bilking the US taxpayers. He hasn’t been to Victorville on an overcast day to see all those wonderful mirrors tilted toward the grey sky, reflecting only a testimony to taxpayer ignorance.
Here’s an idea. Let’s abolish the Department of Energy. What does it do that isn’t already being done by or could be done by the myriad of other real departments? It employs 1600 bureaucrats who could contribute the economy significantly better in the private sector, if for no other reason than that taxpayers would not be paying for them. It is not exactly what one thinks of as one of the essential functions of government. And, look who created it, Jimmy Carter, Obama’s alter ego! What better argument to undue it, than that Carter did it?
If we abolish the DOE, Obama will no longer have a code with which to appease the global warming alarmists! Then he must choose, make a decision! What a frightening thought!
Taxpayer Super Bowl Ads
Posted by Tom in Bankruptcy, Democrats, Statism, Stimulus/Bailout, Unions on February 7, 2011
Did you happen to see the Chrysler ad during yesterday’s superbowl telecast? It was pretty long, in fact, the longest of the program, running a bit over two minutes. The ad must have been expensive to produce at government inflated costs, and at $3 Million per 30 second slot, one run of this would have been $12 Million. In reality, the spin was just as much about Detroit as Chrysler.
Now we know President Johnson once called Detroit the model city of the Great Society. And we know that our current government bailed out the UAW of GM and Chrysler by subordinating the bondholders to the unions and transferring the bulk of the ownership in each firm to the U.S. taxpayers. So here’s the ad:
In reality, Detroit is the prime example of the progressive agenda. It is barren, deserted and bankrupt. In every important respect it is dependent on the federal government, the U.S. taxpayer.
Knowing that, how do you like your ad? Are you happy about the way your hard earned tax dollars are spent?
Richard Epstein’s Obama Review
Posted by Tom in Centrally Managed Economy, Constitution, Economics, Entitlements, Government Regulation, Legal, Nationalized Health Care, Stimulus/Bailout, Welfare on December 2, 2010
Richard Epstein is a prominent law professor at NYU and Chicago and there a former colleague of Barack Obama. He’s a brilliant economist as well and author of Takings: Private Property and the Power of Eminent Domain. This Reason.tv interview illustrates his sharp mind and growth oriented outlook:
Obama: Bailout King or Head Pusher?
Posted by Tom in California, Constitution, Democrats, Federalism, State Finances, Stimulus/Bailout on November 22, 2010
We read in today’s WSJ that 30 of the 50 states face deficits totaling more that $127 Billion. We also read that the Obama administration wants to permanently extend the federal subsidy for Build America Bonds, the program that uses your hard-earned dollars to reduce interest on state bond issues.
Steven Malanga in his op-ed, The ‘Build America’ Debt Bomb, points out the enabling nature of this addictive federal program for the spendthrift states. The BAB was initiated to help prop up the muni bond market at a time when private bond insurers were thought to be in trouble. It would subsidize higher rates so that new non-taxable investors would come into the muni market. It was designed as temporary and perhaps temporarily justifiable. But like all temporary taxes, like all temporary handouts, like all temporary unemployment insurance, and like all temporary bailouts, in the hands of the Democrats, it tends to become permanent.
The greatest user of the program is the bankrupt state of California which has issued $21 Billion of BABs. Note that CA’s credit is in the tank. Its taxes are among the highest. Its regulatory climate among the harshest. And its green regulatory costs astronomical. As you may have heard CA has an ongoing budget problem to the tune of $20 Billion. It’s ongoing in the sense that the $20 Billion is expected to repeat itself. With a Democratic governor and legislature, there is little hope. If CA can’t tax more for fear of driving out more businesses and CA can’t borrow more from traditional muni investors because its credit is in the tank, then it must look to new markets for lenders. Obama’s BAB drug will continue to serve up sucker new investors but at a costs to the U.S. taxpayers. Why should we pay this?
Malanga points out: “The Obama administration believes the BABs’ direct federal subsidy is a more efficient way to raise money than traditional tax-free municipals. But when money that would otherwise go to private business flows into subsidized government activities, resources are misallocated.
“This is no idle speculation: The financial press is full of stories of investment managers recommending BABs over corporate bonds with similar ratings, thanks to the advantage of federal subsidy. There is also a future bailout risk, given that the federal government might not allow a state or local government to default on a Build America Bond. None of this is what voters signed up for on Nov. 2.”
As I pointed out in a recent post, as long as someone else will pay for the free lunch, there is no reason for the states to stop stuffing themselves. States will only face reality when they are forced to face reality. Congress should reject the BAB extension, provide for state bankruptcy, and promote a constitutional amendment precluding the federal bailout of sovereign states. Oh, and repeal the 17th Amendment; we need a return to federalism.
Politics Not Economics–White House Rebutted
Posted by Tom in Economics, Employment, Fiscal Policy, Politics, Stimulus/Bailout on October 23, 2010
CEA Chairman Austan Goolsbee blames Bust and extolls Obama’s job creation. Unfortunately his chart is more polemic than economic. Keith Hennessey counters the arguments point by point. Warning, this is over 14 minutes long, but since we are about economics, this is definitely worth the time.
Didn’t We Just Have Financial Reform?
Posted by Tom in Congress, Democrats, Financial Crisis, Fiscal Policy, Politics, Real Estate, Stimulus/Bailout on October 14, 2010
Barney Frank now admits he was wrong on Fannie and Freddie in attesting to their financial strength and arguing in the case of trouble that the “federal government doesn’t bail them out.” Of course, he was benefiting from their lobbying largess, $65,000 from 2002 to 2008. And in 2008 despite knowledge to the contrary he assured the public of their financial strength. The Boston Globe treats the political consequences in today’s post. His famous quote though was in 2003: Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing.
Well now we have another mortgage mess, the “robo-signer” brouhaha has brought the foreclosure market to a screeching halt with thousands of would be buyers unable to get title or possession of homes in the foreclosure process. And in this economy, the foreclosure market is a big percentage of overall sales. NRO rightly asked in today’s editorial, Another Mortgage Mess, “didn’t we just have financial reform?”
Yes, we did. The Dodd-Frank bill was passed this year by the Reid-Pelosi Congress and signed by Obama. It was supposed to reform the financial system. It did not touch Fannie and Freddie who are now involved in the mortgage mess. By the way, the taxpayer subsidy projected for Fannie and Freddie for the next ten years is $370 Billion!
Note despite Obama’s lies about an inherited deficit, the Democrats including Obama controlled Congress and were creating the so-called “Bush deficits” since 2006. Barney Frank and Chris Dodd were in charge of their respective financial committees and watching Fannie and Freddie go down the drain. They ignored warnings, ignored the facts and failed to take any action reforming the dynamic government duo.
This year’s Dodd-Frank lack of reform was too much for CNBC’s recently Rick Santelli: Democrats still don’t get it, and they refuse to reform Fannie Mae and Freddie Mac, the government mortgage companies that sparked the meltdown by giving high-risk loans to people who couldn’t afford it. Standing up for American taxpayers, CNBC’s on-air editor, Rick Santelli teed off on Rep. Paul Kanjorski’s (D-PA) claim that Democrats’ couldn’t reform Fannie & Freddie in their financial regulation bill because it was “too complicated,” asking: “It’s too complicated? You think taxpayers that go to work to pay the money you are subsidizing, it will end up a half a trillion, do you think they think complicated is an excuse?”
The real chutzpah here is that the Democrats that created the mortgage mess are using the foreclosure red herring to bash the evil bank lenders and pander to the ignorant voters! In so doing they further delay or perhaps stop the current weak recovery!
Talk about cutting off your nose to spite your face. Course, no one ever accused them of being smart!
How Your Tax Dollars Are Spent
Posted by Tom in Business, Democrats, Entitlements, National Debt, Stimulus/Bailout, Unions, Welfare on October 3, 2010
Obama and his socialist Democrats are on a spending spree, spending future tax dollars, generating piles of debt that will bury us, our children and our grandchildren and condemn them to a lower standard of living. The bulk of the spending goes to entitlements, Social Security, Medicare, Medicaid and the new killer, Obamacare. A significant chunk of the spending goes to support government workers who job it is to redistribute our tax dollars to the non tax paying “entitlees.” The inefficiency and waste attendent to government operations and giveaways are always rampant but there are some things that are particularly bad.
GM, that is Government Motors, is majority owned by the U.S. taxpayers; a significant minority block is owned by the UAW. In practice the UAW calls the shots, since it controls Obama/Democratic votes. Government Motors flushed out its creditors in bankruptcy. So the bondholders got screwed and the union got control. (Those bondholders by the way are the IRAs and pension plans attempting to provide retirement security for the taxpayers financing the government.) So Government Motors operates without the typical burdens of private companies like, say Ford Motors.
One of the ways it spends it’s taxpayer provided largess is to lobby the government that owns it! Yes, that’s right, taxpayer dollars are being spent to influence government officials, the same officials who allocate those taxpayer dollars! This is like Milo Minderbinder in “Catch 22″ taking money from the Germans to strafe his own USAF base in Italy. Truly bizarre. The WSJ calls it “Fannie Mae Motors” after the Barney Frank supported fat cat that spent taxpayer supported money lobbying who but Barney Frank!
Now you can argue about stupid government spending and policies like ethanol, solar energy credits and cash for clunkers, but some things just really piss you off! They are not only stupid but immoral. Bad thing is that our grandchildren will pay for this stupidity.
Your Stimulus Money At Work
Posted by Tom in Centrally Managed Economy, Democrats, Government Regulation, State Finances, Stimulus/Bailout on September 16, 2010
LA City Controller reports that the city has “created or saved” 55 jobs with the $111 Million in stimulus money. The breakdown as reported by Fox News,
- Public Works Department created 7 private sector jobs and saved 7 public sector jobs for $70 million spent,
- Transportation Department created 9 jobs for $40 million spent.
You argue that 7 + 7 + 9 doesn’t equal 55. You’re right, and there’s no explanation offered. But, I suppose as they say it’s “close enough for government work!”
The stated reasons for the poor job creation:
“1. Bureaucratic red tape: 4 highway projects did not even go out to bid UNTIL 7 months AFTER they were authorized.
2. Projects that were supposed to be competitively bid in the private sector went instead went to city workers.
3. Stimulus money was not properly tracked within departments
4. Both departments could not report the jobs created and retained in a timely fashion.”
To cap it off Wendy Greuel the city’s controller suffer’s Obama’s disease of grade inflation; ”I would say maybe in a grade, a B- in creating the jobs,”
The half of the citizens who pay taxes to keep the half that don’t pay on welfare should take note. Their hard work and taxes paid are being wasted big time! We need to get rid of these fools and this November is a start!