President Obama's economic stimulus plan has topped $920 billion after the Senate agreed Wednesday to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry. [emphasis added]
Excuse me while I bludgeon myself against the cold brick wall outside my door.
*multiple thuds followed by wretched screaming*
What I want to know, very simply, is how anybody who could even be considered conservative (or even moderate) can:
1. Justify adding ANYTHING more to this massive pork bill, or,
2. Justify trying to keep trying to perpetuate what's left of the housing bubble which is a part of the reason we "need" this "stimulus" bill.
The American Recovery and Reinvestment Act, also known and the perversion called Porkulus, continues to grow beyond any reasonable number. And while there may be debate on what the government may be able to do to fire up the economy, this ain't it!
I suspect the following ideas will be wasted, as the GOP in the House only grew a spine because they could only make the news if they were unanimous, and the Senate will eventually get the bill over a trillion before someone "reaches across the aisle" and spends another trillion (over the first). And I've heard all kinds of bipartisan crap on how to justify racking up another trillion.
So here's conservatism applied to the concept of stimulus and see if anything in the current Porkulus bill will survive:
Government Does Not Create Jobs (except for government jobs) - Part of the concept of the stimulus is that it will "create jobs" (or save jobs, in case those created jobs aren't). The problem with this is that government can only create "jobs in two ways: Either by creating work with make-work jobs that will eventually stop being funded (the FDR way), or by simply adding people to the government dole by hiring them to do something. Either way, it doesn't produce a product or service that grows the economy. So any idea of spending money to "create jobs" can be discarded.
Command and Control - In my latest post over at my blog, I did a little comparison between the self-destructive effects of the old Soviet economy and the current state of our government. The Soviet model featured the command economy. The highlight of the command economy is that it stifles productivity and innovation (as in bread lines and rationing). Anything in the stimulus bill that attempts to control the means of production for political reasons (stimulus directed to fighting climate change by subsidizing electric cars) is counterproductive.
Eff Yu Pork - Whether you call it pork, or earmarks, or targeted stimulus (bet they'll steal that line), there's no reason ever to use the concept of a stimulus to advance personal pet projects and magic cash for their home states or districts. Enough people have highlighted the inanity, so I'll leave it at that. No pork for you!
Borrowing for Tax Cuts - A conservative stimulus plan would naturally involve lessening the burden of taxes on businesses and individuals. But in the world of Porkulus, these tax cuts have two inconsistencies that render them dumb. First, some of the tax "cuts" are not a reduction in taxes. They are the growth of entitlements for those who do not pay income taxes. And targeting people who are financially on the edge just means they'll be able to invest it in the trailer park retirement plan, more commonly known as lottery tickets. Second, we're running a massive deficit. And while reducing taxes is not a bad idea, borrowing billions to do so sets a dangerous precedence. A related note is more spending to "help" the poor. A government check never motivated anyone.
So.
So now we've eliminated everything contained in the corpulent flesh of Porkulus. And we've done so because we will never grow the economy by growing government, as every dollar that goes to government does not go and grow in the private sector. This leaves only a couple of ways we can stimulate the economy.
We must reduce taxes and regulations. I know I just eliminated the tax cuts above. But my expectation is that we pay for any tax cut by eliminating redundancy and pointless regulation, which requires oversight (which is always inadequate). But as the sheer volume of regs shrinks, the people who are responsible for enforcing the remaining ones will actually need to work more. I don't advocate cutting government jobs right now, as putting people out of work is not a good idea.
And I'm not expecting a balanced budget this year. In fact, there will be deficits. But that brings us to the other secret to recovery.
We must freeze all spending and grow out of debt. One of the things that caused the balanced budget in the late 90's was that government spending did not outgrow increased revenues. And as the engine of the free market starts kicking in, a government that doesn't increase its spending will not only begin to shrink deficits, and maybe the debt, but it will also reduce itself as a percentage of the economy. And as we start growing and creating surpluses, some of that can service the debt, and some can be used to reduce more of the tax burden.
That's it. This plan will not require another trillion in pork and BS, and will begin to address the conditions that led to the current series of crises. And only in shifting away from an expectation of government intervention can we create lasting stability in the economy, and in the country.
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24 comments:
I would assume you are also including the 2.5 trillion bailout of Wall Street as pork spending also....
Because realistically, it was actually just as logically insane, if not more so, than the current stimulus bill. Because all it was was a wealth transfer; a crutch.
Actually government spending does create jobs by putting money in the econcomy (the government wants to buy condoms well someone has to make them!)
But government spending to REPLACE consumer spending or government influx of cash in the financial market to boost falling capitalization metrics is not permanent...its artifical and in the long term artificial.
BUT, to assume that the growth engine of our economy is going to kick in and increase revenues anytime soon is a false dream. We can anticipate negative growth through most likly mid 2010 and then subaverage economic growth until such time as the excess value and capacity is lost/used up...which realistically could take 10 years or more.
If we keep our tax rates at what they are today, and ban any stimulus bill, we are still looking at cutting government spending by 50% and increasing our tax rate and then it will take about 20 years to pay our debt in full.
That will add alot more people to our unemployment rolls, most likely taking unemployment to well beyond 20%.
Personally, with the bailout of Wall Street I would rather the government force banks to freeze foreclosures and drop all interest charges and fees on credit card debt (along with capping all credit card debt) this way it will help the consumer get out of debt faster and get us, as a country, on a path to a demand/cash only economy quicker.
The government wants to stimulate spending to grow the economy I would rather accept the obvious that people want to pay off debt, save, and try to assist them to reach a comfort zone faster and then let them spend when they need to rather than when the economy needs them to.
It is more painful in the short run but a lot more beneficial in the longer term.
Our long term success as a country depends on us getting out of debt faster, that includes people, companies, and government.
The whole concept of bailing out Wall Street was the idea that our economy runs on credit rather than runs on cash. Thats why in my mind it represents the dumbest of the bailouts because it signals a belief that we do not have to change the logic of our economic system.
You actually need to start from the concept of what constitutes a "recovery"
The $15,000 homeownership deduction is just a wealth tranfer gimmick. It puts US taxpayers in debt so that banks can begin to start making money.
Why not just allow people to buy houses when they need one and when they can afford one?
Americans have cut their spending and have begun to start saving money...which are GOOD things but now the government wants to define recovery by getting us back into the credit spending mode.
Thats not recovery in my book thats getting back on the path of the same ol crap that got us in this mess.
Patrick.....what you said!
TAO,
Government spending is not stimulative. It is at the very best a wash and having gone through the exercise of pulling money out of the productive economy to have government pick a winner, which adds cost, regulation and headache, it can only be a net negative.
The problem with engineered economies is the problem of information. Utopian schemes always, every single time, produce shortages where they cannot be afforded and surpluses where they are not needed, 100% of the time.
It is only through the mechanism of price that an economy, a market, gets all of the information it needs, instantaneously. I don't need to know that the citrus crop in Florida was hit by the double whammy of a freeze and infection, I can look at the price of an orange and decide to buy an apple instead or a Texas grapefruit. The government is not equipped to handle it!
When the former Soviet Union collapsed, two of the guys that set prices asked Milton Friedman and government officials who were responsible for pricing more than 2 million items per day, how a government with a market economy controls prices, the answer was a simple, "we don't."
Going back to my original comment on this thread....what Patrick said!
Ah, brother TAO,
As I continue to read your commentary...
Markets self correct, if left to their own devices. All government attempts to intervene only prolong the agony.
The government created an asset bubble and at the risk of losing people in the mixed metaphor, we are now going through the process of de-leveraging. Our housing stock isn't valued properly, the debt held on the books of financial institutions aren't valued properly (many are flat busted broke but continuing to operate under the guise of government bailouts), the stocks in your 401k, IRA or pension aren't valued properly. So what happens....?
The housing market sells off, the stock market sells off, banks fail and recovery begins once we know what the true asset values are so that people can make judgements about where to place capital, investors know where to invest, businesses know which markets to pursue, etc. Government involvement only prolongs the agony of the de-leveraging and hides the information necessary to make decisions that lead to recovery.
CB...
I have absolutely no problem with anything you said...
Till you got to your buddy Milton....
The godfather of supply siders and globalization.
Supply side economics is as much a anti free market scam as anything else. Just because it benefits the 'supply' side of the economic supply/demand paradigm does not lessen the fact that it is government intervention nonetheless.
Which makes Reagan a supporter of communism for the rich.
Lower taxes will not starve the government into smallness only less economic dependency of our system and lower spending will make government smaller.
The government does not starve when it allowed to borrow.
In a democracy when you have rushed to bailout the supply side of the economic paradigm, which is wall street and corporations then you obviously have no choice but to bailout the demand side of the same paradigm...which is what obama is doing now.
As you say, supply and demand will eventually equalize themselves. Which is why I have always hated supply side economics because it ends up forcing us to prop up demand.
That is also why I have always been so angered by conservatives and their support of supply side economics...if you understand economomics you realize where it leads...government involvement in the economy.
Reagan was wrong and it is plain and simple....you cannot starve government you have to kill it to keep it from growing. We kill it with a balanced budget not with lower taxes and deficit spending.
So now look at the mess we got and we want to make it worse...
Government does not create wealth only supply and demand creates wealth. Lower taxes on the rich does not create wealth anymore than higher monthly checks to the poor do.
Globalization does not increase wealth unless all markets are free and open. Right now all globalization has allowed is for the major corporations to benifit from lower wages in one country to capitalize on higher selling prices in another. Markets are not free nor open when there is a wage and price difference between two countries. Globalization is only a profit subsidy when they do not balance.
So, we agree on the wonders of economic theory and the reality of supply and demand determining value.
But I am sure we disagree when I blame Reagan and Bush for our current problems and see Obama as only the final "result" of supply side economics...
He represents to me the final outcome of 20 years of supply side economics....
Thats why I support him....hopefully eventually people will quit believing that government can benefit them at the expense of someone else.
Supply siders had their 20 year run of government benefits...now the tables are turned.
Like I always say, the pendulum that swings too far in one direction must swing just as far in the other before we can get it to settle in the middle.
So...let the pendalum swing....no one who did not complain about the shift to supply side economics over the last 20 years can complain with the direction this country is taking now....
I'll let you two go at it. You're both much more informed on economics than I am. All I know is that this bailout bill is total crap and I think Patrick's plan would work and all the bailout bill will do is cause more debt. Well, that's not all it will do. It will of course make people even more dependent on government (which is the plan) and help the Democrats gain more votes from those who benefit from it. It stinks!
Gayle its very simple, if what you believe is true for one side then it obviously must be true of the other.
So, if this stimulus benefits democrats then the bailout of wallstreet benefits republicans.
If one stimulus makes us dependent on government then one bailout did the same thing.
I wish we had taken as much time discussing the first bailout as we are discussing the second one.
Its time to accept that neither party benefits us in anyway and walk away from both of them.
But I am not going to sit here and clobber the democrats about abusing government powers without assuring that the Republicans enjoy the same clobbering.
I cannot commend the republicans for keeping me safe when they have imprisoned my freedoms with future debt.
Never thought I would see the day when freedom was just another word for nothing left to lose (Janis Joplin the druggy was right) but right now I cannot see it anyother way.
I work hard to make a better future for the next generation...not to straddle them with debt.
Friedman was a brilliant guy and had most things right. He, in many ways was a pragmatist. In the case of our current discussion, that pragmatism plays out in that he understood that we have a federal reserve bank and that there's not much chance of getting rid of it, therefore, he was a monetarist because if the fed was going to manipulate interest rates, then he was interested in limiting the damage.
Both bailouts and stimuli are bad ideas. We need fundamental restructuring of the tax code that apparently a former Majority Leader of the U.S. Senate, the head of the House committee responsible for writing the tax laws and the Secretary of the Treasury/head of the IRS can't even follow. The 16th amendment should be repealed along with death, dividends and capital gains taxes and we should not be in 10% of the things the government has expanded itself into, never contemplated by the people that threw tea into Boston Harbor.
Yes, Milton was a monetarist and that was his specialty and he understood the evil of the federal reserve.
We need fundamental restructuring of our economics system, our tax code, and our government spending priorities.
We basically not only need to redefine government but also our expectations of government and ourselves.
When individuals and or companies make personal and or business decisions based upon tax benefits then they are not making logical financial decisions. For government to assume that its tax policies (the republicans) and or spending policies (the democrats) can manipulate markets, performance, or behavior is absolutely absurd. Tax cuts create no more jobs than spending does.
If they really want to ensure immediate economic growth then watch what would happened if they sat down and addressed the tax code, the debt, and future government spending....
But then again a flat tax or a value added tax does not let one manipulate anything and if you cannot manipulate anything you are powerless.
If the current bailout was some well thoughtout plan to improve our utility and transportation infrastructure only then I would be all behind it. In my mind the government is the only one that can take on these projects and they do one thing, create economic growth for the future and better prepare us for a terrorist attack. Tax cuts and condoms do not really rate on my list of priorities.
The point through all of this is that government involvement stimulates NOTHING, whether Wall Street or spending bills like the current debacle in the Senate.
Government (taxpayer) money infusion stagnates rather than produces as it claims, because inevitably the money either is spent on useless pork, as in the current bill, or provides government involvement in free market business like the Wall Street debacle. Niether idea works.
The collapse last year was bound to happen because of the false bubble created by crappy mortgages brought on by government demands for lower income home ownership and greedy lenders who saw an opportunity to get big bucks fast and dirty regardless of the consequences.
This created a housing boom that was based on numbers scewed by record home purchases with a majority being bad mortgages in the first place. Thus a bubble that burst and a Wall Street problem that as with other Wall Street problems if left alone would have made the necessary corrections and that would have been that.
But the bailout jumped in and now bailouts and false stimulus is everybodies answer.
If Washington was truly interested in stimulating the economy then reducing tax rates for individuals and business accompanied by a reduction of real spending by eliminating failed programs as well as stopping the growth by freezing budgets where they are with the exception of defense and finding ways of actually cutting budgets rather than always looking for increases.
There is enough wasteful spending in government to reduce the deficit by half if they just applied that spending to the deficit.
By cutting tax rates the money goes into the pockets of the people. Who will spend which actually does stimulate the economy. Cutting business tax rates and capital gains rates will also stimulate as business invests through purchasing, growth and real job creation.
But then again we are talking about government and doing what works is the LAST thing it does. Plus Dems haven't been able to spend like wild animals since before 1994 and they have a lot of pent up emotions and are seeing Obama as their knight in shining armor to help then get the junk they have wanted for years.
The GOP left behind the mantra of less government and less spending several years ago and with Obama dealing ONLY with RINO Republicans like Olympia Snow, the possibility of real conservative cuts and tax reduction is also a minimul possibility.
Actually, the GOP has been no more for less government and less spending than the democrats have EVER.
Forget rhetoric and look at facts. Government debt and size increased more under Reagan and Bush than under Clinton and Carter.
Any true meaningful changes cannot be accomplished by exempting military spending. Realistically there is pork and excess spending there too and if you are going to overall the government then spending, all spending must be categorized correctly and reviewed. Government, including the military must justify every dollar they spend.
Then there should be no new spending and no new tax cuts until the government unfunded liabilities and debt is paid in full.
There is not a politician in office today that would agree to any of the above...
Not one, not of any party, not one.
If they cannot stand up TO Pelosi, Reid, MoConnell, Boehnor, or Rush Limbaugh they sure aren't able to stand up FOR anything
For all you Democrats who favor these crooks remaining in office, I say "If the shoe fits, wear it". Just recently Wesley Snipes was detained by authorities and treated as a felon for failure to pay back taxes from money generated from his movie films. NY Yankee's Derek Jeter was also threatened with legal actions for failure to pay taxes on his living quarters in New York. Why should Rep. Rangel be any different? If they find that he indeed broke the law, than he too should be made to pay the penalty for doing so and move on. Rangel has denied any wrongdoing, but a new report from the Washington-based Sunlight Foundation raises additional questions about the New York Democrat. The watchdog group says Rangel has failed to report hundreds of thousands of dollars worth of personal financial transactions on his annual disclosure forms. “Assets worth between $239,026 and $831,000 appear or disappear with no disclosure of when they were acquired, how long they were held or when they were sold, as the operative House rules at the time required,” the group says.
Where's Obama on this issue? He seemed pretty apolegetic to Wee Tommy's dastardly debacle but tends to remain a tad aloof about the Rangel wrangle! Obie needs to speak up and let us knuckle-draggers know as to where he stands with yet another full fledged card carrying 'Rat wallowing in the Tax-cheese barrel. One wonders just how many more are sweeping up and covering their droppings 'bout now.
These politicians must be made aware that they are not above the law and are voted into office to serve the interest of the people that voted them into office. We expect them to be trustworthy and held accountable for their actions. The president at the moment is having a rather difficult time in filling very important post in his administration because of individuals who suddenly find themselves having skeletons in their closets. Where has the public trust of these individuals gone to? Where does it stops? Nothing new with these politicians. Politicians are no different than any of us. Choices we make in life can either make us, or destroy us.
Rangel is a joke! The guy is so freaking crooked its not funny. he like the others are such an embarrassment to this so called Administration of "Change" that almost every single one that Obama has selected has issues with paying there taxes. ALL of them are hypocrites. Its all right for them to tell us or preach to us about paying our taxes, but its clear from the vetting process from the Obama administration that Democrats don't pay there taxes. That Democrats are above all of this when it comes to paying taxes. Rep. Chucky Rangel has to be one of the biggest hpyocrite in Washington. But the thing is so many Congressman and Senators are crooked that its hard for them to "remove one of there own" because they might turn on them. And yes am sure that there are some Republican Senators and Congressmans who are just as bad. But Rangel has to go! If Obama was all that he would like us to think he is, then he would get rid of ALL these cheats and thieves.. And not say "I stand behind him"
But will it happen? I doubt it.
Well, I am a lot like Gayle on this one, I let those more knowledgeable on this subject go at it, but this stimulus bill along with the Wall Street Bailout were both wrong. Republican or Democrat, whoever voted for it should be shot and hung out to dry.
Excellent post Patrick, I couldn't have said it better, myself and I mean that literally!
Folks, lets take a break and have a reality check...
Presidents cannot remove senators or house members only voters and fellow senators and house members (impeachment) can remove senators or house members.
Did any of you believe that democrats were any cleaner than republicans?
Does anyone know of a house or senate member who left office poorer than when he started?
Never had a president leave office poorer than when he started either...and all of them made out like bandits afterwords too...
So, whats the surprise?
Obama comes in a raises the bar just a little off the ground and all of ths sudden all this crap comes out....
He should have just left the bar as low as it was before and let business continue as normal or he should have raised it so high that it would have caught everybody...
Then we could shut Washington down....
Patrick typed:
'We must reduce taxes and regulations.'
Amen to that.
I've got a great idea for recycling used motor oil in my condominium unit. With the money I'll save not building an actual facility for the project which meets local, state and federal standards I'll make a killing! And by doing away with OSHA standards ad the like I'll make even more money!
After all, small business is the engine which drives the economy. Likewise markets are self-correcting and in all ways perfect.
Once this gets going I'm thinking of finding a nice residential neighborhood in a town like New Bremen, Ohio where I can treat PCBs.
Thoughts?
Interesting post here - keep up the great work!
Would you like to have a link exchange with our blog COMMON CENTS where we blog about the issues of the day??
http://www.commoncts.blogspot.com
I could be totally wrong here but I don't think anyone is very happy with the spending that went on with Bush in office either. I honestly don't see this as a democrat vs republican issue....I am against wasteful spending period.
Just curious what "raises the bar" means? I'm not sure what you are getting at with that comment??
He wants to pass an enormous pork bill.....raising our debt seems more appropriate.
Here's the point...we have suffered an economic meltdown that could see a reduction in our GDP of about 20 to 25 percent.
It has not yet been totally felt on Main Street but it is coming.
Now, government can do nothing and we could see even a greater drop or government can do something and either lessen the impact of the drop or make the situation worse in the long term.
It is projected that we will lose 2 trillion dollars in economic activity over the next two years. If the government spends 1 trillion then logically we have cut our losses by half.
The biggest issue is HOW the money is spent and on what. Unemployment insurance is fine...it keeps people eating and you are sure that that money is going to be spent in full everytime they get a check, which will stimulate the economy and save jobs.
Infrastructure is something that we have neglected for too long and we need to address that shortcoming.
On and on it goes...
Now we can argue about doing nothing and that would be fine but you have to understand that lots of local and state governments would shut down and we would lose a tremdendous amount of economic activity which in turn would just make our situation worse.
It is a situation that developed out of supply side economics that no one seemed to grasp or accept. Basically supply side economics creates economic bubbles, like the internet boom in the 90's and the housing market and commodities boom that we have just experienced what no one came to realize is that our whole economy ended up being a bubble....
Government doesn't have money that it doesn't take from the productive economy. Having the government confiscate money from the productive economy to spend only adds cost to what, at best, is a net wash does no good.
If you've gone to Vegas and gambled away your mortgage payment and retirement account, having the government take your paycheck, siphon it through its tortured, inefficient bureaucracy to return it to you pennies on the dollar and tell you how to spend it is not going to help you.
We are realizing that the value we once thought we had was never there, it was an illusion. Government spending won't help that, in fact, it only adds burden.
CB...
I think the issue facing all of us today, at least those of us who understand the economy, is do we make a hard landing or a soft landing?
Once we land then the game changes....
Patrick, your comment about “Porkulus” is a bit rich coming from the same party, the same ideology, and the same dumbledown economics that quadrupled our sovereign debt during the 1980s and doubled it again in the last 8 years.
I left a comment for you (timestamp - 2:21 PM, February 10, 2009) here.
Where were you for the last 6 years? Would you also define no bid contracts for Halliburton and Blackwater as Pork?
None of you were bitching about the 600 billion we were spending in Iraq, or the Billion we give Israel every year to create more terrorists but all of the sudden a black Democrat comes along and decides to use our tax money for something other than killing people or his rich friends and you think it's a crime against humanity. Not only that, when Bush was spending like a rapper getting his first royalty check you thought it was a good idea to cut taxes. The economy needs a shot in the arm and trickled down economics doesn't work. Since 1980 when the top tax rate was 70% which went all the way down to 35%, the poor have gotten poorer, the middle class has stayed stagnant and increased debt and the rich have gotten richer. In fact, in 1982 the top 15 wealthiest people owned $92 billion in wealth and by 2000 that had increase to 1.2 trillion.
I’m sorry but Paris Hilton isn't going to create any jobs (not those types of jobs anyway) if you cut her taxes and she isn't going to "stop investing" all her money in the economy if her taxes go up 4%.
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