Daily Archives: January 26, 2010
For those that have chosen to make man-made global warming a form of religion this might come as disappointing news. Americans just don’t really care that much about it. In fact, since it was first measured by the Pew Research Center for the People and the Press in January of 2007, it has slipped a full 10 points and is now listed as dead last on the people’s priority list.
Global warming is simply not a priority except among Democrats. And even among them it is a minority position – only 43% see it as a top priority while only 11% of Republicans and 25% of independents see it as such.
Is it because they just aren’t buying the hype anymore and don’t believe it is really an urgent problem or is it because other are indeed more urgent problems? As I pointed out previously, since Pew has been tracking it in 2007, it has always been among the lowest of priorities with 38%. It has declined even more each and every year since.
There’s a lesson for the cap-and-traders there who would use global warming as a reason to enact the carbon taxing scheme designed to create a revenue stream for government out of thin air.
Global warming ranks lower among the public than trade policy – which I’m sure is followed with interest and understanding by the masses. Politicians aren’t dumb – well not completely. They’ll see that list and figure out what is below the 49 to 50% level and shy away from that for the time being. That means immigration, tax cuts, financial regulation, the environment and global warming are going to find convenient back burners on which to sit. Or should.
As an aside, just because the public isn’t clamoring for tax cuts, it should be clear to all, given this chart, that spending can not go on as scheduled. Nope – deficit reduction ranks up there in the 60% range. No tax cuts? Cut spending then – big time. Not piddling little 15 to 25 billion a year “freezes” – cut spending. Pick a percentage and do it. 3% a year, across the board, for 10 years. Budget for it.
That’s about the only way the economy will get moving. Government has got to quit sucking up all the available credit for these nonsense projects politicians like to claim will “create jobs”. If those who think global warming is an important priority want to see it addressed at all, they’d better find a way to satisfy the rest of the country that the other 20 priorities have been successfully addressed.
“It’s the economy, stupid.”
The progressive base is having conniptions over the failure of President Obama to get his agenda through Congress despite having supermajorities. Now that Obama is making token gestures (however feeble [via:HA]) towards fiscal sanity, they are experiencing political apoplexy:
As noted in quick hits by BDB and rayj, [UPDATE] and by David in a diary that just caused me to push back this diary’s publication time, Obama has now gone off the deep end. After passing a stimulus that most economists (not just liberal ones) said was too small, and that was made even more inadequate by being heavily tilted toward poor-performing tax-cuts, Obama is now intentionally recreating FDR’s mistake of 1937, when he prematurely cut back spending to try to balance the budget, and sent the country into a new recession.
Specifically: He’s going to announce a spending freeze on domestic programs (but not, of course, on the military) that is “projected to save $250 billion.” The rationale is that he wants to appease folks worried about runaway deficits. Which is just what FDR was worried about in 1937.
This is Bush-style idiocy. There is no other word for it.
The cause of this consternation is magical thinking on the part of the author, Paul Rosenberg.
Here, to remind you, is the chart I put together during the stimulus debate, showing, among other things, the relative ineffectiveness of tax cuts vs. spending in generating jobs, which is the key to getting the nation out of this recession–the only way that we can rationally hope to start bringing down the deficits:
While some tax cuts are much better than the real stinkers, it’s virtually a given that once Obama starts talking about tax cuts, the GOP is going to start demanding that Bush’s tax cuts be made permanent. Not only–as you can see from the chart–are these about the least helpful tax cuts of all, they are also heavily skewed toward helping the rich and the super-rich.
If you look closely at the chart you will be unsurprised to find that government spending is calculated to provide substantially more “bang for the buck” in creating wealth and jobs. That’s unsurprising because this chart is intended to support a progressive prescription for the economy. Of course it will show government as the answer.
Without arguing the statistical or modeling specifics behind the chart, there is one glaring item that reveals how much magical thinking went into its creation. By far the most “stimulating” actions set forth are “Temporary Increase in Food Stamps”(calculated to create 9,803,333 jobs), “Extending Unemployment Insurance” (9,236,667 jobs), and “Increased infrastructure Spending” (9,010,000 jobs). The closest tax-cutting measure, according to this analysis, in job creation is a “Payroll Tax Holiday” which is estimated to create 7,253,333 jobs. Do you see the problem?
How, exactly, do food stamps and unemployment benefits create jobs? Arguably, spending on infrastructure could create construction jobs on a temporary basis, although that hasn’t proven to be the case with the stimulus bill that was passed. But there is simply no logic to the idea that providing government benefits to the poor and unemployed will serve to create jobs, much less 9 to 10 million of them. That’s just magical thinking.
Rosenberg provides this explanation for the employment fairy (from Mark Zandi of Moody’s Economy.com):
The House stimulus plan includes some $100 billion over two years in income support for those households under significant financial pressure. This includes extra benefits for workers who exhaust their regular 26 weeks of unemployment insurance benefits; expanded food stamp payments; and help meeting COBRA payments for unemployed workers trying to hold onto their health insurance.
Increased income support has been part of the federal response to most recessions, and for good reason: It is the most efficient way to prime the economy’s pump. Simulations of the Moody’s Economy.com macroeconomic model show that every dollar spent on UI benefits generates an estimated $1.63 in near-term GDP.x Boosting food stamp payments by $1 increases GDP by $1.73 (see Table 2). People who receive these benefits are hard pressed and will spend any financial aid they receive very quickly.
Another advantage is that these programs are already operating and can quickly deliver a benefit increase to recipients. The virtue of extending UI benefits goes beyond simply providing aid for the jobless to more broadly shoring up household confidence. Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose their sources of support.xi Increasing food stamp benefits has the added virtue of helping people ineligible for UI such as part-time workers.
Whatever the virtues of income support, and even if that support will be quickly spent in the economy, there is no justification for concluding that it will expand the economy. At best, it can stabilize a downturn by maintaining some level of consumer spending. But that does not expand the economy in any way, shape or form, and it certainly doesn’t create jobs an unprecedented level as suggested by Rosenberg.
Indeed, in order to give money to the poor and jobless, the government has to take money fr0m someplace else. Since it doesn’t create anything, the government will either (i) tax those who are working and creating wealth at higher rates, (ii) borrow money, or (iii) print money. Again, these are not wealth producing actions, but instead wealth destroying ones. It is true that, assuming such income support shortens a downturn, tax receipts will eventually outpace the costs of funding those supports. What is not true is that the government benefits will create jobs.
On the one hand, of course, I don’t want to discourage the left from turning on Obama (enemy of my enemy and all that). It just pains me to see it done based on such absurd premises.
Marion Berry, Democratic Representative from Arkansas, has decided to retire from Congress voluntarily instead of chancing an involuntary retirement via the ballot box. Berry is considered a “blue dog” Democrat and is from a nominally conservative state whose voters have made it clear they don’t support the policies or agenda of this Congress or this president.
Berry relates an incident that struck me as the ultimate in hubris and arrogance:
Berry recounted meetings with White House officials, reminiscent of some during the Clinton days, where he and others urged them not to force Blue Dogs “off into that swamp” of supporting bills that would be unpopular with voters back home.
“I’ve been doing that with this White House, and they just don’t seem to give it any credibility at all,” Berry said. “They just kept telling us how good it was going to be. The president himself, when that was brought up in one group, said, ‘Well, the big difference here and in ’94 was you’ve got me.’ We’re going to see how much difference that makes now.” [snip]
What got me laughing was how badly that statement may come to haunt Obama. They certainly have him, but as the political stars are aligning right now, “me” may end up in worse shape than did Bill Clinton. He’s already seen a super-majority go by the boards in the Senate – something Clinton never had – and it isn’t at all impossible that what most people would consider prohibitive majorities in both houses of Congress could be significantly reduced or, possibly, flip – although the latter is unlikely.
The only reason it wouldn’t be like ’94 is because there are enough Democratic safe seats to prevent the flip. But then, after Massachusetts, one has to wonder how many really safe seats there are. And what if the GOP trots something like this out in the interim?
In a recent interview with Diane Sawyer, President Obama said:
“I’d rather be a really good one-term president than a mediocre two-term president.”
There is a third option which he obviously avoided. He could end up being a very mediocre and Carteresque one-term president the way things are trending.
President Obama is about to do what the pundits love to describe as a “hard pivot”. What that really means is he’s going to try to change th subject enough to divert attention from his troubles and give the impression he’s doing something for the people that they actually want. The first part of the hard pivot was his attack on banking and Wall Street. Meeting with a modicum of populist success there and in the wake of the message from Massachusetts, he’s decided it is now time to focus on jobs, the middle class and, of all things, spending.
Well sort of. He’s going to address run-away spending fostered by a Democratic Congress (don’t forget – its been a Democratic Congress for the last 4 years that has increased spending by $900 billion over the last 3 years) by asking for a 3 year spending freeze. Wait. A 3 year spending freeze on non-security discretionary spending.
Make sure you understand that. Congress is quietly trying to raise the debt ceiling another 1.9 trillion dollars and Mr. Obama decides for a symbolism over substance move to address the deficit spending. The result?
The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.
Or put another way, we will “save” less over 10 years than we’re presently running up a month in deficit spending.
Don’t get me wrong here – any spending reduction is good news. But this spending cut – or spending freeze, because it isn’t really a cut – doesn’t at all address the problem of runaway deficit spending. It is another example of the smoke and mirrors for which this administration has become so famous. No one who is seriously concerned about the depth of our deficit spending habit is going to take this piddling $25 billion a year freeze on spending as a serious attempt to cut the deficit. This is a reaction to public concern over the debt. And while it may sound good to the uninformed in the State of the Union address, it is a trivial drop in the public spending bucket.
Obama likes to say that he doesn’t want to “kick the can down the road” when it comes to domestic issues. Well he’s not only kicking the can down the road when it comes to domestic deficit spending, he’s making it bigger too boot. While he’ll tout the “savings” on this end, the spending on the other end will increase dramatically. You are required to “suspend disbelief”, ignore the increased spending and pretend this is an earnest attempt to reign in the deficit.
If he wants to be seen as serious about this, he can cancel the rest of the stimulus, which had done next to nothing to help relieve joblessness. He can ask Congress to cancel the omnibus spending bill which was passed earlier this year and return the money that hasn’t been spent. And he can return what is left of the TARP money to the Treasury. And if he’s really interested in not kicking the can down the road, he can address the real drains on the budget – Medicare, Medicaid, and Social Security. But we all know that’s not going to happen – in fact, he and the Democrats are trying to grow two of those three programs as we speak.
So while this will be described by the adoring media as part of that “hard pivot” to address the public’s concerns, it’s really a bone (and a tiny one at that) thrown to try to buy off those who really don’t pay close attention and to give the impression he’s serious about the deficit and the debt. Don’t be fooled – he’s serious about neither, and that’s been obvious since he was the junior Senator from Illinois. Nothing has changed since he ascended to the presidency.