Free Markets, Free People

Congress

Meltdown On The Left

Dean Baker at American Prospect has an uninformed hissy fit over the amendment GA Sen Johnny Isakson offered to the pork, er stimulus bill. The amendment gives a $15,000 tax credit to those buying a principle residence – note that, principle residence – next year. Baker is sure it is the house flipper’s amendment.

And this is before we get to any gaming. It’s hard to see why tens of millions of people wouldn’t figure out a way to buy a house from a friend or relative and get their $15k. If we can get one-third of the country’s homes to change hands (lots of jobs for realtors) that would be good for $375 billion.

But no cuts

The usual solution

It would have been helpful if reporters had talked to an analyst who could have explained these points for readers.

As much as I criticize the media, someone needs to tell Baker that this information is being and has been reported (I heard it explained when the amendment was first discussed). Below is one example:

The U.S. Senate on Wednesday unanimously approved an amendment to the economic stimulus bill by U.S. Senator Johnny Isakson, R-Ga., that gives a $15,000 tax credit to anyone who buys a home in the next year.

Isakson’s amendment would provide a direct tax credit to any homebuyer who buys any home. The amount of the tax credit would be $15,000 or 10 percent of the purchase price, whichever is less. Purchases must be made within one year of the legislation’s enactment, and the tax credit would not have to be repaid.

The amendment would allow taxpayers to claim the credit on their 2008 income tax return. It also seeks to prevent misuse by only allowing purchases of a principle residence and by recapturing the credit if the home is sold within two years of purchase.

Pretty clear to me.

That dispensed with, here’s the real reason the left is so up in arms with this amendment:

Somehow, Isakson has this thing costing just $19 billion. Let’s break the Washington rules and try a little arithmetic. Even with weakness in the housing market, it is still virtually certain
that we will sell close to 5 million homes in 2009. The overwhelming majority would qualify for the full credit. So, we get 5 million times $15,000. That sounds a lot like $75 billion.

That’s right – this would put more money in people’s pockets and make less available for the government to spend on dog parks and Frisbee golf courses.

Greg Sargent says:

But the ultimate real world cost of this measure has been disputed, with some critics predicting that it would cost much more, given the expected levels of housing sales this year.

Turns out the critics may have been right. The nonpartisan Joint Committee on Taxation has just sent a letter to Chuck Schumer, who’s on the Finance Committee, responding to Schumer’s request that the Committee score an estimate of the measure’s cost.

The total price estimated by the Committee? $35.5 billion — double the original cost, says the letter, which was sent our way by Schumer’s staff.

That’s kind of a big deal, and could actually alter the ultimate cost of the overall bill, potentially creating more complications as this gargantuan measure lurches fitfully towards passage.

Anyone – do you believe that all of the estimates contained in this “gargantuan measure” are dead on? That, among 900 billion of government spending, there will be no cost overruns, budget overruns or cost underestimates?

The problem, as stated, is it “costs” the government by putting money precisely where it belongs – in the pockets of the citizens.

And that’s because most of them believe, as Robert Reich does, that government is the only answer:

Regardless of your ideological stripe, you’ve got to see that when consumers and businesses stop spending and investing, there’s only entity left to step into the breach. It’s government. Major increases in government spending are necessary, and the spending must be on a very large scale.

Notice the smuggled premise – that consumer and business spending can’t be spurred by any other means than government spending. Of course that’s nonsense. And the Isakson amendment is one of many ways that can be done. Other obvious means would be a withholding tax cut (or suspension). That’s an instant stimulus.

The usual result

The predictable result

The CBO says the debt being incurred through this bill will crowd out private investment over the coming years. The key to recovery is private investment which leads to business expansion which leads to jobs.

What part of that don’t the Democrats understand?

Well, if you read Joshua Holland, most of it:

And the GOP’s approach is based on the theory that a “rising tide will lift all boats.” A simple question: how’s that theory been workin’ out for ya?

Mr. Holland, look around you and how you and others live. Then take a trip to, oh, I don’t know, China. Tell us how those boats floated in the past as compared to how they’re floating now. Or India. Or Poland. Or the Czech Republic. Etc.

Big Labor Wins, America Loses

The Democrats just couldn’t bring themselves to eliminate the “Buy American” provison of the stimulus bill.  They owe Big Labor and I”m sure Big Labor reminded them of that prior to the vote:

On another contentious issue, the Senate softened a labor-backed provision requiring that only U.S.-made iron or steel used in construction projects paid for in the bill. A move by Sen. John McCain, R-Ariz., to delete the so-called Buy American requirement failed, 31-65.

But with Obama voicing concern about the provision, the requirement was changed to specify that U.S. international trade agreements not to be violated.

Read that last line carefully. How in the world does keeping the “Buy American” requirement not violate US international trade agreements?

“Just words.”

Hope and change.

~McQ

The Tin Ear: More Do As I Say, Not As I Do

Kingsmill Spa and Resort

Kingsmill Spa and Resort

Yesterday, President Obama expressed outrage at Wall Street’s “excesses” and  said he would cap the salaries of CEOs in institutions getting federal bailout money to $500,000 a year.  If that isn’t absurd enough:

Adding to the outrage was a flurry of reports that after taking taxpayer rescue funds, some big banks were still planning to purchase corporate jets, planned executive junkets to Las Vegas and Monte Carlo, or had spent millions of dollars on office renovations.

Can’t have that – well, except if you’re the Democrats:

The House Democratic Caucus spent more than $500,000 in taxpayer money over the past five years for its annual retreats at resorts in Pennsylvania and Virginia.

On Thursday, Democrats will head to the Kingsmill Resort and Spa in historic Williamsburg, Va., for the three-day planning powwow. The resort boasts multiple championship golf courses, a full-service spa and six restaurants.

Kingsmill's River Course - Democrats only

Kingsmill's River Course - Democrats only

And guess who’s jetting in to say “hi”:

Tonight, Obama takes his first trip as president on Air Force One for a one-day “out and back excursion” to the House Democratic Caucus retreat at the Kingsmill Resort and Spa in Williamsburg, Va.

To be fair, the Republicans had their retreat as well. But the Republicans aren’t carping about executive pay and company junkets at the presidential level, are they?  And don’t forget about the recent Democratic corporate junket with Citi.

What, there’s no place in DC in which the Dems could “retreat” to do any of this?

If a President is going to insist on box lunches and Day’s Inns for others, it might be wise to look at cutting back on a few things himself (like no more $100 a pound Wagyu beef?). But that’s leadership. And leadership is usually developed throughout life by doing things, not talking about them. So turn down those thermostats, America – while they grow orchids in the Oval office.

Hope and change.

~McQ

Josh Marshall And The Sacred Texts

Marshall’s premise is that we are, without a doubt, headed for the “Greatest Depression Ever” if Republicans don’t just capitulate and spend a trillion bucks on whatever it is the Democrats say we should spend it on.

Why?

The discussion of what to do on the Democratic side tracks more or less with textbook macroeconomics, while Republican argument track either with tax cut monomania or rhetorical claptrap intended to confuse. It’s true that macro-economics doesn’t make controlled experiments possible. And economists can’t speak to these issues with certainty. But in most areas of our lives, when faced with dire potential consequences, we put our stock with scientific or professional consensus where it exists, as it does here. Only in cases where it goes against Republican political interests or economic interests of money-backers do we prefer the schemes of yahoos and cranks to people who study the stuff for a living.

The link, if your wondering (or even had to wonder) is to Paul Krugman.

So let’s recap. Only the sacred texts hold the answer. But it’s also true that “macro-economists” can’t conduct “controlled experiments”. And it is also true that economists can’t speak to these issues with certainty.

But, by George, we should listen to them anyway. And certianly not to Republican “cranks” and “yahoos” who only have the interests of “money-backers” at heart and are truly only opposing this for political gain.

No word from Marshall as to why a Senate of 57 Democrats and 2 Independents caucusing with the Dems can’t seem to get this passed, but assuredly the reason is the Republicans and their repudiation of the sacred texts.

And correct me if I’m wrong (speaking of controlled experiments), but the last time we did the Paul Krugman macro thing in the ’30s, the results were less than stellar.

Of course, at some level, why would Republicans be trying to drive the country off a cliff? Well, not pretty to say, but they see it in their political interests. Yes, the DeMints and Coburns just don’t believe in government at all or have genuinely held if crankish economic views. But a successful Stimulus Bill would be devastating politically for the Republican party. And they know it.

Obviously Marshall hasn’t paused long enough in his rant to take a breath and realize that the stimulus package is going to pass in some form. What he’s whining about, and casting aspersions over, is the fact that the Senate Republicans (and the House Republicans as well) refused to bow at the altar of the the newly annointed and take that package of bacon without checking to see if it was spoiled. And besides, if the Republicans only have the interests of “money-backers” at heart, I’d be pleased to hear an argument which logically supports their desire to “driv[e] the country off the cliff” economically.

Yup, doesn’t resonate with me either.

If the GOP successfully bottles this up or kills it with a death of a thousand cuts, Democrats will have a good argument amongst themselves that Republicans were responsible for creating the carnage that followed. But the satisfaction will have to be amongst themselves since as a political matter it will be irrelevant. The public will be entirely within its rights to blame Democrats for any failure of government action that happened while Democrats held the White House and sizable majorities in both houses of Congress.

The public, of course, is showing much more sense than Marshall, with support for this massive mistake dropping to 37% according to Rasmussen.

And, to be clear here, if (and when) the bill does pass (since it is clear that Marshall hasn’t figured that out yet – it isn’t “if” but “when and with what”) then Republicans will be able to hold Democrats responsible for creating the debacle that follows, correct?

So either way – the failure to pass it or the responsibility for the failure that occurs when it passes – rest in the lap of Democrats.

Works for me.

Hope and change.

~McQ

Passage Of The “Stimulus” Bill Will Be A True “Lipstick On A Pig” Moment

As public support for the Democratic version of the “stimulus” package continues to tank, Democratic leaders in the Senate are desperately seeking Republican support.

Before I go on here, two things should be made clear.  A) There are two premises at work here – one says we don’t need this “stimulus” package, but should instead take the ‘pain’ now, get it over with and begin the recovery.  The other  says that government must act to ameliorate the pain and to help jump-start the economy.  B) Senate Republicans have bought into the second premise.

My point?  Like it or not (and I don’t) there’s going to be a stimulus package – just not the one now on the table.

So to the particulars. There aren’t enough votes in the Senate to pass the present version so there are a number of alternatives being offered.  One is by John McCain which cuts the package by about one-half to $445 billion.  But that’s unlikely to happen.  Waffle-boy, Sen. Lindsey Graham (R-Some of the Time), says:

Graham said he could back something between the McCain bill and the House bill. Although some Republicans would prefer to shelve the measure temporarily, hoping that spending demand will cool, other GOP lawmakers would prefer to stay on schedule and find common ground. “There’s sort of political chaos right now,” he conceded.

Got that?  This is something which must remain “on schedule” (Feb 13) vs. being well thought out and well targeted. Does it surprise you at all that their priority is an arbitrary date vs. good legislation?

And here’s what should really make you nervous:

The most ambitious effort to cut the bill is being led by Sens. Ben Nelson (D-Neb.) and Susan Collins (R-Maine), moderates in their parties who share a dislike of the current version. Collins is scheduled to visit Obama at the White House this afternoon. “I’m going to go to him with a list” of suggested deletions, she said.

Nelson said he and Collins have agreed to “tens of billions” in cuts, although he said he is skeptical that the effort will reach Collins’s target of $200 billion in reductions. The pair has counted up to 20 allies in their effort, with more Democrats than Republicans at this point.

Among the items that the Collins-Nelson initiative is targeting: $1.1 billion for comparative medical research, $350 million for Agriculture Department computers, $75 million to discourage smoking, $20 million in Interior Department funding, $400 million for HIV screening and $650 million for wildlife management.

[…]

Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, said the centrist group led by Nelson and Collins would target programs that the Congressional Budget Office has estimated would not spend their funding quickly. He said the list includes a number of proposals that will spend only about 10 percent of their funding in the next 18 months. “These become immediate candidates for review,” Conrad said of the provisions.

Whenever Republicans have Sen. Susan Collins in the lead concerning

"Stimulus Red" is the newest shade

"Stimulus Red" is the newest shade

spending, you can mostly be assured that they won’t get the best deal.

One slightly bright spot in all of this was the portion of the legislation giving Hollywood a specific and very nice tax break was stripped from the bill:

Then, on a 52 to 45 vote, the chamber stripped $246 million in tax breaks for Hollywood production companies, a measure offered by Sen. Tom Coburn (R-Okla.), the Senate’s self-appointed watchdog on federal spending. Coburn, who almost always loses his quixotic efforts to cut funding, appeared jubilant — if somewhat surprised — by his unexpected victory.

“This is a gift,” he said of the Hollywood provision. “It’s not going to stimulate the economy at all.”

One of the reasons that happened, I’m sure, is the visibility it got when it was discovered. So between now and Feb 13th (yes it’s a Friday the 13th and completely apropos for what is being legislated by Congress) more of these examples of pork and special interest legislation need to be given light.

Success for other stimulus amendments was mixed:

Later, the Senate turned away legislation to reduce the tax rate on multinational corporations that are returning earnings from overseas, as opponents argued that it was a giveaway to industry. But some new spending programs proved too politically attractive to the Senate. In a 71 to 26 vote, the Senate approved a new incentive for car buyers, at an estimated cost of $11 billion over 10 years. According to Sen. Barbara A. Mikulski (D-Md.), the amendment’s sponsor, buyers could deduct the cost of sales tax for new cars purchased between last Nov. 12 and Dec. 31, 2009. Individuals with incomes of up to $125,000 would qualify.

Of course the multinational corporation tax cut on earnings would have stimulated investment here, and that leads to what? Yup, jobs. Notice the language – letting a company keep more of what it has earned is a “giveaway”. Amazing.

Bottom line: this is going to pass in some form or fashion within the next week or so. The only thing left to do, to borrow a phrase, is to decide what shade of lipstick they’re going to put on this pig.

Hope and change.

~McQ

The Rush To Pass Global Warming Legislation

It sounds innocuous enough – at least in the broad language used below. I’m talking about Sen. Boxer’s promised push to move “global warming” legislation through Congress within weeks (or, per Boxer, no later than the end of the year):

Boxer’s principles for global warming legislation aim for a law that would:

— set “certain and enforceable” short and long-term emissions targets;

— ensure state and local entities keep working to address global warming;

— establish a market-based system that cuts carbon emissions;

— use revenues from this carbon market to help consumers make the transition to clean energy and invest in new technology and efficiency measures;

— ensure a level global playing field with incentives for polluting countries to give their share to the international effort to curb climate change.

These goals won quick applause from environmental and conservation groups, including the National Wildlife Federation, the Pew Center on Global Climate Change, Environment America and Environmental Defense Fund.

Well of course those groups applauded the list. They’ve been beating the AGW drum for years. And it occurs to me that one of the reasons Boxer is working so hard to move this into the legislative hopper as quickly as possible because the skeptic’s voices are becoming increasingly heard.

Like anything else, there’s a window for legislation and I think Boxer sees that window starting to close. The information countering the AGW nonsense is starting to build momentum. Boxer understands that at some point there will be a tipping point. Already polls have flipped and for the first time more believe the climate change we’re undergoing is the result of natural cycles and not man-made emissions.

If that gap continues to widen, and I believe it will, plus the cost to do what Boxer and the Democrats want to do is given more visibility, the opportunity to pass such legislation will wane (just as we see support for the present stimulus bill withering as more and more information about it becomes available).

Boxer and the Democrats hope to strike while the iron is hot – no pun intended.

Hope and change.

~McQ

The “Stimulus” As Written Means Increased Welfare And Protectionism

The key phrase is “as written”.

The NY Post notes:

Turning back the clock.

Turning back the clock.

Buried deep inside the massive spending orgy that Democrats jammed through the House this week lie five words that could drastically undo two decades of welfare reforms.

The very heart of the widely applauded Welfare Reform Act of 1996 is a cap on the amount of federal cash that can be sent to states each year for welfare payments.

But, thanks to the simple phrase slipped into the legislation, the new “stimulus” bill abolishes the limits on the amount of federal money for the so-called Emergency Fund, which ships welfare cash to states.

“Out of any money in the Treasury of the United States not otherwise appropriated, there are appropriated such sums as are necessary for payment to the Emergency Fund,” Democrats wrote in Section 2101 on Page 354 of the $819 billion bill. In other words, the only limit on welfare payments would be the Treasury itself.

“This re-establishes the welfare state and creates dependency all over the place,” said one startled budget analyst after reading the line.

So the limits on welfare payments, written into law when welfare was reformed, would be lifted. Welfare reform, widely panned when it was first passed, has been very successful in cutting dependency on tax payer dollars. Now, without any need evident, Democrats are attempting to reinstate welfare as we once knew and hated it.

And that means the obvious – more dependency and more government to administer it. It also will mean more taxes.

Then there’s the “Buy American” clause in the stimulus bill. It would require government to be restricted to goods and services produced by US companies.

We can't afford a trade war.

We can't afford a trade war.

Of course that sounds just peachy keen when you first hear it. Our government should buy from American firms if it can. But only if they provide the best services/products at the best price.

But that’s not what is being required. And to the rest of the world, that means protectionism. We don’t take very kindly to protectionism when others do it, so we shouldn’t be particularly surprised when they aren’t any more happy about it than we are.

So the obvious reaction by the rest of the world would most likely be to reciprocate in kind. We would see the same sorts of provisions pop up in countries we trade with.

And not as obvious is the fact that it will end up making the American goods the government is required to buy even more expensive than now.

Protectionism imposes large-scale structural sectoral dislocation, as exporters are ejected from their foreign markets and domestic producers that depend on cheap imported imports suddenly find themselves to no longer be competitive, on top of the global effective demand failure we are already suffering from.

This isn’t progress “as written”. For such a “progressive” administration, it is a return to the 20th century, and in the case of trade, the 19th century.

Hope and change.

~McQ

Old Habits? Or Business as Usual?

Please ignore the outrage you hear from Congress about Citi almost buying a new airplane. Apparently that’s an inappropriate expenditure, but this is appropriate:

New York’s Charles Rangel and five other Democratic members of the House enjoyed a trip to the Caribbean sponsored in part by Citigroup (see above) in November – after Congress had approved the $700 bailout for financial firms (including Citigroup).

The members no doubt will object to the terms “junket,” but that shoe fits. The National Legal and Policy Center, a watchdog group, has asked Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP) to investigate the Nov. 6-9 excursion to the island of St. Maarten.

It was called the Caribbean Multi-Cultural Business Conference, but “the primary purpose … for most participants appeared to be to take a vacation,” said the NLPC. And not only was the timing lousy, but “corporate sponsorship of such an event was banned by House rules adopted on March 1, 2007, in response to the (lobbyist Jack) Abramoff scandal,” the group pointed out.

Joining Rangel on that trip were Donald Payne of New Jersey, Sheila Jackson-Lee of Texas, Carolyn Cheeks Kilpatrick of Michigan, Bennie Thompson of Mississippi and Donna Christenson, delegate from the U.S. Virgin Islands.

Your “most ethical Congress ever” hard at work watching over those Wall Street fat cats.

Hope and change.

~McQ

Bailing out … Brazil?

Every time I see one of these stories I just shake my head in wonder.

Obama and Congress are frothing at the mouth at those Wall Street types for paying out 18 billion in “bonuses”.  Of course, had Congress not acted like a panicked herd of wildebeast when Paulson came flapping around declaring the sky was falling, they might have written legislation which prevented such an occurrence.

But while they prefer to yell at others, the failure to be specific about what the money could be used was theirs – the Democratic Congress.

Well here’s round two.  The great, “we have to have it now or we’ll go under” auto bailout scam of 2008.  And guess what:

Right nowGeneral Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to “complete the renovation of the line of products up to 2012.”

“It wouldn’t be logical to withdraw the investment from where we’re growing, and our goal is to protect investments in emerging markets,” he said in a statement published by the business daily Gazeta Mercantil.

So tell me, how many jobs will that billion create or preserve here, hmmm?

Hope and change.

~McQ