Apparently Joe Biden is the one chosen to carry the story that the reason the $862 billion “stimulus” plan failed is because of the stingy GOP.
Ed Morrissey pulls that apart like a kid pulling the wings off a fly. First Biden:
“There’s a lot of people at the time argued it was too small,” he said. “A lot of people in our administration…even some Republican economists and some Nobel laureates like Paul Krugman, who continues to argue it was too small.”
“But, you know,” Biden told Tapper, “there was a reality. In order to get what we got passed, we had to find Republican votes. And we found three. And we finally got it passed,” Biden said.
But if it wasn’t for the legislative reality, Biden explained, “I think it would have been bigger. I think it would have been bigger. In fact, what we offered was slightly bigger than that. But the truth of the matter is that the recovery package, everybody’s talking about it [like] it’s over. The truth is now, we’re spending more now this summer than we — I’m calling this…the summer of recovery,” the Vice President said.
"Legislative reality" at the time consisted of prohibitive majorities on the Democrats side in Congress. They ddin’t need a single GOP vote – not one. And, in fact, as Morrissey points out, the original package was to be $775 billion and the final package was $862 billion pig we got stuck with. In fact it was bigger than what had been asked for by Biden and company. You have to love the revisionist history, don’t you?
Of course Biden is pretty sure the victory in Iraq is possibly one of the "greatest accomplishments" of this administration so it’s no like he’s new at rewriting history. Morrisey also provides us with a couple of Obama quotes that sort of kick the Biden contention in the gut:
February 5th, 2009:
While efforts have been under way in the Senate to whittle the plan back to $800 billion or less, Mr. Hoyer said he believed it should be higher, at like $880 billion. Earlier on Air Force One, Mr. Obama was asked by pool reporters traveling with him about the size of the proposal …
Asked if the figure should be $800 billion and not more, Mr. Obama said: “Well, I gave you a range. I think we’re in range.”
And February 9th, 2009:
“It is the right size, it is the right scope. Broadly speaking it has the right priorities to create jobs that will jump-start our economy and transform it for the 21st century,” Obama said of the more than $800 billion bill at a rally in Elkhart, Indiana.
If the stimulus was too small (it wasn’t), it had zip to do with the GOP. And Joe and company isn’t fooling anyone but those who want to believe fantasy over reality. As usual, the Democrats blame-game runs into reality and facts and comes out second-best.
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Mort Zuckerman, a former Obama supporter, has again gone after the President’s economic policies as the primary source of the economic non-recovery. In a long opinion piece, Zuckerman spells out the exceptionalism of American business through our history and why it has been able to weather financial storms of the past and come out in much better shape than other countries.
The ‘storm’ metaphor is apt, since Zuckerman likens the Obama policies to “our economic Katrina”. Not the economic problem itself, but the administration and Democratic Congress’s answer to the problem. Here’s his summation:
The unique danger today is the possibility that we may face longer-term stagnation as a consequence of relying too heavily on borrowed money. When the housing and credit bubbles burst in 2007 and 2008, the unemployment rate soared to double digits and caused a cascade of shock throughout the credit markets and the banking system. Washington’s ability to initiate a resurgence is now limited by the long-term dangers of our deficits and our debts.
But one unfortunate pattern that has emerged in the last 18 months is to lay all the blame for our difficulties only on the business community and the financial world. This quite ignores the role of Congress in many areas, but most glaringly in forcing Fannie Mae, Freddie Mac, and the Federal Housing Administration to back loans to people who could not afford them. And not to mention the role of the Securities and Exchange Commission, which in 2004 sanctioned higher levels of leverage for financial firms, from 12 times equity to over 30 times equity.
This predilection to blame business is manifest in the unnecessary and provocative anti-business sentiment revealed by President Obama in a recent speech that was supposed to be seeking the support of the business community for a doubling of exports over the next five years. "In the absence of sound oversight," he said, "responsible businesses are forced to compete against unscrupulous and underhanded businesses, who are unencumbered by any restrictions on activities that might harm the environment, or take advantage of middle-class families, or threaten to bring down the entire financial system." This kind of gratuitous and overstated demonization of business is exactly the wrong approach. It ignores the disappointment of a stimulus program that was ill-designed to produce the jobs the president promised—that famous 8 percent unemployment ceiling.
But it’s not just the rhetoric that undermines the confidence the business community needs to find if it is to invest. Consider the new generation of regulatory rules, increased bureaucracy, and higher taxes created by the Obama administration. For example, the new financial regulation bill includes nearly 500 "rule-makings," studies, and reports, compared with just 14 in total for the controversial Sarbanes-Oxley bill, passed after the financial scandals of Enron and WorldCom. The disillusionment has spread to the Business Roundtable, the U.S. Chamber of Commerce, and the National Federation of Independent Business (NFIB), which represents small businesses that normally account for roughly 60 percent of job creation.
The chief economist of the NFIB, William Dunkelberg, put it clearly: Small business owners "do not trust the economic policies in place or proposed." He also said, "The U.S. economy faces hurricane force headwinds and the government is at the center of the storm, making an economic recovery very difficult."
Our economic Katrina, in short.
Note that even Zuckerman recognizes the government role in the economic turmoil that was generated in late 2008, but also notes that they simply have ignored the government role in favor of blaming business. Half a trillion dollars have been quietly pumped into Freddie and Fannie and both have been delisted from the stock exchange so investors can no longer monitor them.
Instead the focus has been on blaming the private sector and clamping down on perceived problems with hundreds if not thousands of new regulations. The regulations, of course, will put a new, onerous and costly burden on the business community even while it is that community which is critical to recovery and employment.
In fact, it seems that the administration and Congressional Democrats talk out of one side of their mouths about how jobs are their number one focus (actually unemployment benefits seem to constitute the entirety of the focus) while out of the other side they talk about how “Wall Street and the banks” are the prime villains in our economic woes.
In that atmosphere, as unsettled as any category 5 hurricane can accomplish, business is battening down the hatches, moving everything inside and abandoning the marketplace until the instability subsides and a more pro-business administration is in place.
Instead of doing what it can to settle the market place and put policies in place that encourage and provide incentive to businesses to expand and hire, this Congress and administration continue to wage war on the private economic engine of the country.
And the results remain plain for anyone with a pair of eyes to see. Stagnation, no growth, high unemployment and the real possibility of a double dip recession. All to purse the “progressive” anti-business agenda and gain more control over the private economy. Clearly they simply refuse to let this crisis go to waste, and have chosen to further cripple our ability to recover instead of aiding and abetting it.
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Gallup’s latest poll brings us back to reality:
Gallup Daily tracking finds Americans’ confidence in the economy significantly lower so far in July than in June. And confidence in June was, in turn, down from May. The Gallup Economic Confidence Index for July 1-13, at -35, is lower than any monthly average in more than a year.
Recovery summer isn’t off to a very blazing start. If the administration and its spinmeisters think they’re selling the recovery, they need to “reset” their calculation:
The decline in confidence seen in recent months is owing primarily to mounting public skepticism with the economy’s direction. Thus far in July, 30% of Americans, on average, have said the economy is getting better and 65% have said it is getting worse, for a net -35 economic outlook score. This is down sharply from -13 in April.
Economic confidence is a critical key to any recovery. Once consumers are sold on the economy’s recovery, positive growth is usually the result. The opposite is also true. That’s because consumers who have lost confidence in the economy are more likely to put off buying anything but necessities. The obvious economic repercussions of that sort of thinking is to slow growth and thus delay (or kill) any recovery.
The political problem here (I think the economic problems should be obvious to all) is that the confidence of the consumer in the economy is heading down while all the spin is telling us we’re recovering quite well, thank you very much.
In other words, the political sales job on the economy and recover – critical to Democrats going into the mid-term elections – isn’t taking. Consumers hear the pitch, look around them and not seeing what is said to exist, are rejecting it for the reality they are seeing and living.
Bad mojo for Dems looking at an election in 4 months. That’s has caused all sorts of inter-party whining, wailing and fighting. Meanwhile companies do what companies do when they lack confidence in the economy (and the policies of the government) – nothing.
Economically, without a true miracle, things will not begin to turn around sufficiently in the economy to be of any help to Democrats in November. It appears it isn’t a question of whether or not they’ll lose seats, it is a question of how many. With the numbers we’re seeing in various polls about how the electorate views the Democratic Congress and Obama administration’s economic policies, it’s clear that most have decided that giving the GOP another chance is the least of their bad choices for this coming election.
Whether that has much of any impact, given the demonstrated obstinate nature of this administration, in the new Congress (and assuming they take control of at least on house in Congress) remains to be seen. But if the Republicans take the House, the great blame-shifter in the White House will have a new entity on which to blame any continued economic failure.
Or, shorter for the GOP, be careful of what you wish for.
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he NY Post reminds us that the Joe Biden/Christina Romer dog-and-pony show now currently touring and touting some amazing "magical" job creation numbers are the same crew that gave us other estimates of job creation in the past:
Last year, when they touted their jobs figures, they wound up backtracking — after it turned out that hundreds of jobs were included from congressional districts that didn’t even exist.
Biden later admitted the data were flawed, noting that "further updates and corrections are going to be needed."
Then he and Obama bragged about new job numbers for May — some 430,000 of them. Except that 411,000 were temporary, part-time positions created by the Census Bureau.
Now the claim is that somehow, despite the unemployment numbers, they’ve managed to “create” or “save” anywhere from 2.5 million to 3.6 million jobs with their excellent management of the financial and economic crisis.
Of course no one can put a finger on what jobs were “created” or, really, what jobs were “saved.” Says Romer, apparently trying desperately to keep some shred of professional integrity in tact:
"There’s obviously a lot of uncertainty about any jobs estimate," Romer acknowledged.
Really? That’s certainly true of the estimates this administration has put forth. However, as the Post points out, the timing of this estimate is perfect. This estimate shows an increase of 20% over the last estimate that was found to be based in fraudulent numbers. As the Post notes, this estimate arrives just as Obama’s poll numbers are down.
All that anyone really needs to know is that this all started within the administration when it promised that the massive pork bill of nearly a trillion dollars it passed early in its tenure would keep the unemployment rate under 8%. It didn’t. In fact it didn’t even come close. And the figure is now around 9.5% and shows no indication of falling anytime soon. Where these magic jobs are and why they haven’t had any impact remains a mystery.
Of course the entire point is to understand that they can (and are) claim whatever they wish and it’s pretty hard to check. But skeptics, like myself, aren’t going to be convinced by mere claims. Hard numbers that can be checked and verified will have to follow. And it is my contention that when they do, we’ll see a repeat of the previous two attempts at pulling the wool over the eyes of the America people for political reasons – something this administration shamelessly attempts pretty consistently on a number of fronts.
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This weekend on on Fox News Sunday, Jon Kyl (rather inartfully) set up a classic struggle between political views of how government economics work:
What’s remarkable about Kyl’s position here is that it appears to be philosophical. “You should never have to offset cost of a deliberate decision to reduce tax rates on Americans,” he said. Never! This is much crazier than anything you hear from Democrats. Imagine if some Democrat — and a member of the Senate Democratic leadership, no less — said that as a matter of principle, spending should never be offset. He’d be laughed out of the room.
Back in the real world, tax cuts and spending increases have the exact same affect on the budget deficit. This sort of comment is how you tell people who care about the deficit apart from people who are interested in exploiting fears of the deficit to shrink the size of government.
While Kyl’s phrasing lends to this sort of demagogic mockery, it’s hard to blame Klein, et al., after the spending binge that followed the Bush tax cuts of 2001. Kyl’s immediate point — that paying for some tax cuts by raising other taxes — is spot on. Shuffling around the types of taxes that one pays makes no sense if the idea is to let Americans hold onto more of their money. Indeed, he made exactly that point after his Fox News Sunday appearance (via Daniel Foster):
“Who does the money belong to?” Kyl asked rhetorically. “The money belongs to the taxpayer, to the people. The money does not belong to the government, and yet that’s what this kind of a rigid paygo rule would assume: that the money belongs to the government, and therefore if you’re going to deny the government some of that revenue through a tax cut, you have to make the government whole, because the government can never lose any money. That would mean that you could never reduce the size of government. Each year, when it gets bigger, it stays at that level or it gets bigger yet, but you can never reduce it.”
As Foster notes, “Kyl is openly advocating some ‘starve the beast’ unfunded tax cuts.” Klein counters this with a reasonable budgetary point: deficits are deficits, whether from reduced income or increased spending. Yet, this misses the real issue:
He who has the money expands; he who does not shrinks.
According to the “starve the beast” strategy, if government takes in less revenue than it spends, eventually it will have to cut spending in order to match revenues, and thus the government will shrink. At the same time, if the private sector has more money in its pocket, the economy will expand. While the efficacy of this strategy leaves much to be desired in practice, at least one part of the equation can’t be denied, i.e. the more money that the government takes in, the more it expands.
The same holds true for the private sector. The fewer taxes it is forced to pay (that is, the more money it is allowed to keep), the greater it expands.
So, the real question is, which do we want to expand: the private sector or the government?
Kyl is dead-on in his describing the pervasive attitude of statists of all stripes. They really think the money belongs to the government and should be dispersed as it sees fit (provided, of course, that government is run by officials suitably attuned to the “common good”). That is where the struggle lies. Statists believe that government is the best source of economic expansion while
history individualists commend the opposite.
If the statists are correct, then we should want the government to expand, and deficits should be run up without commensurate spending cuts or, alternatively, with tax increases. If, instead, the private sector holds the key to economic expansion, then deficits (if any) should be met by spending cuts. Period.
To be sure, in order to live under a rule of law, some minimal level of government spending is required. Ideally, taxes, user fees, etc. pay for that minimal level, but there will always come a time when unfortunate events necessitate dipping into the red. It is in those times when raising taxes may be the best solution on a temporary basis (which hasn’t always worked out very well). Once those events subside, however, continuing to expand government spending can only be done to the detriment of the private sector, which will then shrink.
In the end, whether the electorate chooses an expansion of the state or the private sector will be the real deciding factor in whether the economy expands or not. All deficit spending may be equal in budgetary terms, but only one course will actually serve to expand the economy. On that score, Kyl has the better of the argument.
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Ben White at Politico tells us:
Obama has been happy to be seen by voters as cracking down on Wall Street but those efforts have had an unintended result: feeding a sense that the president and his party are indifferent or even actively hostile toward big business, whether those businesses are Silicon Valley tech companies, Midwestern manufacturers or Main Street small businesses.
And it is more than just politics: Obama’s aides believe confidence in the general direction of White House policy has an effect on the willingness of corporations to hire, invest and push the economy toward a more solid recovery.
We’ve all heard about the $1.8 trillion that companies and corporations have saved while they sit on the side-lines refusing to invest or hire. We’ve seen the likes of Mort Zuckerman declare that the policies and attitude of the administration are decidedly "anti-business". And we’ve seen little or no evidence that anything the government has done has, in fact, spurred economic recovery.
So – what’s the administration’s answer? A public relations campaign where they essentially tell us things have happened we know haven’t, take credit for things they had little to do with and essentially try to spin their way out of the "anti-business" label.
Or, “business as usual”:
So the White House has launched a campaign to help instill that confidence, highlighted by Obama’s remarks on Wednesday stressing his commitment to lifting trade barriers as a way to spur economic growth. That was followed by Treasury Secretary Timothy Geithner’s interview on CNBC’s “Kudlow Report” last night — following his spot on PBS’ “NewsHour” on Tuesday. Obama talked up the economy in Missouri Thursday as well.
In a Thursday interview, White House chief of staff Rahm Emanuel argued that rather than recoiling against Obama, business leaders should be grateful for his support on at least a half-dozen counts: his advocacy of greater international trade and education reform open markets despite union skepticism; his rejection of calls from some quarters to nationalize banks during the financial meltdown; the rescue of the automobile industry; the fact that the overhaul of health care preserved the private delivery system; the fact that billions in the stimulus package benefited business with lucrative new contracts, and that financial regulation reform will take away the uncertainty that existed with a broken, pre-crash regulatory apparatus.
But you see, businesses know all of that and they aren’t “grateful”, they’re alarmed. Not only that, they don’t see private banks and financial institutions as the sole problem in the financial meltdown – but they do see government trying to pretend it was all Wall Street and greedy corporations, while Freddie and Fannie have become half a trillion dollar financial sink holes that politicians don’t want to talk about.
They also understand that the Bush tax cuts are expiring, new health care laws and taxes are pending, new and onerous regulations are in the offing and the lame duck Congress will most likely try to push through some version of cap-and-trade. Add to that failing states like Illinois and California and the probability of higher taxes all the way around.
And then there’s the possibility of a double-dip recession.
Why wouldn’t business be sitting on their money given the “rest of the story” that the administration conveniently leaves out of their pitch?
This is a crew that has supreme confidence in their ability to propagandize anything and get away with it. And why shouldn’t they – look who is sitting in the White House. You’d have to believe if you can sell an empty suit to a majority of the nation, you can probably sell anything.
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If anyone has been out and about in this economy, they don’t find the numbers “unexpected" at all:
Claims increased 13,000, to 472,000, while forecasters expected a slight drop to about 455,000 from the previous week’s seasonally adjusted 457,000, according to Labor Department figures released Thursday.
Not good. The Hill tries to put lipstick on this pig:
The four-week moving average, which smoothes out the volatility of the weekly number and is a better look at the employment picture, increased 3,250, to 466,500, from the previous week’s revised average of 463,250, the highest in almost three months.
But the fact of the matter is 3,250 jobs in a month isn’t even a good statistical blip. In order to see real job creation numbers, we have to be in the neighborhood of creating 250,000 jobs over the same period. So essentially we have a job deficit of about 700,000 at the moment.
“Economists” cited by The Hill apparently have a much lower target in mind:
Economists argue that jobless claims need to drop into the low 400,000s or high 300,000s to reflect stronger job growth in the private sector.
Again, that’s not “job growth” – that’s just smaller decline in job losses. And that decline may have nothing to do with reflecting “job growth”. Job “growth” would be on the positive side of these numbers. Until they are positive, we’re essentially replacing a lost job with a new job or just seeing fewer losses. Job recovery, if you will, takes place between these numbers and about 120,000 to 140,000 jobs which is the maintenance level of the unemployment percentage. IOW, if we’re putting on 120,000 to 140,000, we’re essentially treading water in the jobs area. Only once we’re past those numbers on the positive side are jobs “growing” in number.
Anyway, these numbers aren’t unexpected and they certainly aren’t good news.
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If ever there was an indicator – an example – of the appalling level of economic ignorance to be found among our national legislators, this from Nancy Pelosi is perfect:
Talking to reporters, the House speaker was defending a jobless benefits extension against those who say it gives recipients little incentive to work. By her reasoning, those checks are helping give somebody a job. "It injects demand into the economy," Pelosi said, arguing that when families have money to spend it keeps the economy churning. "It creates jobs faster than almost any other initiative you can name."
Pelosi said the aid has the "double benefit" of helping those who lost their jobs and acting as a "job creator" on the side.
Demand is not created or "injected" by jobless benefits. At best may be, at some level, maintained. But it also could be argued that if the drop in income in an area is wide enough (former salary income v. jobless benefit income) it could cost jobs.
For instance the store clerk in a grocery store can be economically justified if the average grocery bill in the area is X. But if it falls to Y, which is likely with belt tightening by those receiving lesser unemployment benefits, then the clerk’s salary is no longer economically justifiable.
Jobless benefits rarely lend themselves to purchases outside the necessities because they’re usually not a great amount of money. The benefits are a maintenance income. What they mostly do is allow the recipient to pay for food, clothing, shelter and transportation, or some combination of those necessities.
Employers don’t create businesses and jobs in anticipation of receiving some of a person’s unemployment check. So unemployment checks are not out there creating jobs "faster than almost any other initiative you can name". In fact, their extension most likely inhibits job seeking (as the person and/or family adjust their lifestyle to the income until all necessities are covered).
This is an amazing example of the appalling economic ignorance that has gotten this country in the financial hole it is in and seems bound and determined to dig it deeper. And she’s 3 heartbeats away, folks.
[MICHAEL ADDS:] The left has been pushing this idea for awhile. I tackled it back in January:
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.
And again in February. Based on whatever studies they’ve compiled to prove their point, the Democrats are going to simply go with this economic model sans examination.
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The follow-up Supreme Court decision to Heller that was handed down yesterday marked a significant point in Second Amendment history. And that has not just gun-rights advocates jumping for joy, but also Democrats:
For them, the court’s groundbreaking decision couldn’t have been more beneficial to the cause in November. Now, Democratic candidates across the map figure they have one less issue to worry about on the campaign trail. And they won’t have to defend against Republican attacks over gun rights and an angry, energized base of gun owners.
“It removes guns as a political issue because everyone now agrees that the Second Amendment is an individual right and everybody agrees that it’s subject to regulation,” said Lanae Erickson, deputy director of the culture program at the centrist think tank Third Way.
A House Democratic aide agreed that the court’s decision removed a potentially combustible element from the mix.
“The Supreme Court ruled here that you have a fundamental right to own and bear arms, and that means at the national level it’s harder – whether it’s Republicans or whether it’s the [National Rifle Association] – to throw that claim out: if Democrats are in charge they’re going to come get your guns,” said the aide. “It pretty much took that off the table.”
Despite the fact that there are a fair number of pro-gun Democrats in Congress, members of the Donkey Party are typically slammed as “gun-grabbers” in close elections. With the decision in McDonald, that issue is basically moot for Democrats running red or purple districts.
The likely removal—or at least neutralization—of the gun issue this fall is of no small matter in the battle for the House and Senate. The Democratic majorities in both chambers were built, in part, on victories in pro-gun states and districts that had until recently been difficult terrain for Democratic candidates as a result of the national party’s position on gun control.
For congressional Democrats—especially those in seats outside major metropolitan areas where support for gun rights runs high—the ruling offered a chance to assert their pro-gun bona fides.
John Anzalone, a prominent Alabama-based pollster with a roster of Southern Democratic clients, called it a “win, win, win, win” situation for everyone—and above all, “for conservative Democrats who will be able to use it as a credential that they’re conservative. This is a tough political environment; you’re going to see Southern, Western Democrats use it and stand up for gun rights.”
Unfortunately for the Democrats, gun rights issues weren’t likely to be very high on the list of grievances redressed at the ballot box this Fall. Mired in the middle of the Great Recession, economic issues will be paramount in November, especially on jobs and tax policy.
In fact, although Democrats are cheering the absence of Second Amendment posturing thanks to McDonald, to the extent such issue would have been raised, it would have served as a distraction from the core concerns of voters. Now, with that issue off the table, the Democratic spending policies are cast in stark relief. While out on the hustings, they will be forced to answer for their support of ObamaCare, Stimulus, Cap and Trade, Finreg and the rest of the Democratic agenda that’s done nothing to help the economy, and sure looks like it may have done much to hinder it.
In political time, November 2nd is an eternity away. There is really no telling what might happen between now and then that might influence various elections, whether on a national or local level. Even so, I wouldn’t be surprised if Democrats were wishing they had the distraction of gun-rights issues this Fall instead of being forced to face the economic policy music. It will be a baleful tune.
By that I mean the belief that massive public deficit spending is the cure for an economic recession/depression?
It should be. And that’s the argument going on in at the G20 meeting in Toronto. The US is urging Europe and the rest of the world to “pump it up”. The rest of the world, rightly in my estimation, is resistant to the plea. The WSJ reviews why for us, using the US’s experience as the case study:
Like many bad ideas, the current Keynesian revival began under George W. Bush. Larry Summers, then a private economist, told Congress that a “timely, targeted and temporary” spending program of $150 billion was urgently needed to boost consumer “demand.” Democrats who had retaken Congress adopted the idea—they love an excuse to spend—and the politically tapped-out Mr. Bush went along with $168 billion in spending and one-time tax rebates.
The cash did produce a statistical blip in GDP growth in mid-2008, but it didn’t stop the financial panic and second phase of recession. So enter Stimulus II, with Mr. Summers again leading the intellectual charge, this time as President Obama’s adviser and this time suggesting upwards of $500 billion. When Congress was done two months later, in February 2009, the amount was $862 billion. A pair of White House economists famously promised that this spending would keep the unemployment rate below 8%.
Seventeen months later, and despite historically easy monetary policy for that entire period, the jobless rate is still 9.7%. Yesterday, the Bureau of Economic Analysis once again reduced the GDP estimate for first quarter growth, this time to 2.7%, while economic indicators in the second quarter have been mediocre. As the nearby table shows, this is a far cry from the snappy recovery that typically follows a steep recession, most recently in 1983-84 after the Reagan tax cuts.
The chart in question:
2.7% is not good, especially when most of the spending is government spending. Or said another way – this isn’t a great advertisement for over a trillion dollars spent to “stimulate” the economy.
And, as you see here – for the money, job creation has been absolutely abysmal, except for government jobs.
Now couple all of that with the awful news about house sales this past month (down 33%) and it would appear, economically, that the “stimulus” has essentially failed in its dual role of stimulating economic and job growth, wouldn’t you say?
Yet it seems the spin doctors in the administration want to pretend otherwise and, by the way, hook the rest of the world on their public spending addiciton. Thankfully, at least for their citizens, most of the rest of the world isn’t buying into the scheme. We, however, are stuck with the world’s most profligate spendthrifts in the guise of the Obama administration and the Democratic Congress.
We are told to let Congress continue to spend and borrow until the precise moment when Mr. Summers and Mark Zandi and the other architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced. Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more government control over nearly every area of the economy. Even the CEOs of the Business Roundtable now see the damage this is doing.
That’s a long way of saying the anticipation of raised taxes to pay off this unprecedented and massive assumption of public debt is keeping businesses on the sidelines and the business atmosphere unsettled. They’re not about to expand their businesses until they have a much better handle on what it will cost them to do so. That’s why, for what little recovery is taking place, it is mostly a jobless one.
Most who understand at least rudimentary economics knows that some “stimulus” from government spending, coupled with other government actions, such as tax cuts for individuals and businesses, may have a beneficial effect in times of recession. The stimulus funds get money in circulation and the tax cuts encourage businesses to expand and hire.
What we’ve seen is nothing but “stimulus” – no tax cuts, no incentive for businesses to come off the side lines. Additionally we’ve seen attacks on the business community, calls for much more draconian regulation and new mandates imposed by legislation such as health care reform.
The result has been a seemingly perpetually unsettled business atmosphere that has provided absolutely no incentive for companies to expand or hire.
What we should have all taken from this is that government “stimulus” funded by massive public debt isn’t the answer we were led to believe it was and, when it is all that is done, is more of a problem than any sort of a solution. All the “stimulus” has managed to accomplish is the promise of large tax increases to pay down the debt it created.
The other service it hopefully has rendered is to prove defective the once cherished Keynesian belief that government can spend us out of recessions.
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