It’s been interesting to watch the left attempt to paint the right as obsessive about tax-cuts, to the exclusion of any other method of stimulating the economy. Josh Marshall called it “tax cut monomania”. Of course careful readers who’ve followed this debate know that’s absolute nonsense. The Republicans have bought into the premise that some level of government spending is necessary, except that it should be tightly targeted and provide immediate stiumlus.
Instead they’re faced with this bloated piece of garbage legislation derisively called the “2009 Spend Your Grand Children and Great Grand Children into Debt bill”.
I noted Marshall’s appeal to authority (the sacred macroeconomic texts) yesterday and his claim that macroeconomists couldn’t exactly run controlled experiments to prove their point. But upon reflection, I thought, that’s not precisely true. While it may not fit the classic definition of a “controlled experiment”, Japan’s 2 decade long struggle to revive its economy is about as close as we’re going to get.
And you know what – the lessons learned from that say we’re about to commit the same mistakes they did. President Obama claimed, last night, that spending on infrastructure was the way to go – that it would create jobs and stimulate the economy. But Japan spent $6.3 trillion on construction-related public investment between 1991 and September of last year, and it did nothing of the sort. Nope, paving over Japan accomplished little in terms of stimulating a down economy.
In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations.
In the United States, it has also led to calls in Congress, particularly by Republicans, not to repeat the errors of Japan’s failed economic stimulus. They argue that it makes more sense to cut taxes, and let people decide how to spend their own money, than for the government to decide how to invest public funds. Japan put more emphasis on increased spending than tax cuts during its slump, but ultimately did reduce consumption taxes to encourage consumer spending as well.
Trade and tax cuts along with spending targeted at banking system was how Japan finally pulled out of its doldrums. We already have 700 billion aimed at our banking system, with only half of it spent. That leaves what, if you’re interested in not repeating the mistakes of an economy which has already gone thorugh this sort of thing?
Well it’s certainly not a huge NRA style spending spreed on public works. Japan spent trillions on public works and infrastructure and it didn’t do what all the economists said it would do. Instead Targeted spending on the banking system, tax cuts and the development of trade turned the tide.
Given the present bill it appears we’re going to “Buy American”, refuse tax cuts and spend hundreds of billions on roads and bridges. The Republicans objections to this mammoth pork and relief fest have nothing to do with “tax cut monomania”. It has much more to do with understanding the lessons learned from the Japanese experience and not wanting to repeat them. Democrats, in their arrogance, seem to believe that they can do the same thing as Japan but have a different outcome.
Well, after Democratic assurances that the Fairness Doctrine wasn’t something they planned to pursue, Michigan Democratic Senator Debbie Stabenow muddied those waters again. Appearing on the Bill Press Show she had this to say:
BILL PRESS: Yeah, I mean, look: They have a right to say that. They’ve got a right to express that. But, they should not be the only voices heard. So, is it time to bring back the Fairness Doctrine?
SENATOR DEBBIE STABENOW (D-MI): I think it’s absolutely time to pass a standard. Now, whether it’s called the Fairness Standard, whether it’s called something else — I absolutely think it’s time to be bringing accountability to the airwaves. I mean, our new president has talked rightly about accountability and transparency. You know, that we all have to step up and be responsible. And, I think in this case, there needs to be some accountability and standards put in place.
BILL PRESS: Can we count on you to push for some hearings in the United States Senate this year, to bring these owners in and hold them accountable?
SENATOR DEBBIE STABENOW (D-MI): I have already had some discussions with colleagues and, you know, I feel like that’s gonna happen. Yep.
Really. “Accountability”? What sort of “accountability” is Sen. Stabenow talking about?
What she means is she’d like to see the bane of the Democrats, the one venue that regularly frustrates their efforts, out of business or seriously handicaped.
The arguments for the previous Fairness Doctrine were pitifully inadequate and certainly an infringement of free speech, but radio was a dominant medium at the time and that’s how supporters justified their attempted control of what could or couldn’t be said.
Now, however, even those marginal arguments are obsolete. The choices of media have expanded exponentially. The internet has changed the whole game. To pretend that “standards” and “accountability” must be imposed on a very small part of this media spectrum while ignoring the rest is laughable.
So this comes down to power and control. And it requires a willingness to ignore the tenets of liberty and heritage of free speech embodied in the Constitution. I have no doubt that Democrats are more than willing to do exactly that in their effort to consolidate their power.
If you recall, all of us here at QandO had a rough time understanding how the government was going to pay for something when it didn’t know the value when it announced it was going to buy distressed bank assets.
Common sense says you don’t buy something on the way down, but instead wait for it to bottom out before jumping in. As we’re now learning, the government lost between 64 and 78 billion dollars when it doled out that first quarter of a trillion dollars:
According to the testimony of Harvard Professor Elizabeth Warren, who is chairing the Congressional Oversight Panel for TARP, Treasury doled out $254 billion for bank assets worth only $176 billion – an overpayment of $78 billion of taxpayer funds. She has also noted that Treasury has not cited any reason for the overpayment. According to the Congressional Budget Office’s independent estimate released a month ago, Treasury overpaid $64 billion.
This is the same institution that now is going to spend 900 billion of borrowed, taxed or printed money. Apparently everyone who is for doing that believe the outcome will be different this time.
Stephen Spruiell and Kevin Williamson over at NRO have put an excellent “stimulus package” summary together.
I’m going to give you an condensed summary from their work. Make sure you read the whole thing.
$50 million for the National Endowment for the Arts
$380 million in the Senate bill for the Women, Infants and Children program
$300 million for grants to combat violence against women
$2 billion for federal child-care block grants
$6 billion for university building projects
$15 billion for boosting Pell Grant college scholarships
$4 billion for job-training programs, including $1.2 billion for “youths” up to the age of 24
$1 billion for community-development block grants
$4.2 billion for “neighborhood stabilization activities”
$650 million for digital-TV coupons; $90 million to educate “vulnerable populations”
POORLY DESIGNED TAX RELIEF
$15 billion for business-loss carry-backs
$145 billion for “Making Work Pay” tax credits
$83 billion for the earned income credit
STIMULUS FOR THE GOVERNMENT
$150 million for the Smithsonian
$34 million to renovate the Department of Commerce headquarters
$500 million for improvement projects for National Institutes of Health facilities
$44 million for repairs to Department of Agriculture headquarters
$350 million for Agriculture Department computers
$88 million to help move the Public Health Service into a new building
$448 million for constructing a new Homeland Security Department headquarters
$600 million to convert the federal auto fleet to hybrids
$450 million for NASA (carve-out for “climate-research missions”)
$600 million for NOAA (carve-out for “climate modeling”)
$1 billion for the Census Bureau
$89 billion for Medicaid
$30 billion for COBRA insurance extension
$36 billion for expanded unemployment benefits
$20 billion for food stamps
$4.5 billion for U.S. Army Corps of Engineers
$850 million for Amtrak
$87 million for a polar icebreaking ship
$1.7 billion for the National Park System
$55 million for Historic Preservation Fund
$7.6 billion for “rural community advancement programs”
$150 million for agricultural-commodity purchases
$150 million for “producers of livestock, honeybees, and farm-raised fish”
$2 billion for renewable-energy research ($400 million for global-warming research)
$2 billion for a “clean coal” power plant in Illinois
$6.2 billion for the Weatherization Assistance Program
$3.5 billion for energy-efficiency and conservation block grants
$3.4 billion for the State Energy Program
$200 million for state and local electric-transport projects
$300 million for energy-efficient-appliance rebate programs
$400 million for hybrid cars for state and local governments
$1 billion for the manufacturing of advanced batteries
$1.5 billion for green-technology loan guarantees
$8 billion for innovative-technology loan-guarantee program
$2.4 billion for carbon-capture demonstration projects
$4.5 billion for electricity grid
REWARDING STATE IRRESPONSIBILITY
$79 billion for State Fiscal Stabilization Fund
You add it up. Estimates say that only 17% of these funds would be spent in the first year.
No – pork and relief.
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.
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.
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 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.
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?
Hope and change.
The promises are going faster than a pizza at a Weight Watcher’s Convention.
The Promise: Obama pledged during his campaign that he would give the public five days to review a bill before he signs it.
Sunlight Before Signing: Too often bills are rushed through Congress and to the president before the public has the opportunity to review them. As president, Obama will not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House website for five days.
The Reality: Broken with the 2nd bill he signed.
The House gave final approval on Wednesday to a bill extending health insurance to millions of low-income children, and President Obamasigned it this afternoon, in the first of what he hopes will be many steps to guarantee coverage for all Americans.
5 days? He didn’t even wait 5 hours.
Hope and change.
This circus needs a couple of more clowns:
When retired Marine Gen. Anthony Zinni told the Washington Times that he was offered the job of U.S. ambassador to Iraq before being passed over in favor of diplomat Christopher Hill, he did not say that one of the outrages of the experience was that his friend of 30 years, fellow former Marine Corps commandant and now national security advisor James L. Jones, had offered him the job, and then failed to tell him when the decision was changed.
“Jones had called me before the inauguration and asked if I would be willing to serve as ambassador to Iraq or in one of the envoy jobs, on the Middle East peace process,” Zinni told Foreign Policy. “I said yes.”
“Then two weeks ago, Jones called,” Zinni continued, “and said, ‘We talked to the secretary of state, and everybody would like to offer you the Iraq job.’ I said yes.
“The president called and congratulated me,” Zinni said.
Sounds like a done deal, doesn’t it? And Zinni, who was a staunch Obama supporter and harsh critic of the Bush administration’s conduct of the Iraq war thought it was too. In fact, he even met with Hillary Clinton, and again, everything seemed on track.
Then he didn’t hear from anyone for a week. He finally reached Jones one night and Jones told him, ‘We decided on Chris Hill.’”
Needless to say, Zinni was less than pleased and, when offered the ambasadorship to Saudi Arabia, told Jones to stick it where the sun doesn’t shine.
So trying to figure out who the “we” is in “we decided on Chris Hill” I happened to read a piece by Michael Goldfarb at the Weekly Standard.
I just had a conversation with one Republican who speculated that Richard Holbrooke may have been at the center of the current mess over who will serve as U.S. ambassador in Iraq. According to the scenario he laid out, despite Jones having offered the job to Zinni — an offer from one retired four-star to another — and Clinton having confirmed the offer, Holbrooke interceded on behalf of his protege, Chris Hill, urging Clinton to reserve the Iraq post for someone who had spent a career in the foreign service.
You just knew Clinton was at the bottom of this somewhere. And no surprise that Holbrooke is in the middle of it too. Nice. Essentially tell a guy he has the job and then avoid him for a week. Real class.
If you’re wondering what the excuse is going to be when they’re finally asked to explain it, well, here it is:
[T]he former senior official said, it might also have been problematic that until the end of 2008, Zinni had been executive vice president of defense contractor Dyncorp, which has hundreds of millions of dollars worth of business in Iraq. “If I was a responsible senator, I would scream about having the number two Dyncorp official” as ambassador to the country where it’s making so much money, the former official said.
How could a ‘responsible Senator’ scream about anything after putting a tax cheat in the Treasury post? They were also on the verge of puttin one into HHS had he not withdrawn.
Another embarrassment for the Obama administration (created by Hillary Clinton – and mark my word, this won’t be the last), which is becoming quite adept lately at creating them.
Hope and change.
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.
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.
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.
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.