Pretty sad when you have the Secretary of State soliciting funds for debt instruments:
US Secretary of State Hillary Clinton has urged China to keep buying US debt as she wrapped up her first overseas trip, during which she agreed to work closely with Beijing on the financial crisis.
Ms Clinton made the plea shortly before leaving China, the final stop on a four-nation Asian tour that also took her to Japan, Indonesia and South Korea, where she worked the crowds to try to restore America’s standing abroad.
In Beijing, she called on authorities in Beijing to continue buying US Treasury bonds, saying it would help jumpstart the flagging US economy and stimulate imports of Chinese goods.
“By continuing to support American Treasury instruments the Chinese are recognising our interconnection. We are truly going to rise or fall together,” Ms Clinton said at the US embassy here.
Of course, its absolutely necessary that China (and the rest of the world) continue to buy these bonds and fund this spending debacle or taxes will have to be raised dramatically (and not just on the ‘rich’) and/or more money will have to be printed. That’s not to say that both of those won’t be done anyway whether China continues to buy or not. My guess is it’s only a matter of time. Don’t forget, health care reform legislation and environmental legislation are yet to come. Both may end up taking even more out of the private side of the economy than the so-called “stimulus” did.
With Wall Street already showing absolutely no confidence in Barack Obama and Tim Geithner, the president is announcing tax increases in an attempt to cut the budget deficit by half in four years:
A summary of Obama’s budget request for the fiscal year that begins in October will be delivered to Congress on Thursday, with the complete, multi-hundred-page document to follow in April. But Obama plans to unveil his goals for scaling back record deficits and rebuilding the nation’s costly and inefficient health care system tomorrow, when he addresses lawmakers and budget experts at a White House summit on restoring “fiscal responsibility” to Washington.
Yesterday in his weekly radio and Internet address, Obama said he is determined to “get exploding deficits under control” and said his budget request is “sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don’t, and restoring fiscal discipline.”
Reducing the deficit, he said, is critical: “We can’t generate sustained growth without getting our deficits under control.”
To get there, Obama proposes to cut spending and raise taxes. The savings would come primarily from “winding down the war” in Iraq, a senior administration official said. The budget assumes continued spending on “overseas military contingency operations” throughout Obama’s presidency, the official said, but that number is lower than the nearly $190 billion budgeted for Iraq and Afghanistan last year.
Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.
Obama also proposes “a fairly aggressive effort on tax enforcement” that would target corporate loopholes, the official said. And Obama’s budget seeks to tax the earnings of hedge fund managers as normal income rather than at the lower 15 percent capital gains rate.
Overall, tax collections under the plan would rise from about 16 percent of the economy this year to 19 percent in 2013, while federal spending would drop from about 26 percent of the economy, another post-World War II high, to 22 percent.
Add this to the list of “Things Not To Do During A Recession.” Soak the achievers and give absolutely meaningless tax cuts, $13 dollars a week, to the rest of us while the government continues to plunge us further into debt.
Enough with wealth envy and populism. Let’s cut taxes for everyone, cut spending and kill the corporate income tax.
What if we wanted to borrow a bunch of money and no one would lend it to us? How would that affect the “stimulus” or bailout? The government would have to either raise taxes or print money, wouldn’t it? One leads to an extended recession and the other leads to the same thing plus inflation.
Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.
This shows a real lack of confidence in foreign investors. If you want to view it this way, this is a de facto downgrading of the credit rating of the two FMs. And, as pointed out in the final sentence, this may trip up efforts to hold down interest rates for home owners. It certainly means trouble for the plan to refinance Freddie and Fanny and for the mortgage bailout plan.
And as the problem deepens, the effort to borrow money for the FMs will only get harder. My guess is that’s just a prelude to the same problems being encountered more broadly as the government tries to borrow the promised stimulus money. This is a very dangerous, and in my estimation, unnecessary road we’re traveling. The law of unintended consequences is setting up an ambush the likes of which we’ve never seen before.
“We should look at the vehicular miles program where people are actually clocked on the number of miles that they traveled.”
Why that would be Ray LaHood, the supposed Republican Secretary of Transportation.
“The policy of taxing motorists based on how many miles they have traveled is not and will not be Obama administration policy.”
Well if you guessed Barack Obama, you’re wrong. And if your second guess was Robert Gibbs, President Obama’s Press Secretary, you’re 0-2.
No, it was Lori Irving.
And who is Lori Irving?
Well she’s the department spokeswoman for Secretary Ray LaHood’s Transporation Department.
Which begs the question – who is running Transportation? Or, perhaps, for whom is Lori Irving really the spokeswoman?
And more importantly why is a Republican putting this idea forward in the first place, I mean if its true they’ve finally “found” themselves?
I‘m sure this will come as a complete surprise to some on the left but the people didn’t go for Gov. Paterson’s idea at all:
New York Gov. David Paterson admitted Thursday one of his most talked-about tax proposals, an obesity tax on sugary drinks, is fizzling.
But he said it popped the right question.
In meeting with college students over his budget, Paterson told the young New Yorkers not worry about his soda tax because the Legislature won’t go for it. But he said it has served its purpose of raising awareness of childhood obesity.
It served another more important purpose – it showed the extent to which politicians are willing go to control your life and that they are only limited by their imagination. Without a public outcry, this might have found its way through the legislative process. Eternal vigilance is the price of freedom.
And another point to ponder – if government was the sole purveyor of health care, how outlandish of an idea do you really think this would be? A legislature looking for ways to raise revenue while cutting costs in health care? A fat-tax would be a no-brainer and its justification would be found in government’s assumed responsibility for your health.
[HT: Matthew H.]
Well yeah - now:
President Barack Obama on Friday warned that economic recovery in the United States “will be measured in years, not months” as he scored a major victory in his young presidency with the approval in Congress of a $787 billion (£542) bill to revive the economy.
How unfocused is this mess? Well here’s a nice example:
Sec.1421 of the American Recovery and Reinvestment Act gives employers a tax incentive for hiring people (I hesitate to call them “workers,” given it’s not likely they’ve ever held a job for more than a couple days) who fit the following description. Betcha can’t wait to hire this person!
DISCONNECTED YOUTH . –The term ‘disconnected youth’ means any individual who is certified by the designated local agency as having attained age 16 but not age 25 on the hiring date, as not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date, as not regularly employed during such 6-month period, and as not readily employable by reason of lacking a sufficient number of basic skills.
I wonder if the Democrats who voted for the stimulus bill realize they just voted to give a tax break to McDonald’s and WalMart.
Of course, they have no idea of who or what they’ve given breaks too (although I doubt McD’s and Wal-Mart are eager to take on workers with no skills).
And the bill is rife with examples like the above. What is doesn’t have at all are the things economists know work and work immediately – like marginal tax cuts.
Fact Check takes a look at the bill and finds problems with many of the basic promises made (and certainly takes issue with the claim there are “no earmarks” in the bill).
A couple of things Fact Check notes include the claim that digitizing health records and modernizing the electrical grid will be quickly done and provide great savings:
The president also says electronic health records will save billions of dollars. But the Congressional Budget Office says that even a decade of expected savings are unlikely to pay back the government what the government will spend on health IT.
The president said the bill will modernize the nation’s electricity grid, reducing consumption by 2 percent to 4 percent. That’s optimistic. Industry reports say that a new grid could reduce energy consumption by up to 4 percent, but not until 2030 and at a cost much greater than the stimulus bill would cover.
But what this does is get the proverbial government nose under the tent and set up more spending with future bills:
Mr Obama will also propose a budget to lay the groundwork for sweeping health care reform and present a major green energy bill. Mr Obama will also propose a budget to lay the groundwork for sweeping health care reform and present a major green energy bill.
The mistake of the paragraph above is the “groundwork” is being laid with this “stimulus” bill.
So, we’ve added 789 billion to the 750 billion TARP and the possible 1.2 trillion Geithner plan and are contemplating spending hundreds of billions more for “sweeping health care refomr and … a major green energy bill”. And we haven’t even mentioned the coming “AGW” spending debacle.
What generation are we up to now? Have we dragged my great, great, great grandchildren’s generation into to this yet?
As the details of the compromise stimulus package come out, most will find plenty to not like.
For instance, those stimulative tax cuts for 95% of Americans:
Q: What are some of the tax breaks in the bill?
A: It includes Obama’s signature “Making Work Pay” tax credit for 95 percent of workers, though negotiators agreed to trim the credit to $400 a year instead of $500 — or $800 for married couples, cut from Obama’s original proposal of $1,000. It would begin showing up in most workers’ paychecks in June as an extra $13 a week in take-home pay, falling to about $8 a week next January.
$13 bucks a week for 6 months, down to $8 bucks a week by January. $338 in ’09, and, if it stays in place for all of ’10, $416.
Wow. 800 billion of your dollars and in the next year and a half you’re going to see $754 of it. Go make that down payment on the new house or car now!
Now, here’s the rope-a-dope:
Q: How will infrastructure spending affect jobs?
A: The Federal Highway Administration has estimated that every $1 billion the federal government spends on infrastructure projects translates to 35,000 jobs. Collins put the total infrastructure spending — including highways, mass transit, environmental cleanups and broadband facilities — at $150 billion. Do the math and that translates into more than 5 million jobs, based on the highway administration’s assumptions.
Senate leaders have offered their own estimate — they said Wednesday that the total stimulus package will sustain some 3.5 million jobs.
Most of that work will go to people who already have jobs. And those who are hired will be hired on a temporary basis. When the revenue stream for that job ends, so will the temporary jobs.
And one other thing to keep in mind – these people are estimating based on nothing more than some assumptions they’ve decided look rosy and fit their narrative. They have no freakin’ idea how many jobs, if any, their spending will bring.
Q: How long would it take for highway projects to begin?
A: Lawmakers say most of the projects could be up and running within 90 days, although it could take somewhat more time in northern states with longer winters. Highway construction groups have estimated that there are thousands of projects that could be started within that 90 days.
Here’s a dirty little secret about this answer – projects that are 90 days from beginning have most likely already been funded and those who are going to work on them have been hired.
All the rest of the projects in the bill will have to go through the normal years long bidding process that is required by government. So “shovel ready” does not necessarily mean an infusion of new cash or jobs.
Q: Does the bill include federal aid to the states?
A: Yes. It includes major contributions to states to help with their budget shortfalls and assure the viability of Medicaid and education programs.
Sen. Susan Collins of Maine, the moderate Republican who helped broker the deal, said the spending includes about $90 billion in increased federal matches to states to help pay for Medicaid, along with a $54 billion “fiscal stabilization” fund that states could use to build and repair schools and improve facilities at institutions of higher learning.
This bill is the “State Fiscal Mismanagement Bailout Bill” which rewards states for budget busting.
Tell me, in life, what is one of the major means of changing behavior?
Pain. No pain, nothing learned. Be it emotional, physical or financial pain, unless you suffer it, you have no reason to change your behavior. Given this bill, profligate state governments have no reason to change their spendthrift ways.
BTW, none of that spending will stimulate anything but more government.
Q: What are some of the other main focuses of the bill?
A: Here are some highlights:
Education: The package has some $11.5 billion to support the IDEA program for special education. There’s another $10 billion for a federal program to help low-income students.
Energy: The package includes funds to modernize the electrical grid — in part by incorporating renewable energy resources — and to make federal buildings more energy efficient and help low-income households weatherize their homes.
Health: The plan includes subsidies to allow people who are laid off to purchase health insurance through the federal COBRA plan. There is also money to support hospitals seeking to modernize health information technology.
Infrastructure: The infrastructure section of the package includes funds for building and repairing highways and bridges, expanding transit systems, upgrading airports and rail systems and building and repairing federal buildings — with the focus on making them more energy efficient. Funds are available for clean water projects, cleanup of environmental waste areas and nuclear waste cleanups.
Nothing listed here is stimulative. Nothing. This is all the pork that everyone has denied is in the bill. This is the left’s shopping list of the last 40 years rolled into one big raid on your wallet.
And what about the engine of productivity, the creator of jobs and wealth? Not much at all:
From auto dealers to the home-building industry, big business appears to be the biggest loser in the final economic stimulus plan being pieced together Wednesday on Capitol Hill.
Negotiators from the House and Senate sliced billions of dollars in tax incentives for businesses and slashed huge tax breaks for consumers that were strongly backed by industry lobbyists.
Many of the business tax provisions were added to the stimulus legislation in the Senate in an effort to attract Republican votes. President Barack Obama wants bipartisan support for the plan and was dealt a setback when no Republicans voted for the House version of the plan two weeks ago.
But when only three Republican senators voted for the Senate version of the bill Tuesday, Democrats slashed the business tax proposals in an effort to bring the total cost of the bill under $789 billion.
That’s right, Democratic spite and their propensity toward government as the solution have mostly driven tax breaks for business, the one sector that can, in fact, create real jobs that produce wealth, out of the bill.
Tthe Democrats like to use the term “trickle down” derisively, but as Karl Rove notes, you’re about to see their version of it. The difference is the money will “trickle down” through the government filter. Any guess as to how much will actually reach down to where it is needed?
Well, don’t bet that whopping $754 bucks you’ll be seeing over the next year and a half that it will do any good. Instead you might consider buying gold with it, since my guess is it isn’t going to be worth $754 when the Democrats get done with screwing around with the economy.
Julio works at Mickey D’s and has for the last 4 years. President Obama tells him not to worry, that upcoming legislation is going to cover him up with money he didn’t earn (“refundable tax credits”) and help pay for his college too!
Watch this performance – on both sides:
Maybe that car and mortgage payment aren’t such a wild thought after all.
But as Walter Williams reminds us:
“In stimulus package language, if Congress taxes to hand out money, one person is stimulated at the expense of another, who pays the tax and is unstimulated. A visual representation of the stimulus package is: Imagine you see a person at work taking buckets of water from the deep end of a swimming pool and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new President proposes for the economy.”
Welcome to the deep end. You’re going to be putting Julio through college. Do you think he’ll even send you a thank you note?
My favorite line from the other night’s Obama presser:
Now, just in terms of the historic record here, the Republicans were brought in early and were consulted. And you’ll remember that when we initially introduced our framework, they were pleasantly surprised and complimentary about the tax cuts that were presented in that framework. Those tax cuts are still in there. I mean, I suppose what I could have done is started off with no tax cuts, knowing that I was going to want some, and then let them take credit for all of them. And maybe that’s the lesson I learned.
Maybe that is a lesson he’s learned. Always nice to see your chief executive engaged in on-the-job training, no?
But more importantly, I enjoyed the spin. “Republicans were brought in early and were consulted”. That’s a bit of a stretch. In actuality the Republicans and Democrats were in agreement that government had to do something. And they were further in agreement with the broad outline of a stimulus package that would include a large percentage of tax cuts.
Now whether or not you agree that a stimulus package is needed or not, the point to be made here is a bunch of politicians from different sides agreeing that something must be done and one of them being pleased that the other side is considering tax cuts as a major part of that “something” does not equal being “brought in early” or being “consulted”.
That happens when the bill is written and put into final form, and as everyone know, Republicans weren’t brought in at all on that process, much less consulted. So when that final bill was trotted out and placed before the full House, with no debate, Republican voted 177-0 against it. They did so for a number of reasons, but primary among them was they had had no part in writing the bill. But of equal importance, the tax cuts that they were promised would be in the bill and comprise approximately 40% of it total, just weren’t there.
Oh the Democrats had used language to attempt to convince the Republicans and the press they were in there, but the CBO pretty well killed that meme. Look on the huge graphic which lays out the spending proposed by the House and check out the upper right hand corner where the CBO discusses the tax cuts. Its analysis reduces the Democratic claim that the bill contains 26% tax cuts down to 22%. The primary reason the CBO denies what Democrats call tax cuts is because in reality they’re tranfer payments. Approximately 100 billion dollars will go to people who don’t pay taxes in the first place. Other than among Democrats, no other rational person would call giving money to people who don’t pay taxes a “tax cut”.
So when you hear President Obama say that the framework he outlined (which supposedly contained 40% tax cuts) was met with Republican approval, he’s probably right. But when he then says, referring to those tax cuts, “they’re still in there”, he’s wrong and my guess is he knows that. But as was obvious in the press conference, he was interested in characterizing the Republcians in a negative light, again mocking them and denigrating them, while at the same time speaking out of the other side of his mouth with faint praise to escape criticism for doing so.
That is not how I define “acting presidential”.
The fact remains the level of the promised tax cuts are not in the House version of the bill. And while it is somewhat closer in the Senate bill, the reconciliation process may lower that as well. Without the level of promised tax cuts in the bill which passes out of the reconciliation process, Republicans cannot be faulted for voting against its passage. Again, that’s not to say I support a single bit of this – but I cannot fault the Republicans for not voting for it if what they were promised initially isn’t in the final bill.
The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7trillion, enough to pay off more than 90 percent of the nation’s home mortgages.
The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more. The Senate is to vote this week on an economic-stimulus measure of at least $780 billion. It would need to be reconciled with an $819 billion plan the House approved last month.
Again, that’s “trillion” with a “T”. In order to grasp the magnitude of that much spending, understand that you can reasonably round the number to $10 Trillion and thereby assume an extra $300 Billion, which is about the amount of TARP funds already pushed out the front doors of Congress. It’s also about one third of the amount being debated in Congress right now. In other words, the stimulus funds are pennies compared to amount of money already spent and/or promised.
Here’s another way to look at it (my emphasis):
The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.
It’s a lot of money. So why is it that we’re only privy to the debate (if it can be called that) over a measly 10% of the spending?
“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”
The pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid.
Many of us were disappointed with the spending habits of “compassionate conservativism” and lamented how it merely approximated socialist government policies with a friendly face. Of course, the alternative to Bush was real-deal socialist spending and a weakening of our national security.
Now we’re getting the full-on brunt of a dour-visaged collectivist government, employing a magician’s sleight of hand, and it makes the compassionate conservatism look positively stingy in comparison. While we argue over $800 Billion, another $9 Trillion is quietly being shoveled out the backdoor with little to no accountability.
When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return.
There’s no doubt that the Bush administration greased the skids, but Obama is running a rocket sled of spending, and there does not appear to be any end in sight.
One has to wonder when Atlas will finally shrug.