President Obama has been waving a quote from Jim Owens, CEO of Caterpillar, “said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off.”
Asked if the stimulus package would be able to stop the 22,000 layoffs or not, Owens said, “I think realistically no. The truth is we’re going to have more layoffs before we start hiring again”
“It is going to take some time before that stimulus bill” means re-hiring, he said.
Amateur hour continues.
Well, well, well. I wondered what the impact of moving the census from under Commerce to the White House (a blatantly political move) would have on Gregg. Apparently it became obvious he was a token Republican (but a strong Senator) who was being taken aboard the Obama administration in a relatively useless position to give Obama some bi-partisan cover.
Sen. Gregg stated, “I want to thank the President for nominating me to serve in his Cabinet as Secretary of Commerce. This was a great honor, and I had felt that I could bring some views and ideas that would assist him in governing during this difficult time. I especially admire his willingness to reach across the aisle.
“However, it has become apparent during this process that this will not work for me as I have found that on issues such as the stimulus package and the Census there are irresolvable conflicts for me. Prior to accepting this post, we had discussed these and other potential differences, but unfortunately we did not adequately focus on these concerns. We are functioning from a different set of views on many critical items of policy.
“Obviously the President requires a team that is fully supportive of all his initiatives.
“I greatly admire President Obama and know our country will benefit from his leadership, but at this time I must withdraw my name from consideration for this position.
Gregg also said there was nothing that came up during the vetting process that caused him to withdraw.
So Obama’s back in the hunt for a Commerce Secretary.
Since the inception of the current downturn, free market capitalism has taken quite the bashing. Supporters of significant government involvement in the economy deride the horrors of “unfettered capitalism” and a “free market run amuck.” Frequently, deregulation of capital markets is singled out as the most dastardly culprit, to which Pres. Obama seems to be alluding when he blames “relying on the worn-out dogmas of the past,” and “too little regulatory scrutiny.” Yet, after the last eight years in which we witnessed Sarbanes-Oxley, No Child Left Behind, Medicare Part D, and numerous attempts to reign in Fannie Mae and Freddie Mac shoved aside by legislators, evidence of unregulated economic activity being the source of our crisis seems rather scant.
The idea that “deregulation” was somehow responsible for the mortgage meltdown is a particularly shaky proposition. Shannon Love explains why:
Leftists have to answer a question: if greedy, irresponsible, unregulated etc. capitalism caused the housing bubble, why didn’t we see a similar bubble in commercial real-estate markets which operate under even less regulation than the residential markets? Why does the politically neglected and unregulated commercial real-estate market exhibit much milder swings?
The differences between residential and commercial real estate provide the means to test the hypothesis that government intervention or the lack thereof caused the housing bubble and subsequent collapse of the financial system. We can compare the two markets because the same institutions ultimately make residential and commercial loans. They make loans in the same communities and regions. Changes in the economy affect both types of real estate at the same time and to the same rough degree. The only major difference between the two markets lies in the degree of government intervention.
After dispensing with some obvious questions about the comparison, Love highlights how the residential market was essentially turned into a Lemon’s Market:
As Love points out, the commercial real estate market has no such mechanism muddying its waters, and information is comparatively less asymmetric. Without the government interference, commercial mortgage lenders let the potential for bad outcomes drive their decision making:
More than any other policy, the creation of Freddie Mac and Fanny May distorted the residential mortgage market in a way that the commercial market escaped. The FMs exist solely to induce lenders to make residential loans that the free market judged too risky. The FMs buy up residential mortgages from primary lenders and bundle them together in securities. They do so precisely in order to short-circuit the free-market feedback system that communicates to banks when the financial system as a whole has lent out as much money as it safely can. That feedback system worked like a governor on an engine. It kept the system from running away and lending more money than it could recoup, but also prevented people with poorer credit from getting loans.
Politicians who wanted the engine to run faster created the FMs to bypass the governor in order to get higher performance in the short run. Since the FMs would buy up almost any mortgage, lenders could make riskier and riskier loans without suffering any negative consequence. The FMs replaced the self-interested secondary-market buyers with people playing with government money and a mandate to induce more and more lending. Special dodgy accounting rules allowed the FMs to hide the risk behind the securitized mortgages they sold.
Tellingly, no such intervention occurred in commercial markets. The FMs’ charters expressly prevented them from buying commercial mortgages. As a result, the commercial mortgage market functioned with a free-market governor. When lenders made too many risky loans, free-market secondary buyers stopped buying their mortgages and the system cooled down. As a result, commercial markets saw no runaway boom and subsequent colossal bust.
Although I think that laying the crisis solely at the feet of the residential mortgage market is overly simplistic (for example, what was up with the ratings agencies?), Love does point to a very apt comparison as to how government intervention in the market changes incentives and behavior. If you guarantee risks against bad loans, and subsidize the debtors, then more of such loans will be made. Remove such a guarantees and subsidies and market forces will severely punish improperly compensated risk taking.
The trade off, of course, is that free markets do not allow much opportunity for rent-seeking. Which is why Love’s final lament is so true:
Sadly, experience suggests that mere empiricism has no place in political economics.
That’s because empiricism does not buy votes.
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.
Perception is reality in politics. I’m not sure how many times we’ve made that point on this blog. And the perception among those out in flyover country is the stimulus package being pushed by the Democrats is a turkey. Or a pig. Or both. Regardless of which animal reference you choose to use, the fact is most Americans don’t think it will work. As further proof of that point, take a look at the latest ATI-News/Zogby results:
Question #1: ATI-News/Zogby asked likely voters, “Some people say that the nearly one trillion dollars in debt and subsequent interest incurred by the stimulus bill during an economic downturn will make the recovery hard to achieve. Do you agree or disagree?”
Overall, 53 percent of Americans agree that the Obama stimulus bill will actually hinder economic recovery; while only 31 percent disagree (16 percent are not sure). Fifty-six percent of Independent voters also agree, while only 27 percent disagree (17 percent are not sure). A staggering 88 percent of Republicans agree and just 6 percent disagree (another 6 percent are not sure).
Frankly, when looking at these polls, I expect the majority of Democrats polled to support Democratic policy and the majority of Republicans not to support it. I key on self-identified independents who have the luxury of going whichever way they choose to go on each policy question. And in the case of this issue, independents are not at all impressed with it. So while President Obama’s personal approval ratings remain high (and that should come as no real surprise this early in his presidency), he’s not been able to convincingly sell this mess to a majority of Americans.
Question #2: ATI-News/Zogby asked voters, “Some Republicans say the Obama stimulus package spends too much and stimulates too little. Do you agree or disagree?”
Fifty-seven percent of Independent voters agree that Obama’s stimulus package spends too much and does little to stimulate the economy; while just 31 percent of Independents disagree (12 percent are not sure). Eighty-nine percent of Republicans also agree, while only 5 percent disagree (6 percent are not sure).
Of importance here is a majority of independents are agreeing with Republicans on the issue. That lays the responsiblity for the bill squarely in the lap of the Democrats. Of course that’s a double-edged sword for Republicans on the off chance this bill somehow succeeds. But if I were giving odds, I’d go 80/20 against.
Question #3: ATI-News/Zogby asked voters, “Most Republicans oppose the currently proposed stimulus bill supported by President Obama because they say there is too much money being spent for non-stimulus items. Do you agree or disagree that too much money is being spent on items that won’t improve the economy?”
Sixty-six percent of Independent voters think Obama wants to spend too much money on items that won’t improve the economy. As for Republicans, a staggering 93 percent agree.
Across the board, the poll found that, on average, 90 percent of Republicans and 60 percent of Independents disapprove of Obama’s stimulus bill.
The answer to this particular question shows the sharpest split and the largest majority of independents against the Obama bill. That sort of percentage means despite all the TV appearances, town hall meetings and press conferences, the message Obama has been putting out there has been rejected.
That means that Republicans have been at least partially successful in framing the debate. Of course they’ve been helped by the common sense argument that you can’t cure a problem brought on by borrowing and spending with more massive borrowing and spending. Somewhere, as the public knows and many have experienced, we have to pay up. The public has also had enough experience with government programs to know they’re never speedy, they’re wasteful and they’re poorly monitored. My guess is what you see reflected in those independent numbers is a healthy dose of both skepticism and mistrust.
As the details of this bill have become public, the claim that there’s ‘no pork’ in it has been resoundingly rejected. The spin has not been effective and the public perceives this all as “business as usual” among Congress and Democrats. And it also isn’t helping the Obama image. Many now think he got rolled by Democratic leaders in Congress and, instead of displaying leadership, is now their front-guy trying to leverage his popularity into a win for this massive mess of a bill.
I still think the bill will pass in some form or fashion. But one thing I think is certain. Obama’s honeymoon was a short one and is now over. And I’m also of the opinion that he’ll never again be trusted by independents as the agent for “hope” and “change” in Washington DC. To them, in the future, those will be “just words”.
Also included at the press conference was a blogger from the left-wing Huffington Post (and more power to him, I might add):
Longtime members of the White House press corps who are accustomed to sitting in the front row of presidential press conferences were surprised to find their prime real estate occupied by Ed Schultz, a strident liberal who hosts a nationally syndicated radio program originally based in Fargo, N.D., but of late broadcasting from the Center for American Progress in Washington, D.C.
So, since no right-wing bloggers or talk show hosts were included, does this mean we need a Fairness Doctrine for Presidential press conferences?
Clearly, President Obama was making a point of showing deference to the Left at his first prime-time press conference, which was broadcast to millions from the stately East Room of the White House on Monday.
Like such a show was actually necessary. I can’t wait for Sen. Debby Stabenow to bring the Fairness Doctrine up again in the Senate. Watching someone embarrass themselves is usually pretty entertaining.
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 new line out of Tehran is that Iran is ready for talks with the US if those talks are a “dialog with respect”. So let’s check out President Ahmadinejad’s words, shall we?
“The new U.S. administration has said that it wants change and it wants to hold talks with Iran,” President Ahmadinejad said.
“It is clear that change should be fundamental, not tactical, and our people welcome real changes,” he said. “Our nation is ready to hold talks based on mutual respect and in a fair atmosphere.”
Mr. Ahmadinejad went on to say that Iran could cooperate with the United States to uproot terrorism in the region. “The Iranian nation is the biggest victim of terrorism,” he said.
But he referred to former President Bush as one of reasons for insecurity in the region and said, “Bush and his allies should be tried and punished.”
“If you really want to uproot terrorism, let’s cooperate to find the initiators of the recent wars in the Middle East and the Persian Gulf region, try them and punish them,” he said.
“Fundamental, not tactical”. Remember, Ahamdinejad accused the Obama administration of only favoring a tactical change. His claim was the Obama administration would not be fundamentally different in its approach to relations with Iran than was the Bush administration. While in Munich, VP Joe Biden made it clear that the US wouldn’t tolerate Iranian nuclear weapons and reserved the right to pre-emptively attack Iran in case it refused to stand down its nuclear weapons program and produced a nuclear bomb. That is the very same policy the Bush administration advanced. How that can be spun as a “fundamental change” vs. a “tactical change” will be interesting to watch. But one is certainly hard put to describe such a policy as one which would place the talks on a plane of “mutual respect”.
An interesting line, of course, is Ahmadinejad’s declaration that the “Iranian nation is the biggest victim of terrorism”. The obvious reason for that declaration is found in the next line, i.e. the policies of the Bush administration are interpreted by Ahmadenijad as being terroristic in nature as they pertain to Iran. But, other than the “let’s talk” invitation, the policy of pre-emptive action remains the announced policy of the Obama administration as well.
Last, but certainly not least, Ahmadinejad clearly puts the Israel question on the table and lays out his solution for stopping terrorism. While Iran demands a “fundamental” change in the US approach to relations with that nation, there’s certainly nothing to suggest that Iran is willing to make fundamental changes in return. And its proxy war with Israel, through Hamas and Hezbollah is certainly an indicator of its continuing attempt to take the “Zionist entity” on.
So while some may be encouraged by the fact that Ahmadinejad is at least talking about better relations with the US, I say take it all with a large grain of salt. Iran has aspirations toward being the regional power in the Middle East. That is what brought it in direct conflict with Iraq and precipitated their 8 year war. Iraq also had such aspirations. Iraq is no longer a threat in that regard, and the only entity that really stands in its way is the US. Obviously Iran would like to neutralize the US and its influence in the region. One way to do that is to pretend to give the new administration what is so desperately wants – a foreign policy success. Entering into direct talks with the US would do that while really costing Iran nothing. In return for those direct talks, Iran would demand that the US tone down its rhetoric and lift sanctions thereby accomplishing it’s neutralization goal. It can extend the talks as long as it wishes while it proceeds on its merry way to creating a nuclear weapon and marrying it to a long-range missile. At that point, the US is no longer necessary as Iran, by fiat, will be if not the dominant regional power in the Middle East, a close second (assuming as everyone does, that Israel has nukes).
At that point, an Obama administration would be left to either live up to Biden’s words or back off and hope Iran doesn’t finally deal with the “Zionist entity” before Israel deals with it.
Food for thought.
Well while you consider that, this from a Jake Tapper story today:
The Obama Administration today announced that it would keep the same position as the Bush Administration in the lawsuit Mohamed et al v Jeppesen Dataplan, Inc..
The case involves five men who claim to have been victims of extraordinary rendition — including current Guantanamo detainee Binyam Mohamed, another plaintiff in jail in Egypt, one in jail in Morocco, and two now free. They sued a San Jose Boeing subsidiary, Jeppesen Dataplan, accusing the flight-planning company of aiding the CIA in flying them to other countries and secret CIA camps where they were tortured.
That’s sure to disappoint the Economist which, in a gushing editorial written a couple of days after Obama’s electoral victory said:
America will certainly change under Mr Obama; the world of extraordinary rendition and licensed torture should thankfully soon be gone.
And, as with most things, this is sure to surprise some liberal blogs who recently assured themselves that the Obama administration wasn’t going to support extraordinary rendition. After claiming the LA Times got punked they soothed themselves into believing that if the CIA isn’t operating the facility then there’s no harm or no foul. If it is a foreign intelligence service operating the facility in a foreign land to which the CIA turns over prisoners, well, then, that’s just not the same thing, you see. But, of course, it’s simply a different shade of gray, isn’t it?
BTW, I believe the questioning of Leon Panetta should have disabused our liberal friends who claim the Bush administration’s use of rendition is any different than the Obama administrations use of that belief.
Should any doubt remain that there may be a difference, Tapper adds:
A source inside of the Ninth U.S. District Court tells ABC News that a representative of the Justice Department stood up to say that its position hasn’t changed, that new administration stands behind arguments that previous administration made, with no ambiguity at all. The DOJ lawyer said the entire subject matter remains a state secret.
How does that go – everybody now – “meet the new boss, same as the old boss”.
This is not going to please civil libertarians and human rights activists who had hoped the Obama administration would allow the lawsuit to proceed.
Not really. Like the bunch linked above, they’ll simply try to spin it.
Hope and change.