Monthly Archives: January 2010
President Obama went after Washington lobbyists in a big way last night, blaming them for what ails America in a major portion of his State of the Union speech.
In his State of the Union on Wednesday, Obama once again targeted K Street: “We face a deficit of trust — deep and corrosive doubts about how Washington works that have been growing for years. To close that credibility gap, we have to take action on both ends of Pennsylvania Avenue — to end the outsized influence of lobbyists; to do our work openly; to give our people the government they deserve.”
But that was yesterday. Today his administration reached out to those same lobbyists to help pass Obama’s agenda:
A day after bashing lobbyists, President Barack Obama’s administration has invited K Street insiders to join private briefings on a range of topics addressed in Wednesday’s State of the Union.
The Treasury Department on Thursday morning invited selected individuals to “a series of conference calls with senior Obama administration officials to discuss key aspects of the State of the Union address.” …
The invitation stated, “The White House is encouraging you to participate in these calls and will have a question and answer session at the end of each call. As a reminder, these calls are not intended for press purposes.”
Like a secret mistress, K-Streeters are not exactly thrilled with Obama demonizing them in public and then requesting their expertise behind closed doors:
Some lobbyists say they are extremely frustrated with the White House for criticizing them and then seeking their feedback. Others note that Democrats on Capitol Hill constantly urge them to make political donations.
One lobbyist said, “Bash lobbyists, then reach out to us. Bash lobbyists [while] I have received four Democratic invitations for fundraisers.”
Lobbyists say the Obama White House has held many off-the-record teleconferences over the past year.
For example, lobbyists and others were invited to a teleconference with “senior Obama administration officials” on Monday to discuss the administration’s plan to improve the lives of middle-class families.
The invitation, which is addressed to “Friends,” emphasizes in bold and italics that “this call is for background information only and not intended for press purposes.” It advises callers to tell the operator “you’re joining the ‘White House Briefing Call.’ ”
Another lobbyist said these types of teleconferences occur “all the time.”
And that is why many on K Street are exasperated with Obama’s use of lobbyists as a punching bag. Some have said they understood why he used strong rhetoric on the campaign trail but are irritated the White House solicits their opinions while Obama’s friends in Congress badger them for political donations.
That politicians court special interests is nothing new, nor is their blatant prevarication and hypocrisy when it comes to claiming to “work for the people.” Yet publicly targeting specific groups for opprobrium in order to drum up public support, and then immediately running to that very same group for their help, is a whole special class of slimy. Who is it, exactly, that Obama thinks he’s backstabbing? The electorate? The lobbyists? Indeed, why should anyone trust him at all? And all of this in the name of transparency.
Judging by his actions, Obama thinks “transparency” means “clearly lying”.
Not a day after the President’s speech telling us how important deficit reduction is, Democrats in the Senate have successfully passed a bill which will raise the debt limit by 1.9 trillion. And it was passed because Senator-elect Scott Brown hasn’t yet been seated and Teddy Kennedy surrogate Paul Kirk, cast the deciding 60th vote.
Senate Democrats needed all the 60 votes at their disposal Thursday to muscle through legislation allowing the government to go $1.9 trillion deeper in debt.
Democratic leaders were able to prevail on the politically volatile 60-39 vote only because Republican Sen.-elect Scott Brown of Massachusetts has yet to be seated. Republicans had insisted on a 60-vote, super-majority threshhold to pass the measure. An earlier test vote succeeded on a 60-40 vote.
The measure would would put the government on track for a national debt of $14.3 trillion — about $45,000 for every American — and it served as a vivid reminder of the United States’ dire fiscal straits.
And that after all the happy talk about the serious need for deficit reduction and how committed the president and, one assumes, his party was to that goal. How serious is he? Remember this?
Now, I know that some in my own party will argue that we can’t address the deficit or freeze government spending when so many are still hurting. And I agree — which is why this freeze won’t take effect until next year when the economy is stronger. That’s how budgeting works. But understand –- understand if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery -– all of which would have an even worse effect on our job growth and family incomes.
The usual presidential double talk – deficit reduction is important, but I’ve decided it is more important to spend more money this year despite my claim we have to reduce the deficit. I’m sorry but that quote is word salad. We must address the deficit and freeze spending but we can’t address the deficit or freeze spending even though not doing so may “have an even worse effect on our job growth and family incomes?”
Oh, that effect won’t be until after next year’s freeze? Oh, ok – spend away.
Do you see how asinine this explanation is?
And, as expected, that 15 to 25 billion “freeze” is all he mentioned as his attempt to address the deficit – again, not at all the actions of someone serious about deficit or debt reduction. More smoke and mirrors with the final act being a claim he’ll veto any bill that tries to melt that freeze. Meantime he and the Dems are raising the debt ceiling by 1.9 trillion and we’re supposed to ignore that and buy into his piddling deficit reduction scheme which doesn’t even start until next year.
Don’t know about you, but this debt increase sounds like the perfect time to wield that veto pen to me. I mean if he’s actually serious about deficit and debt reduction as he claims.
But apparently, Barack Obama still thinks it does. Unfortunately, for him, many Democrats in Congress don’t agree. Mary Landrieu for one:
Sen. Mary Landrieu (D-La.) said health care reform “is on life support, unfortunately,” and the president should have been more specific with how Democrats should move forward.
“He should have been more clear, and I am hoping that in the next week or two he will because that is what it is going to take if it is at all possible to get it done,” Landrieu told reporters. “Mailing in general suggestions, sending them over the transom, is not necessarily going to work.”
Obama’s been mailing it in for a year. Leadership in this particular case is when someone takes the lead in giving direction to the legislative product and process so when it ends up in Congress, the kinks have been worked out on both sides before they vote and enough are happy with the product that it is able to pass both chambers. Presidents have been involved in that sort of leadership since there’s been a presidency. However, it seems it’s a foreign concept to Mr. Obama. It appears he believes that Congress should take his nebulous and sometimes contradictory musings and mumblings and put a coherent bill together which is satisfactory to all sides. The “from on high” pontificating that apparently some scribes at lower levels are supposed to faithfully record and from which they are to somehow fashion acceptable legislation that will quickly pass doesn’t seem to be working, does it?
That’s not how presidents in the past have lead and it certainly doesn’t appear the Obama brand of non-leadership is having much success. Landrieu is trying to be as tactful as possible with her “mail it in” comment, but it is apparent that they have seen nothing in terms of presidential leadership on this issue (or others). So they keep wandering in circles fighting among themselves (something else a leader would attempt to stop vs. standing at a podium and chastising them for his lack of leadership) and have produced a monstrosity of a bill which they can only pass via parliamentary tricks.
The “sidecar reconciliation” is one such trick which, unfortunately for them, seems to have a show stopping Catch-22:
“Neither the House nor the Senate have figured out how to pass a reconciliation sidecar first,” one senior Senate aide says. “We are being asked to pass a piece of legislation that amends another piece of legislation which does not exist yet. We are having problems with the CBO and parliamentarian on that front.”
Got that? The House (Democrats) doesn’t trust the Senate (Democrats) to fix the Senate bill they are currently being pressured to pass. Therefore the House wants the fix passed first so the Senate can’t renege on it. But, you can’t pass a fix on something that doesn’t yet exist. So here they sit, in a parliamentary stew of their own making and with presidential leadership simply not present – except for speechifying and berating everyone else but himself for the failure of his leadership.
It’s an amazing performance.
I’m going to use Taegan Goddard’s reaction at CQ Politics as a basis for mine and to show how two people can watch the same thing and react like they hadn’t:
President Obama spent more than an hour making arguments he should have been making for months. He forcefully reminded Americans that he was not responsible for the big problems he inherited. He desperately needed to remind people the historical context and he did it successfully.
Did he really? He’s been saying this stuff for a year now and I’m pretty sure the world is aware of his opinion on the subject. Whether or not he again “successfully” placed it in a “historical context” is a matter of opinion, but what isn’t a matter of opinion is he’s had a year to work on jobs and the economy and he’s screwed around with health care instead.
Interestingly, it was like a campaign speech designed to appeal to independents. Obama refused to be pulled into the traditional left vs. right polarization that plagues Washington, D.C. It’s what got him elected in the first place.
He was right in the middle of the “traditional left vs. right polarization”. He was lecturing Republicans during most of the speech. And he even got into the populist side of things with his attacks on banks and corporations. Hell, he even went after the Supreme Court and threw a shot across the bow of the Joint Chiefs.
There were also several political moments you might see again in this fall’s midterm campaigns. The video of Republicans sitting on their hands while Obama called for banks to pay back bailout funds will almost certainly come back to haunt them.
This is the inside the beltway mentality speaking. That particular video will mean zip to those who see it. Jobs, economic turnaround, prosperity – attacking banks isn’t going to bring any of those.
While everyone knew the president would focus on jobs and the economy, it was nonetheless shocking it took him nearly 40 minutes to get to health care reform. Just weeks ago, it was the most important issue on his agenda. Obama made his case once again but it’s far from clear whether Democrats are scared enough or feel the urgency to ignore the confused politics of the issue and pass the bill.
For the 30th time in a year he talked about health care. What part of “we don’t want what you’re selling” do you suppose he doesn’t get? It isn’t that they aren’t conveying the message properly – it’s the message itself that’s being rejected along with a procedure that includes such absurdities as “sidecar reconciliation”, bribes and closed door meetings. Get a freaking clue.
It was a decent speech, but not a great one.
In fact it was an outstanding speech as far as speeches go, but what does it mean. This is a president who has given more outstanding speeches than any since Reagan. The difference is, things happened after Reagan spoke. Nothing happens after Obama speaks. So while the rhetoric was defiant, pointed, and lofty, it was all “just words”.
President’s get kudos for words. They are remembered for deeds. And thus far, Obama is very light in the deed department.
An address that has become popularly known on blogs and Twitter as the SOTU. In the case of the one scheduled for tonight, some think it should be abbreviated as the STFU address, but then there are always some who’d prefer silence to the usual nonsense that takes place at the Capitol.
So what will we hear tonight? Well as we get closer, more and more is leaking out. One thing that leaked earlier than the rest is the spending freeze we’ve written about. 25 billion a year for three years. Make sure you listen for what the president talks about spending tonight to balance it against that huge spending freeze. As mentioned, we do many more times that amount of deficit spending each month. If that is the sum of his plan for addressing the deficit, he’s not at all serious about it.
The NY Times has an interesting paragraph in their preview of the SOTU.
When Mr. Obama presents his first State of the Union address on Wednesday evening, aides said he would accept responsibility, though not necessarily blame, for failing to deliver swiftly on some of the changes he promised a year ago. But he will not, aides said, accede to criticism that his priorities are out of step with the nation’s.
First, he will accept the “responsibility” but not necessarily the “blame”? How’s that work? If you’re responsible for something and it doesn’t get done, who else is to blame? Another in a long line of indicators that this guy is not a leader. One of the first things any company commander makes clear to a new platoon leader is the platoon leader is responsible for everything that does or doesn’t happen in his platoon. And that platoon leader knows exactly who the company commander will blame. The same is going to happen here. Obama may decide he’s not going to accept blame, but he’s really not the final arbiter on that, is he?
However, if that’s the Obama game plan, it will be interesting to hear to whom or what he tries to shift the blame. Bush, of course, is in for a round of finger pointing (perhaps more obliquely than usual, but I’m sure it will be there). One thing to remember when he begins that is the Congress – the branch of government that appropriates and spends money as well as making laws (and regulations) – has been in Democratic hands for the last 4 years.
I’d bet he’ll also set his sights on blaming “obstructionist” Republicans. Of course to buy into the “obstructionist” argument you have to again be ignorant of the fact that Democrats have enjoyed overwhelming majorities in both houses of Congress to include, until recently, a super-majority in the Senate. So it is unclear who he can credibly blame, other than himself, for not passing his agenda items except, perhaps, the leadership of the Congress. And we all know how that would be received.
Then there’s the sentence that Obama refuses to “accede to criticism that his priorities are out of step with the nation’s”. Pure arrogance. Pure hubris. Poll after poll have made it clear the majority of Americans do not want this monstrosity of a health care bill specifically and in general they want government’s size and expenditures reigned in. And the sooner the better.
Obama and his team still haven’t recognized the fact that the entire political landscape changed with the financial crisis. He seems to think if he gives that crisis enough lip service while proceeding with an agenda ancillary to it, he can still do the agenda. No. Not true. All one has to do is read the Pew survey I posted yesterday to understand where the public’s attention is and where the public wants government’s attention focused. Almost without exception it’s the economy and jobs. All the rest is simply not important. The bunch in DC better figure it out and do so quickly or, as has been promised, they’ll get someone who will – beginning this year with the mid-terms.
So in effect, doubling down on an ineffective and unpopular decision doesn’t make one a strong leader. Instead, in the face of what those who put him in office want him to focus on, it makes him seem more of a petulant and stubborn adolescent who refuses to change because the adults want him too.
As Mr. Obama navigates a crossroads of his presidency, a moment when he signals what lessons he has drawn from his first year in office, the public posture of the White House is that any shortcomings are the result of failing to explain effectively what they were doing — and why. He will acknowledge making mistakes in pursuit of his agenda, aides said, but will not toss the agenda overboard in search of a more popular one.
That’s incredible. It is the very same fallback Democrats took when they lost the presidency in 2000. It wasn’t the message, it just wasn’t properly conveyed. For them it is never the message, even after poll after poll tells them it is. The man gave almost 30 speeches on health care and the public still has said – repeatedly – “no”. What part of “no” doesn’t he and the Democats understand? Which again brings us to the last sentence and the petulance I describe above. It also points to a man who has yet to understand what I pointed out previously – the political landscape has irrevocably changed since he introduced that agenda on the campaign trail. In politics those who can’t adapt “die” electorally – and that is precisely where he and the Democrats are headed.
Finally, it gives lie to the contention that Obama is a pragmatist. If what the NYT is claiming is true, he’s the very antithesis of a pragmatic politician. He’s a dyed-in-the-wool ideologue who will not give up his ideological agenda regardless of the hand reality deals him. And that sort of ideological intransigence will cost him politically. While I can admire those who try to live their ideology, I don’t particularly care for those who try to force it on others. And that’s precisely what he is attempting here.
I’m sure there will be some surprises tonight. I’m interested to hear his “pivot” toward jobs and the economy. And I’m sure the speech will be eloquent. But we’re over the awe of his eloquence. It’s means zip anymore. Those 30 eloquent speeches on health care delivered what? Nothing. Even though I’m quite happy about that, it makes the point that he’s all speech and no action. He is “just words”.
Speaking of words, I’m trying to get an idea of what the over/under is on how many times he’ll say “I”, “me” or “my” tonight. This is the first SOTU for the most self-absorbed president in my lifetime and I can’t help but believe the count will be high.
It started as a trickle and is now turning into a flood. More claims found in the “bible of the alarmists”, the UN’s 2007 IPCC report, have been found to be false.
The two latest have to do with extreme weather increases and the disappearance of the Amazon rain forest.
The IPCC 2007 report claimed that global warming was leading to an increase in extreme weather, such as hurricanes and floods. Like its claims about the glaciers, this was also based on an unpublished report which had not been subject to scientific scrutiny — indeed several experts warned the IPCC not to rely on it.
The author, who didn’t actually finish his work until a year after the IPCC had used his research, has now repudiated what he sees has its misuse of his work.
His conclusion: “There is insufficient evidence to claim a statistical link between global warming and catastrophe loss.”
Yet it was because of this — now unproved — link that the British government signed up to a $100 billion transfer from rich to poor countries to help them cope with a supposed increase in floods and hurricanes.
Peer review? Obviously impossible since the work hadn’t even been finished by the time the IPCC report was published. And much the same has been found concerning the IPCC claim that 40% of the Amazonian forests were at risk from global warming and would likely be replaced by “tropical savannas” if temperatures continued to rise.
This claim is backed up by a scientific-looking reference but on closer investigation turns out to be yet another non-peer reviewed piece of work from the WWF. Indeed the two authors are not even scientists or specialists on the Amazon: one is an Australian policy analyst, the other a freelance journalist for the Guardian and a green activist.
The WWF has yet to provide any scientific evidence that 40% of the Amazon is threatened by climate change — as opposed to the relentless work of loggers and expansion of farms.
What was that question that alarmists like to ask about the IPCC report? Oh, yeah – “how can 2,500 scientists be wrong?” Here’s how – take unfinished research, fudged data and un-peer reviewed work and publish it claiming it is none of those things, that’s how.
The good news?
The sceptics may be about to get their first scalp. Rajendra Pachauri, the IPCC chairman often wrongly described in the media as the world’s leading climate scientist (he’s actually a railway engineer), at first attacked those who questioned the IPCC’s alarming glacier prediction as “arrogant” and believers in “voodoo science”.
He’s since had to retract the prediction but can’t quite manage an apology — and is now under mounting pressure in his Indian homeland to resign.
And resign he should – the IPCC report, for which he was responsible, seems to be a pack of lies promulgated to advance a political agenda designed to loot rich countries and transfer the wealth to poorer countries under the auspices of “science”. He and that group have, instead, tarnished the reputation of science and set it back at least 50 years. It’s time for a little accountability in this world. Pachauri should resign at a minimum and, if a way can be figured out to do it, brought up on charges of conspiracy to defraud.
If you were to ask them though, the taxes will be collected only from corporations and the rich. The idea is to stick them with the bill for services the rest of the voters have decided they’d like but can’t afford. It’s a bit like getting on a train without a ticket, finding a well dressed man, and having the ticket collector point a gun at him and demand ticket money for your trip.
If I were the well dressed man, I’d probably find alternate transportation for my next trip. If I was a “rich” person in Oregon, I might begin scouting out a new place to live. The voters have certainly made it clear they feel they have every right to loot my earnings at will. Why would I want to give them any more chances?
Measure 66 raises the income tax paid by households earning at or above $250,000 a year or individual filers who make $125,000 or more. Measure 67 raises the state’s $10 minimum corporate income tax.
Together they generate an estimated $727 million, which has already been budgeted by the 2009 Legislature for public schools and other state services.
So instead of cutting budgets at the state level to what they can afford, Oregon voters have doubled down and bought into the populist notion that they can do it on back of those demonized rich people and evil corporations.
Corporations, of course, have a number of choices. Among them, if the tax isn’t too high, is pass the cost on to their customers. That would most likely be those who voted “yes” on Measure 67 ironically. If it is a large tax which is not easily passed on to the consumer, the corporation has other choices. It can cut headcount – lay people off – to recoup the cost. Or, if it is really crippling, find a new home for their business in a state which is friendlier toward business than is Oregon. What they most likely won’t do, at least not anytime soon, is hire and expand. And if I was a corporation looking for a new home, this vote would have me cross Oregon off the list.
The “rich” also have options. Find ways to hide that income. Like increase 401k savings so that taxable income is below that number. Many are probably small businesses which will hide income in the business vs. putting it in the owner’s income. If none of that’s possible they may find a new home for themselves and their business. One of the benefits of being “rich” is it does tend to give one some options as to where to live.
That’s not to say they will or even that all of them object to this new tax, but Oregon voters shouldn’t fool themselves that this sort of taxation is beneficial in the long run to an atmosphere which will attract and keep businesses or people who have the money to help the economy. Oregon might be a nice place to live, but it’s not that nice – especially when alternatives exist.
UPDATE: Megan McArdle points out something about the tax on business that makes it even worse:
The business tax changes apparently include a gross receipts tax, which is really an awful tax, especially during a downturn. Companies which are actually losing money may still owe taxes, which could hasten their closure, and the evaporation of any jobs they provide.
Any business that took in a dollar last year owe taxes on it. That means, as McArdle points out, marginal businesses who have just managed to hang on (and continue to provide employment) may be forced to lay off or close their doors and liquidate to pay the tax. A particularly “smart” move in a recession.
Additionally, as Tonus points out in the comments – the $727 million will be spent on the static analysis which said such a tax would yield that amount of revenue. But life isn’t static and those effected will immediately begin to do things which will lessen the impact on them and, of course, make that revenue stream smaller than anticipated. That means two things – more deficit spending and, most likely, more taxes on those who approved these to measures in order to make up the revenue shortfall.
For those that have chosen to make man-made global warming a form of religion this might come as disappointing news. Americans just don’t really care that much about it. In fact, since it was first measured by the Pew Research Center for the People and the Press in January of 2007, it has slipped a full 10 points and is now listed as dead last on the people’s priority list.
Global warming is simply not a priority except among Democrats. And even among them it is a minority position – only 43% see it as a top priority while only 11% of Republicans and 25% of independents see it as such.
Is it because they just aren’t buying the hype anymore and don’t believe it is really an urgent problem or is it because other are indeed more urgent problems? As I pointed out previously, since Pew has been tracking it in 2007, it has always been among the lowest of priorities with 38%. It has declined even more each and every year since.
There’s a lesson for the cap-and-traders there who would use global warming as a reason to enact the carbon taxing scheme designed to create a revenue stream for government out of thin air.
Global warming ranks lower among the public than trade policy – which I’m sure is followed with interest and understanding by the masses. Politicians aren’t dumb – well not completely. They’ll see that list and figure out what is below the 49 to 50% level and shy away from that for the time being. That means immigration, tax cuts, financial regulation, the environment and global warming are going to find convenient back burners on which to sit. Or should.
As an aside, just because the public isn’t clamoring for tax cuts, it should be clear to all, given this chart, that spending can not go on as scheduled. Nope – deficit reduction ranks up there in the 60% range. No tax cuts? Cut spending then – big time. Not piddling little 15 to 25 billion a year “freezes” – cut spending. Pick a percentage and do it. 3% a year, across the board, for 10 years. Budget for it.
That’s about the only way the economy will get moving. Government has got to quit sucking up all the available credit for these nonsense projects politicians like to claim will “create jobs”. If those who think global warming is an important priority want to see it addressed at all, they’d better find a way to satisfy the rest of the country that the other 20 priorities have been successfully addressed.
“It’s the economy, stupid.”
The progressive base is having conniptions over the failure of President Obama to get his agenda through Congress despite having supermajorities. Now that Obama is making token gestures (however feeble [via:HA]) towards fiscal sanity, they are experiencing political apoplexy:
As noted in quick hits by BDB and rayj, [UPDATE] and by David in a diary that just caused me to push back this diary’s publication time, Obama has now gone off the deep end. After passing a stimulus that most economists (not just liberal ones) said was too small, and that was made even more inadequate by being heavily tilted toward poor-performing tax-cuts, Obama is now intentionally recreating FDR’s mistake of 1937, when he prematurely cut back spending to try to balance the budget, and sent the country into a new recession.
Specifically: He’s going to announce a spending freeze on domestic programs (but not, of course, on the military) that is “projected to save $250 billion.” The rationale is that he wants to appease folks worried about runaway deficits. Which is just what FDR was worried about in 1937.
This is Bush-style idiocy. There is no other word for it.
The cause of this consternation is magical thinking on the part of the author, Paul Rosenberg.
Here, to remind you, is the chart I put together during the stimulus debate, showing, among other things, the relative ineffectiveness of tax cuts vs. spending in generating jobs, which is the key to getting the nation out of this recession–the only way that we can rationally hope to start bringing down the deficits:
While some tax cuts are much better than the real stinkers, it’s virtually a given that once Obama starts talking about tax cuts, the GOP is going to start demanding that Bush’s tax cuts be made permanent. Not only–as you can see from the chart–are these about the least helpful tax cuts of all, they are also heavily skewed toward helping the rich and the super-rich.
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.
Rosenberg provides this explanation for the employment fairy (from Mark Zandi of Moody’s Economy.com):
The House stimulus plan includes some $100 billion over two years in income support for those households under significant financial pressure. This includes extra benefits for workers who exhaust their regular 26 weeks of unemployment insurance benefits; expanded food stamp payments; and help meeting COBRA payments for unemployed workers trying to hold onto their health insurance.
Increased income support has been part of the federal response to most recessions, and for good reason: It is the most efficient way to prime the economy’s pump. Simulations of the Moody’s Economy.com macroeconomic model show that every dollar spent on UI benefits generates an estimated $1.63 in near-term GDP.x Boosting food stamp payments by $1 increases GDP by $1.73 (see Table 2). People who receive these benefits are hard pressed and will spend any financial aid they receive very quickly.
Another advantage is that these programs are already operating and can quickly deliver a benefit increase to recipients. The virtue of extending UI benefits goes beyond simply providing aid for the jobless to more broadly shoring up household confidence. Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose their sources of support.xi Increasing food stamp benefits has the added virtue of helping people ineligible for UI such as part-time workers.
Whatever the virtues of income support, and even if that support will be quickly spent in the economy, there is no justification for concluding that it will expand the economy. At best, it can stabilize a downturn by maintaining some level of consumer spending. But that does not expand the economy in any way, shape or form, and it certainly doesn’t create jobs an unprecedented level as suggested by Rosenberg.
Indeed, in order to give money to the poor and jobless, the government has to take money fr0m someplace else. Since it doesn’t create anything, the government will either (i) tax those who are working and creating wealth at higher rates, (ii) borrow money, or (iii) print money. Again, these are not wealth producing actions, but instead wealth destroying ones. It is true that, assuming such income support shortens a downturn, tax receipts will eventually outpace the costs of funding those supports. What is not true is that the government benefits will create jobs.
On the one hand, of course, I don’t want to discourage the left from turning on Obama (enemy of my enemy and all that). It just pains me to see it done based on such absurd premises.