Thread: Obama Stimulus package

Originally Posted by Jet Gorgon

Job losses are growing. Sure, tax cuts are good, but how will that help folks with no jobs? The banks need to open credit again.

Credit is the problem.

obama pushed back hard on the obstructionists in congress and the 'liberal' media yesterday....it seems he's got a pretty good chance for 60 senate votes on friday.

Max Weiser on Bank Nationalization, calling for citizen revolt, and decline of the dollar:

Originally Posted by Bugs

And they are all fighting over a bill that won't release much of the funds until next year and the years that follow.

even though 'much' is a relative term, that's not my understanding....please provide a link.

and btw, this is no ordinary recession, and there should be funds available to inject into the troubled economy in the months of economic crisis to come.

The bottom line is, whether we had a red or blue President there would be stimulus package wending it's way through Congress. They are just squabbling over the details. The Rep's, predictably, are pushing for more tax cuts for the rich- which I don't agree with, they get a pretty good deal in the US as it is. Tax cuts for the middle class would be more effective, to stimulate broader consumption.

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Agreed, the principles of godd fiscal policy for a government is not that different from good control of personal finances. We have for years spent more than we have earned, both private and public sectors, and now the bills are coming due. It is like an individual using a credit card each and every month, sure in the short term you can live better, but it is not sustainable in the long term. The way out for an individual is not to give them another credit card so they can go further into debt to continue to live the lifestyle they want.

Same with our government, sure going further in debt through a stimulus package may ease the pain (slightly) short-term, but it does nothing to address the main problem.

If we really want to "fix" the problem, we as a nation have to get away from unsustainable easy credit, instead we need to revert to solid business practices that creates real value and profits, not just illusionary paper profits.

I can't see trying to revert back to the practices of easy credit with little regard to the value of what the credit was buying that started the problems will result in fixing the underlying problems.

The banks got out of whack and are paying the price the market extracts for poor practices, and if we allow the natural self-correcting mechanism to take place, it will be painful but effective in creating s long-term recovery. If the government interferes and rewards the banks for their poor practices in the past, the self-correctng mechanism will not take place and the same poor practices that caused the failures will continue.

Originally Posted by sabang

The Rep's, predictably, are pushing for more tax cuts for the rich- which I don't agree with, they get a pretty good deal in the US as it is. Tax cuts for the middle class would be more effective, to stimulate broader consumption.

obscene tax cuts for the extremely wealthy during the bush administration are partly to blame for how the US got into this mess....govt. spending is precisely what is needed at this point.....highways, bridges and other infrastructure, developing the alternative energy industry, throwing a life line to the struggling auto industry, health care for all citizens so that the playing field is equal, etc...

reaganomics is dead.

Originally Posted by raycarey

reaganomics is dead.

For now, but it will return. Socalism did not work in Europe or South America and it will not work in America.

Funny, the same people saying this now never complained about having a market-based economy during the Clinton years.

Clinton's economic policies were closer to Reagan's than Obama's.

Why isn’t anyone asking the question where the money will come from for the stimulus package?

There are three options. One, print more money, which of course results in inflation. Therefore everyone holding US dollars will pay for the stimulus package through an inflation tax which will lower both consumption and investment.

Two, direct taxation, which of course will also reduce the amount of funds available for consumption and investment (remember economics 101, Aggregate demand equals consumption, investment, government expenditure + net exports).

Three, borrowing the money. If the government borrows the money, it will create more competition amongst credit seekers. Obviously, the government is a better risk than private organizations and this becomes even more pronounced during a time of crisis. Therefore lenders will prefer loaning to the government which will drive up the cost of credit for private industries resulting in less consumption and less investment.

At best, increased government spending is a wash in aggregate demand due to the crowding out of consumption and investment, but in reality it is harmful as all research indicates government spending is less effective in creating jobs than is private sector spending coming from consumption and investment.

Bad idea, it has been tried before and failed and the failures are explained theoretically. Why then are we going for a policy that empirical and theoretical evidence does not support?

Originally Posted by Norton

Originally Posted by Accidental Ajarn

If we really want to "fix" the problem, we as a nation have to get away from unsustainable easy credit, instead we need to revert to solid business practices that creates real value and profits, not just illusionary paper profits.

Here in lies the root problem. Failure to change the fundamentals of responsible business and individual fiscal practices will ensure the market will suffer "crisis" after "crisis.

The expectation government is obligated to "fix" irresponsible business and individual irresponsibility is ingrained into the psyche of modern capitalism. Government has a responsibility to make sure it's businesses can operate in an environment conducive to success. These include; infrastructure, education, fair practices, taxation, oversight and the like, full stop.

I am amused as I watch the "political" circus in full swing as it relates to the various "stimulus" packages. No question, the economy is in crisis and is going to get worse. The unemployment of millions of workers as a result of the economic downturn will require government spending on unemployment benefits so allocation of budget to cover this is the only thing that should be in government budgets. All the rest of the stuff I see in government "stimulus" packages is of questionable value and is but a reaction by elected officials to demonstrate they are taking action on behalf of their constituents. Aka getting reelected!!!

The "economy" will recover. May take time as it has for many years been living on borrowed time (pun intended). It is the responsibility of the businesses and individuals that fuel the economy to "fix" it.

Government should stand aside and let the chips fall where they will.

Great post and I agree with 90% of your analysis, I do feel the market does work (where is enron now) in the long run. Who does a better job of making decisions? The collective wisdom of all of society operating through markets and a few elite members of society? While not perfect, the evidence I have seen has consistently shown the collective wisdom of all members of society through a market system is superior the the decisions made by a few elites as is the case in socalism, nazism, communism etc...

Question for you, who should decide what you have for dinner tonight? Yourself or the government?

WHy?

It's easy to give up, surrender, throw your hands in the air and cast off any responsibility for anything in your life.

Look how happy the Euro trash is.

Originally Posted by Accidental Ajarn

who should decide what you have for dinner tonight? Yourself or the government?

Using this analogy, I would have to say the government as headed up by my wife. Why? She is the chief cook and bottle washer.

To answer as it relates to the intent of your question, I should decide what I want to eat, not the government. Why? I have individual tastes and I know what I can afford. It will be hamburger if I have to borrow money to have Fillet Mignon. I.e. individual fiscal responsibility.

there is no such things as government tyranny,

that's a hillbilly wet dream,

gun nuts and rednecks idea of a civil society,

^

WOW

With such indepth insight and clear reasoning, I sure you have convinced many others of the correctness of your position. WOW, what intellect on display here.

Since there is no such thing as government tyranny, we will all reevaluate our positions and agree with every move, such as Gitmo, that Bush made.

Originally Posted by Texpat

It's easy to give up,

it is, and you speak from experience

Originally Posted by Norton

Government should stand aside and let the chips fall where they will.

I agree with most of what you have said. But at this point if they want to get reelected they cannot stand back and do nothing. So passage of some form of stimulus package is inevitable. IMHO they should pass a smaller package – like maybe half – two-thirds the size. Keep in the tax cuts – probably expand them a bit, keep in the infrastructure stuff – again possibly expand this part a bit, keep in some of the aid to the state – but scale back the size drastically, keep in part of the unemployment benefits (the part about expanding the period folks can draw unemployment), and pretty much shit can the rest.

^

Seems a sensible appraoch, therefore it is unlikely to be approved in Washington .

Originally Posted by raycarey

Originally Posted by Bugs

And they are all fighting over a bill that won't release much of the funds until next year and the years that follow.

even though 'much' is a relative term, that's not my understanding....please provide a link.

and btw, this is no ordinary recession, and there should be funds available to inject into the troubled economy in the months of economic crisis to come.

The link is already there - all the details are in the CBO report:
http://www.cbo.gov/ftpdocs/99xx/doc9968/hr1.pdf

Page 3 gives a big picture year-by-year break-down, and there is a detailed break-down at the end of the report.

Based upon deficit impact (combination of goverment outlays and reduction in revenues) – just over 20% ($169.6 billion) of the package takes effect in ’09, and another 43-44% ($355.9 billion) in ’10 – total of around 64% over the first two years. Of that about 45% of the first year impact is reduced tax revenue ($76.5 billion), while the other 55% is actual government expenditure – so less than $100 billion ($93.1 billion) is expected to actually be spent in ’09. The ratio of expenditure to revenue reduction gets a bit better in ’10, as only about 30% or so of the ’10 impact is related to reduced revenue ($131.3 billion) and the rest ($224.6 billion) is actual government outlays.

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I would like to see the model they used for these projections, does the model take into acount the crowding out effect that research has demonstrated or does it ignore it as most Keynesian models do?

The outcomes of the model depend to a great extent what assumptions one makes and how much the crowding out effect offsets the actual stimulus the spending creates.

By Charles Krauthammer
February 6, 2009

"A failure to act, and act now, will turn crisis into a catastrophe."
-- President Obama, Feb. 4.

Catastrophe, mind you. So much for the president who in his inaugural address two weeks earlier declared "we have chosen hope over fear." Until, that is, you need fear to pass a bill.

And so much for the promise to banish the money changers and influence peddlers from the temple. An ostentatious executive order banning lobbyists was immediately followed by the nomination of at least a dozen current or former lobbyists to high position. Followed by a Treasury secretary who allegedly couldn't understand the payroll tax provisions in his 1040. Followed by Tom Daschle, who had to fall on his sword according to the new Washington rule that no Cabinet can have more than one tax delinquent.

The Daschle affair was more serious because his offense involved more than taxes. As Michael Kinsley once observed, in Washington the real scandal isn't what's illegal, but what's legal. Not paying taxes is one thing. But what made this case intolerable was the perfectly legal dealings that amassed Daschle $5.2 million in just two years.

He'd been getting $1 million per year from a law firm. But he's not a lawyer, nor a registered lobbyist. You don't get paid this kind of money to instruct partners on the Senate markup process. You get it for picking up the phone and peddling influence.

At least Tim Geithner, the tax-challenged Treasury secretary, had been working for years as a humble international civil servant earning non-stratospheric wages. Daschle, who had made another cool million a year (plus chauffeur and Caddy) for unspecified services to a pal's private equity firm, represented everything Obama said he'd come to Washington to upend.

And yet more damaging to Obama's image than all the hypocrisies in the appointment process is his signature bill: the stimulus package. He inexplicably delegated the writing to Nancy Pelosi and the barons of the House. The product, which inevitably carries Obama's name, was not just bad, not just flawed, but a legislative abomination.

It's not just pages and pages of special-interest tax breaks, giveaways and protections, one of which would set off a ruinous Smoot-Hawley trade war. It's not just the waste, such as the $88.6 million for new construction for Milwaukee Public Schools, which, reports the Milwaukee Journal Sentinel, have shrinking enrollment, 15 vacant schools and, quite logically, no plans for new construction.

It's the essential fraud of rushing through a bill in which the normal rules (committee hearings, finding revenue to pay for the programs) are suspended on the grounds that a national emergency requires an immediate job-creating stimulus -- and then throwing into it hundreds of billions that have nothing to do with stimulus, that Congress's own budget office says won't be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. He said.

Not just to abolish but to create something new -- a new politics where the moneyed pork-barreling and corrupt logrolling of the past would give way to a bottom-up, grass-roots participatory democracy. That is what made Obama so dazzling and new. Turns out the "fierce urgency of now" includes $150 million for livestock (and honeybee and farm-raised fish) insurance.

The Age of Obama begins with perhaps the greatest frenzy of old-politics influence peddling ever seen in Washington. By the time the stimulus bill reached the Senate, reports the Wall Street Journal, pharmaceutical and high-tech companies were lobbying furiously for a new plan to repatriate overseas profits that would yield major tax savings. California wine growers and Florida citrus producers were fighting to change a single phrase in one provision. Substituting "planted" for "ready to market" would mean a windfall garnered from a new "bonus depreciation" incentive.

After Obama's miraculous 2008 presidential campaign, it was clear that at some point the magical mystery tour would have to end. The nation would rub its eyes and begin to emerge from its reverie. The hallucinatory Obama would give way to the mere mortal. The great ethical transformations promised would be seen as a fairy tale that all presidents tell -- and that this president told better than anyone.

I thought the awakening would take six months. It took two and a half weeks.

Charles Krauthammer - The Fierce Urgency of Pork

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'Bout sums it up.

Originally Posted by raycarey

obscene tax cuts for the extremely wealthy during the bush administration are partly to blame for how the US got into this mess

Wrong. It was bank regulation mishmash, Fannie/Freddie disasters and no govt oversight.

This stimulus pkg is sh*te, and Obama looks like a Pelosi/Reid puppet. There is NO real job creation in this bill. Spending = stimulus? No. Even Feinstein (D CA) is against the bill -- where is the job creation? Tax cuts are good, but where are the long-term jobs? Credit for small biz, get companies moving again. And only a small portion of the bill is earmarked for this year. FO. Obama is looking like a dufus.