The Stimulus Package: Who Do You Trust?
I usually have an opinion on most policy matters. But I must say that this stimulus package has had me sitting on the fence. On one hand the Democrats and many economists say this huge package of spending measures and tax cuts will help save the economy from a really bad recession - or even a depression. But then you have Republicans saying that it is a big waste of money. In general I don’t trust the Democrats - especially the Congressional leaders - to do the right things.
On the other hand, I don’t trust the Republicans either anymore. They have been terrible at controlling spending for 8 years now. They should have been cutting spending all of those years, but instead they sat by and let federal spending grow and grow. I mean the budget deficit is up to a trillion dollars. So I don’t have much faith in their judgment right now when they say that this stimulus package is all bad news and pet Democratic projects. Republicans in Congress may be just wildly oscillating to the other extreme in a kneejerk reaction to the recent elections.
I think that nearly everyone agrees that we need a stimulus package. At the very least we need some massive tax cuts to get people spending more and to help businesses. Personally, I don’t see much problem with handing out some temporary money too, such as to states to help with their budget shortfalls. But how far do you go with this? I am just not trusting the answers I hear from anyone.
And even if I had someone I trusted to be informed and objective on this, in the end even the wisest economist in the world doesn’t really know if this stimulus package is going to work miracles or not really have much impact at all. Economics, especially in these uncharted waters, has no mathematical models to tell us what the right answer is. Economics is not like physics where you can clearly predict the trajectory of a rocket based on the engine thrust and other well known variables.
This is not a time for wearing ideological blinders. We need something that works - and who cares how neatly it fits into the conservative or liberal sandboxes.
Among Republicans in power, and among commentators (including in the conservative blogosphere), there is this attitude that this bill is all nonsense. This reminds of when George Bush was having to make the tough calls on Iraq while all the Democrats could do was criticize him in every way imaginable. So it seems to me that Republicans are taking their turn at doing this now. It is really ironic that the Democrats are now the ones who must bear the burden of actually exercising power and making the decisions.
Because there appears to be no alternative, I reluctantly must say that I go along with the stimulus package. If there was a better alternative that would not take months to get out - I would be for that instead. But where is it and what’s in it? Don’t hold your breath waiting on a good alternative that both Republicans and Democrats can live with.
February 10th, 2009 at 1:54 am
I have a plan. Start slashing gov’t spending and then cut taxes so that we all have more money to spend/invest rather than give it to the gov’t. I am very sure that we can spend/invest the money far more appropropriately then the bureaucrats can. Then we need to start reworking our monetary system to a “sound” system where our money is backed by something real.
If the gov’t has to do something then it should help people that are hurt by no fault of their own. Banks are not one of those. People who bought homes who could not afford them are not one of those. State and other gov’t entities who have done a horrific job of managing budgets are not one of those. Education is not one of those. “Green” jobs is not one of those. People being laid off because of the recession may be one of those. The taxpayer is definetly one of those.
The best way to jumpstart our economy and ensure that people keep there jobs or get new ones is by lowering or even eliminating corporate taxes, at the very least having business profits taxed only once at a fairly low rate. The next step would be to change our tax sytem completely to a flat income tax with no deductions, but the first part of the income tax going to a personal retirement account (which will replace the SS system). This is just a taste of a plan I have in mind, but I won’t go into it any further at this time.
There are certainly alternatives, but they entail the gov’t giving up power, control, and money so you won’t be hearing much of them from Washington or the media. What they are doing now is very similar to what they did in the 30’s and what Japan did in the 90’s and it didn’t work then and it likely won’t work now. It will just bankrupt our children or at the very least stunt our economice growth for quite some time.
February 10th, 2009 at 9:46 pm
Why not go with the congressional budget office. They say if the government does nothing the economy will start recovering in 6-9 months, with Hussien’s help it will be years before it recovers. History proves the CBO correct. With Hussein’s plan from the beginning the U.S. will be at the mercy of his family of Arab/Islamist within months. Today he effectively banned all oil production in this country. Who does that help? His Arab Islamic family only. But then the crazies, along with some on the right who still consider themselves smart, say he’s not Islamist. BS The entire democrat party is suffering from self inflicted BDS so bad they would qualify for immediate confinement in an insane asylum.
February 10th, 2009 at 11:39 pm
feel free to be mad about 8 years of sloppiness - but still look at the substance. its obvious that there is a ton of wasted spending in this package, i really dont see how you can be ambivalent on it - at least on the acorn type buy offs.
February 10th, 2009 at 11:47 pm
Brendan,
“The acorn type buy offs” really bother me. After all of the bad loans caused by acorn and CRA groups shaking down banks, these groups should get nothing.
“really dont see how you can be ambivalent”
The great bulk of economists warn that a stimulus package is needed very soon. The Republicans lost the election and therefore don’t get to put one together. So the choice is to use the Democrat’s plan, with some compromises made to Republicans, or do nothing. Doing nothing is high risk. So I very reluctantly go along with this plan.
February 11th, 2009 at 10:03 am
Actually doing nothing is probably less of a risk than what they are trying to do. It has been tried at least two times before in the 30’s here and in the 90’s in Japan and in both cases it failed miserably and caused at least a decade of economic stagnation at best. I don’t know of any time in histroy when this type of gov’t spending binge has been tried and has worked. They say it just wasn’t big enough or quick enough to work in the past. Maybe they will be right, but if not they will have destroyed our economy, possibly forever, by destroying the dollar. Or maybe gov’t spending just doesn’t work, no matter how big or how quickly it is done.
Doing virtually nothing in the early 2000’s and in the early 80’s at least in regards to trying to spend our way out of a problem helped get us out of each recession very quickly. Nearly every time this has been tried, while we go through some short term pain, the economy comes out like gangbusters and grows at a rapid pace. I like the odds of this working better.
While this downturn could get worse and IMO with what the gov’t is doing it will almost assurdely get significantly worse, unemployment figures are still no worse than even in the early 90’s and in the early 80’s. We are no where near the level in the 30’s.
This whole bill just reaks of rewarding liberals special interest consitituency. Labor unions, check. gov’t employeess, check. education, check. environmental groups, check. national health care groups, check. and now big business, check. Small businesses, hosed. The american taxpayer, hosed. The american consumer, hosed.
Whenever gov’ts in the past have gone full in like they are doing now they have extended a recession into a long term economic downturn (ie depression). Whenever the gov’t has stayed to the sidelines for the most part, we have come out of the recessions fairly rapidly.
Who would want to put any money at risk, when the rules seem to change daily. Who would want to lend money when tomorow they may get a subisdy from the gov’t to do so or the gov’t may change the rules about how they get paid back. Everybody will continue to stay on the sidelines until we have a more firm set of rules and the free market can work through the overproduction, overconsumption, and to much debt of the last number of years. That can’t be done while the gov’t is trying to prop it all up. They are trying to fix the situation by doing more of the same.
They say that the gov’t is the only entity that can jolt our economy because the private sector is hurting. But they never question where the gov’t will get the money to do so. Yes that is right, they will get the money through the private sector, through taxation, borrowing, and lowering the value of the dollar through monetary inflation. The gov’t does not produce anything and the only way they get anything is by taking it from someone else who owns it or produces it.
They say they want to create jobs, but all they are doing at best is redistributing jobs to their special interest industries. They talk about all these construction jobs, but there are only so many people who are trained in how to do much of that work. Someone out of a job in the service industry likely will not benefit much from paving roads. They may be able to stand by the road holding a sign, but that isn’t the jobs we are looking for, is it. This means it will take far longer than they think and it will cost far more than they think as well. They are trying to push jobs for education and health care. These sectors already have very low unemployment. When the supply is low and you push more demand into it, you get higher prices. Look for costs in both of these sectors to continue to rise at a faster pace then the rest of the economy. They are pushing for jobs in the “green” economy. The problem is they are pushing them into things that are just not economically efficient today. They may be down the road but they aren’t today. This is an extremely inefficient use of our dollar at a time when we can’t afford inefficiency.
Tax cuts, while on the surface seem pretty good, without spending cuts they are just tax increases or inflation in the future in disguise. We are pushing the pain that we caused down the road to our children and grandchildren. Nice legacy. When we say “do it for the children” we are doing it to them in spades, alright. We are bankrupting them, just so we don’t have to feel any pain of our own poor decisions.
I choose doing nothing other than maybe helping people who are being hurt by this downturn and gov’t actions through not fault of their own.
February 11th, 2009 at 2:55 pm
TerryP,
You may be right on all fronts. I keep wondering if I am being duped. I think my brain may implode if I have to keep defending the policies of the Democrats, but here goes -
- Some targeted tax cuts are known to work as an ecomomic stimulus (think the 1920s, the JFK tax cuts, etc.)
- Giving money to the states (tempoarily) allows them to retain employees to keep unemployment from getting as bad.
- The great bulk of the new spending is supposed to be temporary (but I have yet to find a break down of this)
- Infrastructure spending and school spending was part of Obama’s plan anyway. So that was likely going to happen anyway - and it will give some stimulus after 2009.
February 11th, 2009 at 4:34 pm
Dan
Some across the board tax cuts or even possibly some targeted tax cuts may help, however, we are borrowing everything at this point or printing money. It very well could help in the short term but in the long term it will likely actually hurt more. In fact the CBO has scored the stimulus bill helping just a little in the first few years and then actually hurting our economy after that. This is coming from the gov’t itself. It is probably even worse then what they are projecting. Normally I am all for tax cuts, but if you are increasing spending at the same time you are decreasing taxes you are setting yourself up for future failure. I know that most other countries are doing the same thing we are to our currency, but they don’t have as much to lose. We are the reserve currency of the world. At some point othe countries may decide that isn’t working so well and the dollar is dropped as the reserve currency. If you think the economy is bad now, wait till that happens. We will be yearning for the times when we only had 7.5% unemployment and we could afford to worry about global warming.
Giving money to the states only will make them be even more fiscally imprudent in the future. Why be prudent with the money if the federal gov’t will always help us out. I don’t know if there are any provisions for having the states payback any of the money they are getting, but I doubt it. As far as I am concerned the state gov’ts could certainly cut back on the number of employees and probably should cut back. Look at how the incentives in the medicad program has drove up the spending by states in healthcare. The more they spend the more they get from the federal gov’t, ie taxpayers from other states. If I was a politician in a state and could get my money from taxpayers of other states or from my state, it wouldn’t be that difficutl of a choice. You are going to get as much as you can from everyone else before asking the people you are supposed to serve to pay.
Sure most of the spending is supposed to be temporary but have you ever heard of a gov’t program ending when it was supposed to. And even if it is temporary, we don’t have the money to spend. It will all be borrowed or created. Borrowing and living above our means is what got us into this problem. Doing more of the same will not get us out of it.
While I believe that we need to have infrastucture spending it should be done when economically we are in good shape and can do it with little to no borrowing. Education spending per child excluding capital spending has doubled in something like twenty-twenty five years after inflation is taken into account. Education should not be hurting for money, because they have been getting far more than anyone other industry save maybe health care for many years. They never make the hard choices because they know the gov’t/taxpayer will always give them more. What’s even worse is the quality has not improved and quite possibly it may have detoriated. Capital spending in education is the same way. They don’t do what they need to do to keep buildings maintained because that comes out of their operating budgets. They know at some point the taxpayer will be forced to build a new building or make huge improvements to current buildings outside of the normal operating budget.