10 Reasons to Whack Obama's Stimulus Plan...

[posty 2,802]

http://www.usnews.com/blogs/capital-commer...mulus-plan.html

 

Some people are going to oppose President Obama's ginormous stimulus package just because they're on a different political team. But when you look at the economic evidence, it sure seems like an economic recovery package that's heavy on government spending and light on tax cuts is just the opposite of what we should be doing right now. Try this closing argument on for size:

 

1) A 2005 study by Andrew Mountford and Harald Uhlig "analyzed three types of policy shocks: a deficit-financed spending increase, a balanced budget spending increase (financed with higher taxes) and a deficit-financed tax cut, in which revenues increase but government spending stays unchanged. We found that a deficit-spending shock stimulates the economy for the first 4 quarters but only weakly compared to that for a deficit-financed tax cut." In other words, FDR vs. Clinton vs. Reagan, Reagan wins.

 

2) Harvard economist Robert Barro looked at the multiplier effect of World War II military spending -- supposedly the Mother of All Stimulus Plans and found that "wartime production siphoned off resources from other economic uses — there was a dampener, rather than a multiplier." Barro prefers eliminating the corporate income tax to massive government spending.

 

3) Alberto Alesina of Harvard and Luigi Zingales of the University of Chicago want to adress the fear and confidence issue by creating "the incentive for people to take more risk and move their savings from government bonds to risky assets. There is no better way to encourage this than a temporary elimination of the capital-gains tax for all the investments begun during 2009 and held for at least two years."

 

4) An initial CBO analysis found that a mere $26 billion out of $274 billion in infrastructure spending, just 7 percent, would be delivered into the economy by next fall. An update determined that just 64 percent of the stimulus would reach the economy by 2011.

 

5) University of Chicago economist and Nobel laureate Gary Becker doubts whether all this stimulus spending will do much to lower unemployment: "For one thing, the true value of these government programs may be limited because they will be put together hastily, and are likely to contain a lot of political pork and other inefficiencies. For another thing, with unemployment at 7% to 8% of the labor force, it is impossible to target effective spending programs that primarily utilize unemployed workers, or underemployed capital. Spending on infrastructure, and especially on health, energy, and education, will mainly attract employed persons from other activities to the activities stimulated by the government spending. The net job creation from these and related spending is likely to be rather small. In addition, if the private activities crowded out are more valuable than the activities hastily stimulated by this plan, the value of the increase in employment and GDP could be very small, even negative."

 

6) Christina Romer, the new head of the Council of Economic Advisers, coauthored a paper in which the following was written about taxes: "Tax increases appear to have a very large, sustained, and highly significant negative impact on output. Since most of our exogenous tax changes are in fact reductions, the more intuitive way to express this result is that tax cuts have very large and persistent positive output effects." And former Bush economic adviser Lawrence Lindsey tack on this addendum: "The macroeconomic benefits of tax cuts can be two to three times larger than common estimates of the benefits related to spending increases. The relative advantage of tax cuts over spending is even clearer when the recession is centered on the household balance sheet."

 

7) Economists Susan Woodward and Robert Hall find that the multiplier effect from infrastructure spending maybe just 1-for-1, less than that 3-to-1 ratio for tax cuts that Romer found: "We believe that the one-for-one rule derived from wartime increases in military spending would also apply to increases in infrastructure spending in a stimulus package. We should not count on any inducement of higher consumption from the infrastructure stimulus."

 

8) Economist John Taylor thinks it better to let the Federal Reserve deal with the short-term problems in the economy, while fiscal policy should attend to long-term issues: "In the current context of the U.S. economy, it seems best to let fiscal policy have its main countercyclical impact through the automatic stabilizer ... It seems hard to improve on this performance with a more active discretionary fiscal policy, and an activist discretionary fiscal policy might even make the job of monetary authorities more difficult. It would be appropriate in the present American context, for discretionary fiscal policy to be saved explicitly for longer-term issues, requiring less frequent changes. Examples of such a longer-term focus include fiscal policy proposals to balance the non-Social Security budget over the next ten years, to reduce marginal tax rates for long run economic efficiency, or even to reform the tax system and Social Security."

 

9) Massive stimulus didn't work in the Great Depression. As this Heritage Foundation study notes: "After the stock market collapse in 1929, the Hoover Administration increased federal spending by 47 percent over the following three years. As a result, federal spending increased from 3.4 percent of GDP in 1930 to 6.9 percent in 1932 and reached 9.8 percent by 1940. That same year-- 10 years into the Great Depression--America's unemployment rate stood at 14.6 percent." Same goes for Japan and its Great Stagnation of the 1990s.

 

10) Olivier Blanchard, the chief economist of the International Monetary Fund, coauthored a paper which found "that both increases in taxes and increases in government spending have a strong negative effect on private investment spending."

 

Bottom line: There is another model out there. One that worked in 2003, 1997 and 1981. But will America use it?

 

Sources:

 

1) http://sfb649.wiwi.hu-berlin.de/papers/pdf...9DP2005-039.pdf

 

2) http://online.wsj.com/article/SB123258618204604599.html

 

3) http://online.wsj.com/article/SB123249646698200289.html

 

4) http://cboblog.cbo.gov/

 

5) http://www.becker-posner-blog.com/archives...he_obama_st.htm

 

6) http://www.econ.berkeley.edu/~cromer/RomerDraft307.pdf

 

7) http://woodwardhall.wordpress.com/2008/12/...pending-on-gdp/

 

8) http://www.stanford.edu/~johntayl/Papers/R...ing+Revised.pdf

 

9) http://www.heritage.org/research/economy/bg2222.cf

 

10) http://www.mitpressjournals.org/doi/abs/10...ournalCode=qjec

 

11) http://www.weeklystandard.com/Content/Publ...51hvyxc.asp?pg=

[gocolts 300]

This whole idea of government bail-out was a nightmare back in October and like always, the government makes something much worse when they get involved.

[Ravens 03 0]

The Dems will pass it anyway.

[Voltaire 5,452]

This whole idea of government bail-out was a nightmare back in October and like always, the government makes something much worse when they get involved.

 

It's poorly designed and full of holes. The banks are not lending and just passed out huge annual bonuses. If a bank gets taxpayer money, which I'm not convinced they should but say they do, it needs to come with a firecracker up their asses. No bonues, no dividends, cuts in executive pay.

[BMoney 0]

give us a bigger stimulus and force us to put it in US stocks for a full year.....

[surferskin 30]

I'm glad it's starting to look like the GOP will show it still has balls and oppose this thing. It mostly likely will still get passed but at least make the Dems sink or swim based on this pork package.

[BudBro 183]

what is the supporting evidence the dems are using to justify this stimulus?

 

it won't increase jobs, it won't produce spending by the public, it won't produce investment by the public. why are they still even talking about it?

[RLLD 4,275]

It's good to see people finally catching on to all this and being pissed about it....

[BudBro 183]

keynesian economics died 50 years ago. all those old democrats still in congress know it. bo is just romanticizing father frank davis' ideas he talked about when he was a child. there's too much anecdotal evidence now that proves these morons wrong, yet they still pursue in order to buy votes.

 

whether you're a dem or repub by voting name, there is no denying that liberal economic policies are failures. every voter not on welfare over 25 years old should never vote for a democrat or lawyer to represent them in the house or senate.

 

if you want to vote your "social" conscience, then do that in the presidential election.

[piget 0]

The Dems will pass it anyway.

 

 

Yep. They never let facts or reality get in their way.

[RLLD 4,275]

keynesian economics died 50 years ago. all those old democrats still in congress know it. bo is just romanticizing father frank davis' ideas he talked about when he was a child. there's too much anecdotal evidence now that proves these morons wrong, yet they still pursue in order to buy votes.

 

whether you're a dem or repub by voting name, there is no denying that liberal economic policies are failures. every voter not on welfare over 25 years old should never vote for a democrat or lawyer to represent them in the house or senate.

 

if you want to vote your "social" conscience, then do that in the presidential election.

 

The Fed has been perpetuating a perversion of the keynesian system.

 

The notion of expanding and contracting the money supply in reaction to economic performance turned into a constant expansion of the money supply to fund wars and social programs, and keep interest payments on the debt manageable.

[Voltaire 5,452]

I'm just glad something is being done. When the lines are clearly drawn like this where it passed the House without a single GOP vote, everybody knows who will be held accountable if the plan works or doesn't work.

 

The GOP had their chance and that's why we're stuck in this mess. Now Obama's already improving foreign policy enormously just by not being a retarded a$$hole who can't properly articulate anything but threats. Weather or not he can also turning around the economy is another story. If he wants a bipartisan bill though, he's going to have to not just seek out GOP advice but actually incorporate some of their ideas in his proposals. When I listened to what the GOP had to say I thought they actually had some respectable ideas.

[Recliner Pilot 61]

I'm just glad something is being done.

 

 

The GOP had their chance and that's why we're stuck in this mess.

 

Yeah, a $1 trillion spending debacle that nobody from the Demwit party can say how many jobs will be created as a result is reason to celebrate.

 

I know you are in China so you may not be aware of it, but the Dems have controlled both houses of Congress since 2006. Seems like that's about the time people started talking recession...............

[tikigods 76]

but the Dems have controlled both houses of Congress since 2006. Seems like that's about the time people started talking recession...............

 

So using this logic the economic boom of the 90's was all due to the Clinton Administration and the Dems that controlled Congress from 90-93.

[DanXIII 8]

Yeah, a $1 trillion spending debacle that nobody from the Demwit party can say how many jobs will be created as a result is reason to celebrate.

 

2-3 million jobs. Just because you're either deaf or not listening doesn't mean it hasn't been said.

[KSB2424 3,172]

There are some things I like and some thinks I don't like about the Stimulus. However I am against the whole damn thing, because even the things I like will be poorly managed and misused since it is being run or overseen by the gov't. They always fock it up.

 

Uncle Sam? You listening? Get the fock out of my house!@#!

[surferskin 30]

This bill just keeps looking better and better...

 

WASHINGTON: The $800 billion-plus economic stimulus measure making its way through Congress could steer government checks to illegal immigrants, a top Republican congressional official asserted Thursday.

 

The legislation, which would send tax credits of $500 per worker and $1,000 per couple, expressly disqualifies nonresident aliens, but it would allow people who don't have Social Security numbers to be eligible for the checks.

 

Undocumented immigrants who are not eligible for a Social Security number can file tax returns with an alternative number. A House-passed version of the economic recovery bill and one making its way through the Senate would allow anyone with such a number, called an individual taxpayer identification number, to qualify for the tax credits.

 

http://www.iht.com/articles/ap/2009/01/29/...-Immigrants.php

[Recliner Pilot 61]

2-3 million jobs. Just because you're either deaf or not listening doesn't mean it hasn't been said.

 

 

Obama's point man couldn't give a figure while being questioned on Capital Hill last week. Ok, who is claiming 2-3 million, what parts of the so-called "stimulus package" is creating them.

 

I would like to see a breakdown, not just emty rhetoric along the lines of HOPE & CHANGE.

 

Let's give Obama the 3 million jobs, at the present cost of $1 Trillion that comes to $333,333 per job. What a clusterfuck.

[Recliner Pilot 61]

Bump to see if Dan found any answers to the question above.

[Greedo 13]

what is the supporting evidence the dems are using to justify this stimulus?

 

it won't increase jobs, it won't produce spending by the public, it won't produce investment by the public. why are they still even talking about it?

link?

 

BTW - there's no specifics you can point to that guarantee how many jobs tax cuts will generate.