My Stance on the Stimulus
1. It is a monumental pile of wasteful spending one would expect from Democrats, wrapped in the guise of a “Stimulus” package tied with a populist Obama bow. Here are some highlights that I posted to Twitter (you can follow me on Twitter if you are so inclined):
$1.5 Billion (with a “B”) for a “carbon-capturing contest”
$252 Bil is for income-transfer payments, not investments, benefits to individuals for doing nothing
Smithsonian gets $150 million; is this a job creator?
$600 million for the federal government to buy new cars
$650M for digital TV coupons, $6 billion for colleges/universities w huge endowments, $50M for the Arts
2. It includes protectionist provisions much like the Smoot-Hawley tariffs that are widely viewed to have deepened the Great Depression.
“What is certain, however, is that Smoot-Hawley did nothing to foster cooperation among nations in either the economic or political realm during a perilous era in international relations. It quickly became a symbol of the “beggar-thy-neighbor” policies of the 1930s. Such policies, which were adopted by many countries during this time, contributed to a drastic contraction of international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934.”
3. It is another excuse for the the Democrats to grow the size of the government. I personally believe the government is a poor vehicle for achieving any end beyond, security, rule of law and some aspects of education/transportation. Hence, my disagreement with showering the Liberal special interests like the National Endowment for the Arts and many of the other beneficiaries of the bill. In addition, one third of the bill is direct transfer payments or, as Obama said so famously on the campaign trail, “spreading the wealth”. This is plain wrong as a function of government and unacceptable.
The Liberal Defense of the “Stimulus”
One defender of the the “stimulus” is Tad Johnson, a friend of mine and a local Wisconsin blogger. I think his argument is typical of my liberal friends and many of those in the media so, I would like to break down my response.
His argument is based on:
1. An assumption of Republican ignorance or avoidance of the noble goals and methods liberals ascribe to Keynesian recovery efforts.
“Could it be that the Republicans opposed the spending bill due to deep-rooted ideology and not a fair read of the goals and methods therein? Gasp!”
This first assumption smacks of Daily Kos type ignorance in and of itself. Republicans have studied this issue and looked back across time to realize that massive amounts of Keynesian spending and even the infrastructure projects you speak of are at the least, ineffective and at their worst counter-productive. Groups like the Republican Study Committee and Cato Institute have roundly disproved the Democrat/Obama/Keynesian approach to “Stimulus”. You can even find a great illustration of the past failures of Keynesian strategies on this great graphic by the New York Times. Here is a quick example from “Obama’s Keynesian Mistake“:
“It is difficult to find a macroeconomics textbook these days that discusses Keynesian fiscal stimulus as a policy tool without serious flaws, which is why the current $800-billion proposal has taken many macroeconomists by surprise. John Cochrane of the University of Chicago recently noted that the idea of fiscal stimulus is “taught only for its fallacies” in university courses these days. Thomas Sargent of New York University noted that “the calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research.”
Your assumption that “If I’m a business owner and my tax bill goes down, that difference falls straight to the bottom line.” is completely false unless, of course, you are a bad business owner. Talk to any business owner and if they make more money, they either reinvest it in the business to grow causing more jobs either building on or hiring staff. Talking to my friends who are businesses owners and family members who are business owners, this is exactly what they would do.
2. The idea that the House Democrats only instilled the most “basic human services and such, which isn’t technically a stimulus to the economy. That said, I would rather see our citizenry clothed and fed than on the starving and in rags.”
1/3 of the is direct transfer payments with another 1/3 being pork spending. This is only “basic human services”? Sorry, I beg to differ. It’s an excuse to push the Democratic spending initiatives that they haven’t been able to push past the public’s watchful eye yet.
If they really wanted to stimulate the economy, Democrats would reduce our 35% corporate tax rate, the second highest in the world. THAT would create jobs.
Last 5 posts by Brandon- The Graphic Effect of High Taxes and Spending, Move on out! - June 16th, 2010
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- Republican Party of Wisconsin State Convention 2010 - May 21st, 2010
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- Liberal Professor to Teach FUELMilwaukee "Government 101" - April 14th, 2010
At a financial forum last week, I heard a much respected economic researcher note that a true stimulus is two things:
1) Instantaneous
2) Multiplying (every dollar spent is multiplied in its effect, resulting in 2, 4, 10, even $20 of economic activity)
Ask yourself if these apply to the provisions of this stimulus package – it’s the difference between stimulus and pork.
So what would you qualify and not qualify?
I agree with most of your points here, but I believe there is useful government spending. I was writing a long post on what that would be, but it got deleted and I don’t have the heart to write it all again. So, we will have to have that conversation some other time.
Sorry that previous post is from me.
This was what I intended to say.
I agree with most of your points here, but I believe there is useful government spending. I was writing a long post on what that would be, but it got deleted and I don’t have the heart to write it all again. So, we will have to have that conversation some other time.
I find it’s much easier to argue against those who disagree with me when I make up their arguments.
You wrote: ‘Your assumption that “If I’m a business owner and my tax bill goes down, that difference falls straight to the bottom line.” is completely false unless, of course, you are a bad business owner’
It’s ‘completely false’ unless you are a bad business owner, or you know how to read an income statement. The GPD report out last week confirmed that business inventories are piling up–there is zero incentive to hire more staff when you can’t sell the widgets you’ve already made.
I wouldn’t be quite so smug with confidence in the Republican economic theory. . . as the last 8 years have shown, reality has a well known liberal bias.
#5 Ryan – good call, friend. That’s the M.O. of the GOP3 and their mothership.
. . . and yet I can’t resist posting my response.
Ryan,
I did my best to accurately represent the just of his post.
Thank you for your comment.
Richard,
I look forward to that discussion
Brandon
Hello Tad,
Thanks for your comment. I did my best to summarize your argument, it’s definitely not my or GOP3s “M.O” to do anything of the sort but, I am glad you are willing to post your response.
“The GPD report out last week confirmed that business inventories are piling up–there is zero incentive to hire more staff when you can’t sell the widgets you’ve already made.”
How do you think you get people to buy more widgets (and start new businesses)? Try giving them more of their own money back, then they will buy each other’s widgets, hire people to make more widgets and generally create economic value. The latest GDP numbers are a result of fewer loans, less investment and fear. Give people permanent tax cuts they can count on and the economy will prosper because they know they will get more of their own money to spend and pay off debts.
I don’t think that the bank failure is proof that “reality has a well known liberal bias.” On the contrary, I believe the last eight years show the power of tax cuts to counteract a government that spends too much and is not fiscally conservative but, only for a time. Bush cut taxes, a good conservative move but, he spent way too much and was not successful in his attempts to stop the mistakes of mammoth government sponsored entities Fannie and Freddie that ultimately caused this downfall (Democrats blocked the legislation).
Always a pleasure to discuss these issues,
Brandon
Is it just me, or is there a really easy compromise here? My personal belief is that the current package is fine and will do a lot of good. I do, however, believe that adding some of the Republican suggestions would do some good. For example, I think the Democrats could turn this into a slam-dunk if they just chopped 5% off the corporate tax rate. And why not? We’re pretty much throwing everything at this problem (including the kitchen sink), so why not drop down the corp tax rate? It would get the bill passed and probably do some good. I should also say that I’m sick of hearing abou the corp tax rate in Ireland. Guess what, they’ve got one road. It doesn’t take much to maintain that one road and their tiny population, so please stop the absurdity of comparing Ireland and the USA.
One more thing. I need a little help understanding the line of reasoning that that says the existance of Fannie and Freddie somehow mandated banks to make bad loans. If that were the case, wouldn’t all banks be belly up now? There are plenty of banks who continued to make prudent loans and they are doing just fine. Fannie and Freddy opened the door, but only banks with poor (or evil) leadership walked through it.
one of the smartest posts on here in a long time from anyone besides dan, thanks brandon!
isn’t it pathetic that a package like this can pass with zero republican support now that both houses of congress and the president are democrat?
what i wonder is this: why are we throwing more pork-laden money at anything or anyone in this company when we’re seeing how the other “bailout”/”stimulus” packages are being used? banks using the money for super bowl parties, GM giving the super bowl MVP an $85,000 truck… and people wonder why we’re skeptical.
To Sam,
You can thank Paulson and Bush for the disastrous bail-out package passed in September. You can also thank them, along with a Republican Congress, for not regulating the CDS market, the derivative market, and creating the biggest income gap between the top 1% and the bottom 50% since the Great Depression.
At least Obama is taking some initiative and is creating a bail-out package that can help middle and lower class families. The current bail-out package needs more useful spending on education and infrastructure and less useless pork as Brandon listed above, but its way better, in its current form, than what our last President came up with.