Tag: stimulus package

When Stimulus Is No Stimulus

The Obama administration has been touting its wasteful “stimulus” package as the answer to the recession.  Now that Uncle Sam has started his spending binge, John Cogan, John Taylor, and Volker Wieland assess the result.  Their conclusion:  for all of the money spent, the effort wasn’t much of a stimulus.

They write in the Wall Street Journal:

Direct evidence of an impact by government spending can be found in 1.8 of the 5.4 percentage-point improvement from the first to second quarter of this year. However, more than half of this contribution was due to defense spending that was not part of the stimulus package. Of the entire $787 billion stimulus package, only $4.5 billion went to federal purchases and $17.7 billion to state and local purchases in the second quarter. The growth improvement in the second quarter must have been largely due to factors other than the stimulus package.

Incoming data will reveal more in coming months, but the data available so far tell us that the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic not the fiscal stimulus program deserves the lion’s share of the credit for the impressive growth improvement from the first to the second quarter. As the economic recovery takes hold, it is important to continue assessing the role played by the stimulus package and other factors. These assessments can be a valuable guide to future policy makers in designing effective policy responses to economic downturns.

If policymakers really want to stimulate the economy, they will stop prodigiously wasting money, unfairly redistributing people’s earnings, making the tax system ever more complex, and imposing job-killing regulations.  In other words, politicians will stop being politicians.

Week in Review: Stimulus, Sarah Palin and a Political Conflict in Honduras

Obama Considering Another Round of Stimulus

With unemployment continuing to climb and the economy struggling along, some lawmakers and pundits are raising the possibility of a second stimulus package at some point in the future. The Cato Institute was strongly opposed to the $787 billion package passed earlier this year, and would oppose additional stimulus packages on the same grounds.

“Once government expands beyond the level of providing core public goods such as the rule of law, there tends to be an inverse relationship between the size of government and economic growth,” argues Cato scholar Daniel J. Mitchell. “Doing more of a bad thing is not a recipe for growth.”

Mitchell narrated a video in January that punctures the myth that bigger government “stimulates” the economy. In short, the stimulus, and all big-spending programs are good for government, but will have negative effects on the economy.

Writing in Forbes, Cato scholar Alan Reynolds weighs in on the failures of stimulus packages at home and abroad:

In reality, the so-called stimulus package was actually just a deferred tax increase of $787 billion plus interest.

Whether we are talking about India, Japan or the U.S., all such unaffordable spending packages have repeatedly been shown to be effective only in severely depressing the value of stocks and bonds (private wealth). To call that result a “stimulus” is semantic double talk, and would be merely silly were it not so dangerous.

In case you’re keeping score, Cato scholars have opposed government spending to boost the economy without regard to the party in power.

For more of Cato’s research on government spending, visit Cato.org/FiscalReality.

Sarah Palin Resigns as Governor of Alaska

Alaska Governor Sarah Palin resigned from office last week with 18 months left in her term, setting off weeklong speculation by pundits.

Cato Vice President Gene Healy comments:

Palin’s future remains uncertain, but it’s hard to see how her cryptic and poorly drafted resignation speech positions her for a presidential run. Nonetheless, her departure presents a good opportunity to reflect on the Right’s affinity for presidential contenders who - how to put this? - don’t exactly overwhelm you with their intellectual depth.

It’s one thing to reject liberal elitism. It’s another thing to become so consumed with annoying liberals that you cleave to anyone they mock, and make presidential virtues out of shallow policy knowledge and lack of intellectual curiosity.

Writing at Politico, Cato scholars David Boaz and Roger Pilon weigh in on what her resignation means for the former Vice-Presidential candidate’s political future:

Boaz:

Will we one day say that her presidency was ‘born on the Fourth of July’? I doubt it. This appears to be just the latest evidence that Sarah Palin is not ready for prime time. The day McCain chose her, I compared her unfavorably to Mark Sanford. Despite everything, I’d still stand by that analysis. At the time I noted that devout conservative Ramesh Ponnuru said ‘Palin has been governor for about two minutes.’ Now it’s three minutes.

Running for president after a single term as governor is a gamble. Running after quitting in the middle of your first term is something else again. If this is indeed a political move to clear the decks for a national campaign, then she needs adult supervision soon. But I can’t really believe that’s what’s going on here. I suspect we’re going to hear soon about a yet-unknown scandal that was about to make continuing in office untenable.

Pilon:

It seems that since her return to the state following the campaign, activist opponents and bloggers have bombarded the governor’s office with endless document requests. And she’s faced 16 ethics inquiries, with no end in sight. All but one have since been resolved, but the politics of personal destruction has cost the state millions, as Palin noted. Add to that the unrelenting, often vicious and gratuitous attacks on her and even on her family, and it’s no wonder that she would say ‘Enough.’ It has nothing to do with ‘quitting’ or with being ‘unable to take the heat.’ It has everything to do with stepping back and saying you’re not willing to put your family and your state through any more. She seems confident that history will judge her more thoughtless critics for what they are. I hope she’s right.

Honduras’ President Is Removed from Office

In reaction to Honduran President Manuel Zelaya’s attempt to stay in power despite term limits set by the nation’s Constitution, armed forces removed him, sending the Latin American nation into political turmoil.

Juan Carlos Hidalgo, an expert on Latin American affairs, comments:

The removal from office of Zelaya on Sunday by the armed forces is the result of his continuous attempts to promote a referendum that would allow for his reelection, a move that had been declared illegal by the Supreme Court and the Electoral Tribunal and condemned by the Honduran Congress and the attorney general. Unfortunately, the Honduran constitution does not provide an effective civilian mechanism for removing a president from office after repeated violations of the law, such as impeachment in the U.S. Constitution. Nonetheless, the armed forces acted under the order of the country’s Supreme Court, and the presidency has been promptly bestowed on the civilian figure — the president of Congress — specified by the constitution.

To be sure, Hidalgo writes, the military action in Honduras was not a coup:

What happened in Honduras on June 28 was not a military coup. It was the constitutional removal of a president who abused his powers and tried to subvert the country’s democratic institutions in order to stay in office.

The extent to which this episode has been misreported is truly remarkable.

How Many Attended the Tea Parties?

Back in April there was a lot of debate about how many people actually attended the April 15 “tea parties” to oppose President Obama’s tax and spending programs. Pajamas Media, an enthusiastic backer of the protests, offered an estimate upwards of 400,000.

Nate Silver of the FiveThirtyEight blog, a more skeptical observer, diligently compiled what he considered “nonpartisan and credible” estimates – mostly from mainstream media or police sources – and came up with a detailed sum of about 311,000. Not bad for widely dispersed events, most with no big-name speakers or celebrities, not hyped by the major media (though certainly hyped by some of the conservative media).

But I’ve recently stumbled across reports of two tea parties that didn’t make Silver’s list. In a long profile of a councilwoman who supported Obama in Greenwood, South Carolina, the Washington Post reports on her encountering 200 people at a tea party in Greenwood. And the latest compilation of newspaper clippings from the Mackinac Center includes an April 16 article from the Midland (Michigan) Daily News about a tea party there that attracted 500 people. So who knows how many other farflung events didn’t get included in Silver’s comprehensive list?

Andrew Samwick of Dartmouth complained that the tea parties – and maybe even libertarians – weren’t clearly focused on the problem of spending. As I said in a comment there, I think that’s an unfair charge:

Here’s how one major news outlet reported them:

Nationwide ‘tea party’ protests blast spending - CNN.com (http://www.cnn.com/2009/POLITICS/04/15/tea.parties/ )
ABCNews.com said “Anti-Tax ‘Tea Parties’ Protest President Obama’s Tax and Spending Policies.” USA Today wrote, “What started out as a handful of people blogging about their anger over federal spending — the bailouts, the $787 billion stimulus package and Obama’s budget — has grown into scores of so-called tea parties across the country.”

It’s hard to put specific cuts, especially COLAs and the like, on protest signs; but I think it’s fair to say that the tea-party crowds were complaining about excessive spending and “generational theft.”

Public Tires of Wasteful “Stimulus” Spending

The president may believe that he’s created thousands (or is that millions?) of jobs, but the public doesn’t believe him.  In fact, according to Rasmussen Reports, a plurality of the public wants to drop the rest of the “stimulus” spending while keeping the tax cuts:

Forty-five percent (45%) of Americans say the rest of the new government spending authorized in the $787-billion economic stimulus plan should now be canceled. A new Rasmussen Reports national telephone survey found that just 36% disagree and 20% are not sure.

Just 20% of adults say the tax cuts included in the stimulus plan should be canceled while 55% disagree. The stimulus plan includes $288 billion in tax cuts.

While there is a wide partisan gap on the question of stimulus spending, there is little partisan disagreement on maintaining the tax cuts.

President Obama on Monday vowed to speed up the pace of stimulus spending and said the money will help “create or save” 600,000 more jobs this summer.

However, only 31% of Americans believe the new government spending in the stimulus package creates new jobs. Forty-eight percent (48%) say the stimulus spending does not create jobs, and 21% are not sure.

This is certainly a better approach for growing the economy.  The people are proving to be a lot smarter than their governors in Washington.

The Politics of Stimulus Spending

USA Today investigates how members of Congress are “working behind the scenes to try to influence how the [stimulus]  money is spent.”

Congress and President Obama proudly noted that there were no earmarks in the $787 stimulus bill. But…

Ten of 27 departments and agencies receiving stimulus money have released records of contacts by lawmakers under Freedom of Information Act requests USA TODAY filed in April. Those records detailed 53 letters, phone calls and e-mails recommending projects from 60 members from February through the end of May. Thirteen of those lawmakers voted against the stimulus package.

Critics of the stimulus bill pointed out that government money is always politically directed. It’s little consolation to be proven right.

Labor’s Waxing Political Influence

It has long been recognized that many capitalists are the greatest enemies of capitalism.  They want free enterprise for others, not themselves.

Unfortunately, organized labor tends to be even more statist in orientation.  Unions now routinely lobby for government to give them what they cannot get in the marketplace.

Labor influence is greatest in the public sector.  And as government’s power has expanded during the current economic crisis, so has the influence of unions.  Observes Steve Malanga in the Wall Street Journal:

Across the private sector, workers are swallowing hard as their employers freeze salaries, cancel bonuses, and institute longer work days. America’s employees can see for themselves how steeply business has fallen off, which is why many are accepting cost-saving measures with equanimity – especially compared to workers in France, where riots and plant takeovers have become regular news.

But then there is the U.S. public sector, where the mood seems very European these days. In New Jersey, which faces a $3.3 billion budget deficit, angry state workers have demonstrated in Trenton and taken Gov. Jon Corzine to court over his plan to require unpaid furloughs for public employees. In New York, public-sector unions have hit the airwaves with caustic ads denouncing Gov. David Paterson’s promise to lay off state workers if they continue refusing to forgo wage hikes as part of an effort to close a $17.7 billion deficit. In Los Angeles County, where the schools face a budget deficit of nearly $600 million, school employees have balked at a salary freeze and vowed to oppose any layoffs that the board of education says it will have to pursue if workers don’t agree to concessions.

Call it a tale of two economies. Private-sector workers – unionized and nonunion alike – can largely see that without compromises they may be forced to join unemployment lines. Not so in the public sector.

Government unions used their influence this winter in Washington to ensure that a healthy chunk of the federal stimulus package was sent to states and cities to preserve public jobs. Now they are fighting tenacious and largely successful local battles to safeguard salaries and benefits. Their gains, of course, can only come at the expense of taxpayers, which is one reason why states and cities are approving tens of billions of dollars in tax increases.

The government’s increased power over the economy also gives organized labor a new hook to lobby for more special interest privileges.  For instance, the AFL-CIO is arguing that the federal bailout of the auto industry should bar the companies from moving factories overseas.

Explains the union federation:

The pundits and politicians inside the Washington Beltway don’t get: If the United States continues to send its manufacturing jobs [1] overseas—as [2] General Motors and Chrysler are now proposing—the result will be more low-income U.S. families.

So today, workers, economists, academics and business and union leaders, fresh from the “[3] Keep It Made in America” bus tour through the nation’s heartland, brought that message to the policymakers’ doorstep as part of a teach-in on Capitol Hill.

The 11-day, 34-city bus tour showcased the ripple effect on communities of the lost jobs in manufacturing. ([4] See video.) Today, during the teach-in, those who took part brought the stories they heard along the tour and presented principles for revitalizing the auto industry to members of Congress and the press. 

Labor officials have been making similar arguments about bank lending.  If you got bailed out by Washington, then you have an obligation to keep funding bankrupt concerns.  Never mind getting paid back, and paying back the taxpayers.

Markets are resilient, but can survive only so much political interference.  If the American people aren’t careful, they might eventually find themselves living in an economy more appropriate for Latin America than North America.

The Stimulus Feeding Frenzy

Billions and billions of dollars! Get yours today!

I’ve written before about the massive lobbying game in Washington to get your own special interests written into the stimulus and budget bills. And about the efforts to pressure governments into spending that money NOW.

Today a friend sent me a new piece of the incredible expanding stimulus economy. A publishing company has created a new newsletter on how to keep up with “ever-changing opportunities and the complex requirements to apply for them” – The Money for Main Street Monitor. Yes, for only $229 a year, with this special offer, you can keep up with the lucrative and ever-changing “new stimulus funding opportunities.”

I’m omitting the specifics so as not to give this parasitical industry any more publicity, but here’s the text of the email advertisement:

Dear Nonprofit Professional,

Billions of dollars from the Obama stimulus plan are becoming available daily for funding thousands of new state, local and nonprofit programs!

And while it’s extremely time consuming and difficult to keep up with the ever-changing opportunities and the complex requirements to apply for them, we can help make that task easier than you’d imagine.

That’s why [the company] is proud to introduce our newest and much-needed online service: The Money for Main Street Monitor.

Just click on or cut and paste the following link into your Web browser to take advantage of a special one-week offer on this continuously updated service:

Continuous Stimulus Funding Updates

While we have diligently kept our readers up to date on the billions of dollars in funding coming from the Obama stimulus package, many tell us they need much more coverage!

Consequently, we have assigned a team of experienced Washington, DC-based editors to focus exclusively on new stimulus funding opportunities for health care, family services, education, mental health, disabilities and substance abuse programs, housing and community development!<

Through continuously updated articles, subscribers to this new online service will be kept up to date on the latest funding opportunities as soon as they emerge. And with our online format, subscribers will have access to our user-friendly search tools to instantly find the funding opportunities most suited for their organizations!

Plus, our updates – unlike those on government Web sites – are in plain English and easy to find.  And, we’ve included a wealth of grant-writing tips designed to help your organization get its share of stimulus funding!

We know how important it is for every organization to watch their dollars closely these days, and we’re doing are best to help. That’s why we are offering you a specially reduced rate for this much-needed publication, The Money for Main Street Monitor.

Just click on or cut and paste the following link into your Web browser to find out more about this special one-week offer:

Or you can call in your order toll free at 1-800-[GET OTHER PEOPLE’S MONEY].

This isn’t the only company making such offers. Lobbyists, consultants, newsletter publishers, and others will be making money this year guiding their clients to the pot of gold at the end of the stimulus. But in economic terms, all this effort is deadweight loss. Instead of devoting time and talent and resources to the production of real economic value, these people are being lured into the parasite economy, jockeying for money extracted from productive workers and businesses and redistributed by a Washington bureaucracy and the lobbyists that revolve around it.