Tuesday, January 27, 2009

The Non-stimulus Package

News last week from the Congressional Budget Office's preliminary scoring that President Obama's stimulus package was not nearly as immediately stimulative as some would hope. In fact, word then was less than 50% of the public works and infrastructure expenditures would occur by the end of fiscal year 2010. Republicans jumped all over these numbers (correctly) on the weekend talk shows.

Now the final scoring is out...and lets see how the Washington Post covers it, shall we? Ah yes, "CBO Sees 65% spent by end of Fiscal 2010". What's happened in the interim? Two things--1) CBO the "non-partisan" organization that it is, came under withering fire from the Dems for telling the truth and 2) the media realized that the initial scoring was bad for the success of the package.

So let's dig a little deeper into this 65%, shall we? CBO says $526B of the $816B in stimulus will get spent before FY 2010....what isn't so clear is that $300B of the $526B (57%) comes from the tax cuts/credits included in the plan (which make up 36% of the total package). This is the least popular portion of the package with Dems, and is seen as the bone thrown to Republicans to make this a bi-partisan bill. So let's take out the $300B and look at the what is left--presumably for immediate, stimulative infrastructure spending.

CBO reports that only 40% of the $356B apportioned for those projects will be spent by the end of FY10.

We would be better off if the difference were simply returned to taxpayers in the form of a check, rather than allocating hundreds of billions of dollars to pet democratic policies.

But now let's take a look at the tax cut/credit portion of the bill....and here too, the devil is in the details. Much of the tax "relief" goes to...you guessed it...that wonderful group of Americans who already pay no income tax! And it comes in the form of a check...which they are presumed to spend, but which more than likely will go to retire debt.

The kind of tax relief needed falls into two categories....1) real tax relief that lowers tax brackets and actually causes people to re-evaluate their financial condition, leaving them in a position to spend more. 2) capital gains tax relief for the investing class, in order that additional capital might flow into the financial system enabling business to get off the dime.

So there we have it....Nearly 65% of the $816B of this package being spent on ill-timed and ill-conceived tax cuts and spending that has no real stimulative impact. Republicans should vote no on this bill.

5 comments:

Crimedog Millionaire said...

"Much of the tax "relief" goes to... wonderful group of Americans who already pay no income tax! And it comes in the form of a check...which they are presumed to spend, but which more than likely will go to retire debt."

While I agree with you that this is just an additional welfare check for the welfare class, they aren't going to be retiring any debt. Fiscal irresponsiblity is one of the reasons they remain in the underclass. As long as there are sneakers and spinning rims to buy, the dough will go back into the economy like poop through a goose.

Ace said...

Well said, CW... in view of our last discussion, I thought it interesting to hear Rush Limbaugh offer a proposal... since the President agreed to listen to all ideas in his administration.

Rush extended the offer for the Ombama-Limbaugh Bipartisan Stimulus Plan of 2009, and I submit for your examination:

BEGIN TRANSCRIPT

RUSH: I have a serious proposal to make: the Obama-Limbaugh Stimulus Plan 2009. There is a serious debate in this country as to how best to end the recession. Recessions will end on their own if they're left alone. The average recession will last five months to 11 months. The average recovery from each recession will last six years. What can make the recession worse is the wrong kind of government intervention. The wrong kind of government intervention is precisely what President Obama has proposed. I don't believe that his stimulus plan is a stimulus plan at all. I don't think it's designed to stimulate anything but the Democrat Party. It's designed to repair the power losses from the nineties forward of the Democrat Party and to entrench this party for, quote, unquote, eternal power like Franklin Delano Roosevelt did with his New Deal.

Now, we have Keynesian economists who believe government spending on shovel-ready projects of all kinds, "infrastructure" -- schools, roads, bridges -- that's the best way, they think, to stimulate our staggering economy. There are just as many supply-side economists who make an equally persuasive case that tax cuts are the surest and quickest way to create permanent jobs and cause an economy to rebound and recover. The Heritage Foundation can provide those figures from the administrations of JFK, who cut taxes; from Ronald Reagan who cut taxes; and George Bush 43, who also cut taxes. The blueprint is there. We can consult it. We know what happens when tax rates are cut in a recession. We know that it brings an economy back. There is recent polling that proves the American people are in favor of both of these approaches.

Keynesian, stimulus spending by the government on infrastructure, roads and bridges and the like; and supply-side proposals -- and it's important to remember this, because it is the people's money in either case that's going to be spent here. It's our money. It is not Washington's. Now, the Rasmussen people have a new poll out, and notwithstanding the media blitz in support of the Obama stimulus plan, most Americans, Rasmussen finds, are skeptical. Rasmussen finds that 59% fear that Congress and the president will increase government spending too much in the next year or two. Only 17% worry that they will cut taxes too much. The American people, in polling, are not certain that the Obama stimulus plan is the way to go, despite what you're hearing from the Drive-By Media.

So it seems to me that there may be an opportunity here and now for genuine compromise and to establish at the same time as this genuine compromise, evidence for how to deal with future recession so that this no longer becomes a matter of partisan debate each time it happens, because recessions are going to happen. My proposal is designed to illustrate once and for all how to deal with them. Congress is currently haggling over how to spend $1 trillion, $1 trillion generated by American taxpayers in the private sector. Congress wants to spend -- think of this now -- $1 trillion that they don't have until you and I go to work and pay taxes. They want to spend this on a stimulus plan....

This does not have to be a divisive issue. It does not have to be in any way, shape, manner, or form a divisive issue. So I have a proposal...

Mine is a genuine compromise. So let's look at how the vote came out, shall we? Fifty-three percent of voters in this country -- we'll say, for the sake of this proposal, 53% of Americans -- voted for Obama. Forty-six percent voted for Senator McCain, and 1% voted for wackos. Let's give the remaining 1% to President Obama, so let's say that 54% voted for President Obama and 46% voted for Senator McCain. As a way to bring the country together and at the same time determine the most effective way to deal with recessions, under the Obama-Limbaugh Stimulus Plan of 2009, $540 billion of the one trillion will be spent on infrastructure as defined by President Obama and the Democrats. The remaining $460 billion, or 46% that voted for Senator McCain, will be directed towards tax cuts, as determined by me.

These tax cuts will consist primarily of capital gains tax cuts and corporate tax rate cuts. So Obama gets $540 billion to spend his way. The other people of this country who did not vote for his way get $460 billion spent the way they would like it spent. This is bipartisanship! This is how bipartisanship really works. Okay, Obama wins by a 54-46 majority, so he gets 54% of the trillion bucks. Spend it his way. We get 46% of the trillion bucks to spend our way, and then we compare. Then we see which stimulus actually works and works the fastest, and I will guarantee you that if this plan is adopted, just the announcement that $460 billion will go toward paying for tax cuts, capital gains, and corporate tax rates -- we could throw in some personal income tax rate reduction in order to make sure that the voters don't think it's all about helping the big guys. But we need jobs, do we not?

Who hires people? Businesses! Businesses need tax cuts. The US corporate tax rate is obscene. It is the highest of all industrialized nations. It's 35%. Cut it. Cut it in half. Make the capital gains rate go away for three months, and then get out of the way to see what happens on Wall Street. And once Wall Street starts ticking up 500 points a day, you watch what happens to the rest of the private sector. It will follow right along. This would ensure a bipartisan compromise bill, as Democrats have said that they're always about. It would satisfy the American people's wishes, as polls currently note; and it would also serve as a test, going forward, as to which approach best stimulates the growth of jobs -- and it can be measured side by side. It could be determined where the new jobs are coming from.

And if President Obama would merely say -- if he would merely say -- that he will take this proposal under serious consideration, we would then see the reaction from the financial markets, which tend to be a barometer of the economy going forward. That is, if President Obama said that he thought this compromise proposal was worth his time to look at, the markets could react to that, just the way they did when President Clinton announced that he had reached agreement in principle with Republicans to balance the budget in the nineties. The market reacted positively to that news. Not to a formal bill signing, but to the news. If we have learned anything in recent months, the financial markets more than ever look to Washington for direction.
That's bad. The markets should be looking at the market. But they're not. The markets are looking to Washington. That's where we are. That's what "is" is. So let's float a trial balloon on this compromise. This satisfies every claim and demand of bipartisanship. This satisfies the people who lost the election. Those people are also people for which the president is the president. He's not just the president of the people who elected him. His job, he says, is to get the economy going. This would do it. This would not disenfranchise the people who did not vote for him. And as I say, not only would it work but it would provide a side-by-side test where we could see which part of this stimulus plan does better, so that the next recession we will know what to do.

The problems Americans face are great, but they are not insurmountable. They never have been insurmountable. There is no reason to get up every day and tell the American people that their future is bleak. There is no reason, as the administration is doing, to depress their hopes. There is no reason to suppress the notion that recovery can happen quickly, because it can, if we work together. In this new era of responsibility, let's use elements of both the Keynesians and the supply-siders to responsibly determine which theory best stimulates our economy -- and if elements of both work, so much the better. We will know. The economy doesn't have to be liberal versus conservative, or Democrat versus Republican.

And it certainly shouldn't be focused on whether or not one party gets reelected. The reason it has is because there is such a division in how the economy is viewed by the two parties. I got a question from a friend just a moment ago when I was talking about the Obamas redecorating the White House, using the same decorator that redecorated the executive suite at Merrill Lynch. Question: "How come taxpayers get so mad at businesses who misspend their money but can't make that connection when Congress misspends their money?" It's a great question. How is it that people that misspend a trillion dollars -- who know how to waste money and lose money faster than anybody -- are thought of as saviors; whereas the people in the private sector, whose job is to generate income for people, are so despised?

And here's the answer. The people, unfortunately in this country today, see themselves benefiting when government overspends. They see the rich getting richer when private sector executives overspend. So the Democrats have foisted, successfully, class envy. The economy need not be right versus left, Republican versus Democrat, but it is because one group wants the economy to be hands off -- government hands off, let the people who make this economy work, let it work. The other belief is that that leads too much inequity, unfairness...

The American people are made up of Republicans, Democrats, independents, moderates, whatever they want to call themselves, but our economy doesn't know the difference. Our economy should not be focused on whether or not one party gets reelected. This is about jobs now. It's about families. It's about solving a real and significant problem. So let us come together as one. The economic crisis is an opportunity to unify all of the people in this country if we just set aside the politics. The leader of the Democrats and the leader of the Republicans (me, according to Obama) can get this done. This will have the overwhelming support of the American people, because it will bring both sides together. The Obama-Limbaugh... Let him call it his. The Obama Stimulus Plan of 2009. Let's stop the acrimony. Let's start solving our problems, together. Why wait one more day?

END TRANSCRIPT

Philip said...

How is funding contraception and abortion clinics "economic stimulus?" Pelosi seemed to imply yesterday that children are a burden to the state....sounds like communism to me. Obama needs to put a muzzle on that woman.

If Obama passes this stimulus as is, which is full of handouts and pork, then he's just like the rest of the politicians..No Change...just more of the same but advertised in Harvard Law-speak.

Dan said...

Anybody else see the irony of the new catch phrase "Shovel Ready Projects" when Caterpillar lays-off 50,000? I mean, if we have all of these potential infrastructure construction jobs looming, wouldn't one of the major construction equipment companies be poised to be "stimulated?"

Mudge said...

Here's something you won't hear in the MSM: (transcript from Mudge's visit to Wal-Mart tire center, Eastern Shore, Md today)
Tire Center Clerk Tywanda: You watch much news?
Mudge: I try, why?
Tywanda: You know what's goin on with that stimulus?
Mudge: Well, I know it passed the House and is on its way to the Senate. I think that it will have a little tougher time in the Senate but I suspect it will still get passed eventually.
Tywanda: Is it goin to be for companies or us?
Mudge: What do you mean?
Tywanda: I mean, is it goin to be like Bush when he sent us those checks? All my friends are askin me if we're gettin checks again? Or is it goin to just go to companies?
Mudge: Which do you think it should be?
Tywanda: Well, I like gettin a check like Bush did for us last year, but I don't see why I work and have to pay taxes and some of my friends who don't work or pay taxes get the same check.
Mudge: Yeah, doesn't seem quite right does it?
Tywanda: Nope. But I guess we need to do something to help all them who lost their jobs.
Mudge: Did your friends lose their jobs recently?
Tywanda: One of them did, but the rest of them never kept a job more than a couple weeks at most. It's their own damned fault they get fired or just stop goin to work because they just quit. You gotta work if you want to get ahead, especially these days.
Mudge: Agree. The big debate is whether the bill has the right mix of tax cuts versus funding for various infrastructure projects like road and bridge repairs versus what they call "pork".
Tywanda: Yeah, I know what that is, I heard it on the news and asked another customer about it earlier.
Mudge: The other issue is whether there is more economic stimulus in cutting taxes versus taking the money, having Washington process it, then turn around and send a portion of it back out to the country. Do you know that President Bush's economic stimulus package cost the IRS in excess of $800M just for postage, webpages, phone services online help, etc?
Tywanda: $800M!! That's messed up!
Mudge: (struggling hard not to say "Welcome to the Republican party"), Yeah, that's why I prefer when Washington let's people like you and me keep our money in the first place. Wouldn't you rather keep more of the money you make than wait to get a check for less later the next year? And wouldn't you rather see people who work not have to send their money to their friends who don't?
Tywanda: Amen to that. Amen to that. But I still didn't complain when Bush sent us those checks and I'll bet you didn't either.
Mudge: Don't bet me on that. Even though I work in Washington, I don't want to take your money.
Tywanda: But I'll bet you took that check when it came in.
Mudge: Guilty. Yes, I did.
Tywanda: Aha! You know, everyone said Bush was all messed up. I didn't think he was all that bad. I mean, he seemed to try to help everyone out. I'm not sure if Obama's gonna do the same thing or not.

Tried my best to capture the conversation as accurately as my aging mind allows. Kind of all over the map, but a very refreshing discussion between two citizens. There was much we agreed upon and I was really quite pleased that she took the initiative to ask me, a total stranger, my thoughts on a topic of interest to all of us. To read the MSM, there is not a black person alive who has anything but negative thoughts about Bush and anything but total confidence in Obama. This discussion today told me there is possibility for Republicans to appeal to those who we so frequently concede to the Dems.

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