President Bush spends $222,000 on Bathroom Renovation, President Obama adds $5.3 Trillion to the Federal Debt

Posted by PITHOCRATES - January 20th, 2013

Week in Review

President Obama added approximately $5,294,450,000,000 to the federal debt in four years.  While President George W. Bush added $2,660,250,000,000 in eight years.  So President Obama is clearly outspending President Bush.  Even though the Interior Department under George W. Bush spent $222,000 to renovate a 100-square-foot bathroom (see Interior Department’s 2007 bathroom renovation cost $222,000 by Stephanie Condon posted 1/16/2013 on CBS News).

In 2007, the Interior Department wasn’t skimping on its own interior. The department spent $222,000 that year to renovate the bathroom in the interior secretary’s private office.

Under the direction of President George W. Bush’s Interior secretary, Dirk Kempthorne, the department made a number of lavish renovations to the 100-square-foot bathroom: New wall panels cost more than $1,500, while custom cabinetry was installed for $26,000. The bathroom was outfitted with a $689 faucet, a $65 vintage tissue holder and even a $3,500 refrigerator…

The Interior Department said the renovations — which were approved and contracted by the General Services Administration — were needed because of water leaks in the bathroom. The GSA told CBSNews.com, “These renovations began in 2007, which predates the current leadership at both the GSA and the Department of Interior. Under the current leadership, we have greater oversight to ensure the responsible use of taxpayer dollars. The renovations were part of a larger restoration project at the historic facility.”

Did the GSA spokesperson say this with a straight face?  That they have greater oversight under the current leadership?  Right.  Pull the other one.

The near trillion-dollar stimulus package was going to explode all that shovel-ready work.  But it actually went to shore up public sector pension and health care plans.  Investments in clean renewable energy didn’t produce any new jobs of the future but instead repaid campaign bundlers.  The auto bailout didn’t help the auto companies become more competitive.  Which was their ultimate problem.  And why they couldn’t fund their pension and health care liabilities.

The bailout did not make GM or Chrysler more competitive.  It just injected cash into the UAW pension and health care plans.  And the only reason why they’re profitable now is because they aren’t paying any federal income taxes.  Their stock price has even fallen.  For as the government sells their GM stock they’re selling it at a loss.  So the taxpayer is collecting no taxes from GM.  And they are not going to get all their money back from the bailout.  And this is greater oversight to ensure the responsible use of taxpayer dollars?

Gee, I’d hate to see irresponsible oversight.

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President Obama’s GM Bailout Bailed Out the UAW not GM

Posted by PITHOCRATES - August 19th, 2012

Week in Review

GM got into trouble because they couldn’t sell cars competitively.  Because they had higher labor costs than the foreign competitors taking their market share.  And they simply couldn’t sell enough cars at their high prices to pay their labor costs.  Which led them to bankruptcy.  But President Obama saved GM.  By bailing them out.  And putting them on the road to prosperity.  Or did he (see Morning Bell: Taxpayers’ Auto Bailout Losses Mounting by Amy Payne posted 8/14/2012 on The Foundry)?

Taxpayers will lose even more on the auto bailout than previously thought, as the Treasury has just revised its estimate upward to $25 billion. This may still underestimate the losses to come—yet President Obama plans to tout the auto bailout as a key accomplishment of his Administration…

Heritage labor expert James Sherk and co-author Todd Zywicki found that all of the taxpayer losses occurred because the Administration manipulated bankruptcy law to shelter the United Auto Workers’ (UAW) compensation. None of the losses were necessary to preserve jobs, and taxpayers spent billions to prop up the compensation of some of the most highly paid workers in America. They write:

We estimate that the Administration redistributed $26.5 billion more to the UAW than it would have received had it been treated as it usually would in bankruptcy proceedings.…Thus, the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.

The union workers, who were making more than $70 an hour in wages and benefits, received preferential treatment when their companies had to restructure. GM and Chrysler owed billions to a trust fund they had created to provide UAW members with gold-plated retiree health benefits—and taxpayers ended up paying right into that fund. That doesn’t happen in a normal bankruptcy.

Even Stephen Rattner, President Obama’s “car czar,” has admitted that “We should have asked the UAW to do a bit more. We did not ask any UAW member to take a cut in their pay.” As a result, even after the reorganization, GM still has higher labor costs ($56 an hour) than any of its foreign-based competitors.

So this wasn’t so much a bailout of GM as it was a bailout for the UAW.  Lovely.  More debt for the rest of us so a privileged few can live better than we can.  And to add insult to injury this didn’t even fix GM’s original problem.  Their high labor costs.  Which prevents them from selling their cars competitively.  So the bailout did nothing to help GM.  Which means they’ll probably need another bailout later.  Or special treatment from the government.  Such as a pass on paying their federal income taxes.  So the American taxpayer is not benefitting at all from the GM bailout.  Unless he or she is a member of the UAW.

So in other words, the GM bailout basically screwed the American taxpayer.  So the president could reward a political ally.  That will repay his kindness in campaign contributions.  And votes.  Which he desperately needs because his stewardship of the economy is worse than Jimmy Carter’s.

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Reaganomics beats Keynesian Stimulus Spending every Time

Posted by PITHOCRATES - July 6th, 2011

Obama’s Policies Failing because they’re too Ronald Reagan

So President Obama is a supply-sider.  Just like Ronald Reagan.  Who’s a thunk it?  Funny, he doesn’t appear to govern like Ronald Reagan.  In fact, I believe Obama has said that we can’t go back to the failed policies of the past.  I’m pretty sure that meant Reaganomics.  But I could be wrong.  Because apparently the faltering economy is faltering because of supply-side economics (see The final nail in the supply side coffin by Andrew Leonard posted 7/6/2011 on Salon).

Ever since Ronald Reagan first attempted to make supply-side economics a reality and proceeded to inaugurate an era of persistent government deficits and growing income inequality, it has become harder and harder to make the trickle-down argument with a straight face. But we’ve never seen anything quite like the disaster that’s playing out right now.

Those persistent government deficits of Ronald Reagan?  They were about $200 billion.  The deficits under the Obama administration have been in excess of $1,300 billion (or $1.3 trillion).  The current projection for 2012 is $1,600 billion (or $1.6 trillion).  So the Obama deficits are over 5.5 times the Reagan deficits.  Or an increase of approximately 550%.  So deficits are worse under Obama.  Far worse.

As far as income inequality, the gap has grown consistently from Richard Nixon through Barack Obama (see The United States of income inequality by Andrew Leonard posed 9/28/2010 on Salon).  That included the 4 years of Jimmy Carter, the 8 years of Bill Clinton and about a year of Barack Obama.  Three Democrat administrations.  So the gap between the rich and poor is greater under Obama.  Far greater.

During the six quarters since the recession technically ended in the second quarter of 2009, real national income in the U.S. increased by $528 billion. But the vast majority of that income was captured as profit by corporations that failed to pass on their happy fortunes to their workers.

First of all, that’s now how business works.  They are not in business to produce wealth for their employees.  They pay employees to help them create wealth.  And they pay them whatever it takes to keep their employees from quitting to find a higher paying job.  If you think that’s wrong let me ask you something.  When you choose a store to shop at, do you pick the one with the highest prices so that store can pay their employees more?

What makes this “recovery” so different? Perhaps the simplest answer is that labor has been broken as a force that can put pressure on management, so there’s little incentive for employers to turn profits into wage hikes or new jobs. Instead, employers are squeezing more out of the workers that they’ve got, and investing in equipment upgrades and new technology instead of human assets — labor productivity has risen sharply since the end of the recession.

GM and Chrysler did not break labor.  Labor broke them.  Those generous UAW contracts saddled these companies with legacy costs that left them uncompetitive.  And insolvent.  The auto bailout screwed the bond holders and rewarded labor.  By giving them seats on the board of directors and stock to fund their underfunded pension funds.  This is why employers prefer investments in productivity.  They’re less political.  And are less likely to come back and bite you in the ass.

Globalization also plays a potent role — and not just as a source of cheap labor to undermine the bargaining power of American workers. The Journal notes that many companies “are benefiting from demand from emerging markets, where they are deriving an increasing share of their sales.” Job creation is probably following the sources of new demand. If the Chinese and Brazilians and Indians are the ones buying American goods and services, then it makes sense to staff up overseas. But with American consumers still shellshocked by the economic crash and dutifully obsessed with paying down their debts while trying to hold on to their homes, domestic demand is hardly a force to be catered to.

Interestingly, the emerging markets noted are making great strides toward free market capitalism.  Countries that are moving towards supply-side economics.  While the U.S. moves away from it.  Those emerging economies are doing well.  The U.S. is not.  It would appear, then, that a move towards supply-side economics is a move in the right direction.  And yet the pundits on the left continue to belittle the success of Reaganomics.  So you be the judge.  Let’s summarize Reaganomics as follows:

1.  Reduce Growth of Government spending.
2.  Reduce Income Tax and Capital Gains Tax.
3.  Reduce Government regulation.
4.  Control the money supply to reduce inflation.

Which president would you say followed these policies more?  Ronald Reagan?  Or Barack Obama?  The one who did would be the supply-sider.  And the one who didn’t would not.

The answer is clear.  President Obama is neither a conservative nor a student of the Austrian School of Economics (i.e., supply-side).  He’s a Keynesian.  His policies are Keynesians.  And Keynesians spend.  As demonstrated by his massive stimulus spending.  That failed to stimulate.   This economic train-wreck in the U.S. is a lesson in Keynesian economics.  Not supply-side economics. 

Keynesian Stimulus Spending is Wasted Money

Let’s take a closer look at Keynesian economics.  The theory that government can spend the economy into prosperity.  By looking at the Obama’s 2009 Stimulus.  One part of which was to expand broadband Internet into rural areas (see How Effective Was The 2009 Stimulus Program? by Nick Schulz posted 7/5/2011 on Forbes).

In an important and eye-opening new paper, Jeffrey Eisenach and Kevin Caves of Navigant Economics, a consulting firm, recently examined ARRA’s subsidization of rural broadband. The ARRA stimulus funds for broadband constitute “the largest Federal subsidies ever provided for broadband construction in the U.S.” An explicit goal of the program was to extend broadband access to homes currently without it.

Eisenach and Caves looked at three areas that received stimulus funds, in the form of loans and direct grants, to expand broadband access in Southwestern Montana, Northwestern Kansas, and Northeastern Minnesota. The median household income in these areas is between $40,100 and $50,900.  The median home prices are between $94,400 and $189,000.

So how much did it cost per unserved household to get them broadband access?  A whopping $349,234, or many multiples of household income, and significantly more than the cost of a home itself.

That’s a lot of money.  It would have been cheaper to buy these people a satellite Internet connection at their homes.  I’m not sure what it would cost, but I’m guessing it wouldn’t have cost more than their house.   

Sadly, it’s actually worse than that. Take the Montana project. The area is not in any meaningful sense unserved or even underserved. As many as seven broadband providers, including wireless, operate in the area. Only 1.5% of all households in the region had no wireline access. And if you include 3G wireless, there were only seven households in the Montana region that could be considered without access. So the cost of extending access in the Montana case comes to about $7 million for each additional household served.

Back in the 1980s there was an uproar over wasteful Pentagon spending. The Air Force spent $7,622 on a coffee maker and the Navy spent $640 per toilet seat. That’s extremely wasteful, but at least the Pentagon arguably needed coffee makers and toilet seats. The seven households in Montana for whom taxpayers just spent $7 million each to extend broadband access probably don’t even want it.

It just goes to show you that government can’t do anything well.  From buying coffee makers to buying toilet seats to providing broadband Internet access.  It just seems like they spend a whole lot more money than necessary.  Pulling more money out of the private economy.  And saddling the American people with more debt.  And for what?  What exactly did that stimulus do?  Not much.  Except make some broad Internet contractors very wealthy.  Which they no doubt are if they’re charging $7 million per installation.

This is Keynesian economics.  Wasteful government spending.  And a jobless economic recovery.  Which is only a recovery by the greatest stretch of the imagination.

Barbara Boxer Lies about Clinton Economy and Budget Surplus

And yet they still argue for more of the same.  In fact, they even go further.  They rewrite history.  And say that Bill Clinton’s tax hikes stimulated the economy and produced budget surpluses (see Barbara Boxer’s blatant rewriting of history by Glenn Kessler posted 7/1/2011 on The Washington Post).

“I think we ought to go back to the people and the party that was the only party and the only people to balance the budget in 40 years. I hate to break it to my Republican friends, but that is the Democratic Party. We are the ones who did it. We did it when Bill Clinton came into office. We did it after hard work. We did it after painful cuts. We did it with smart investments.”

— Sen. Barbara Boxer (D-Calif.), June 29, 2011

‘Investments’ is code for ‘tax hikes’.  As important as they are they still have to lie about them.  You’d think if tax hikes did everything she said they did that they wouldn’t lie.  They’d call them what they are.  Tax hikes.  And not investments.

Actually, neither Bill Clinton nor the Democrats meant to balance the budget in his 1993 budget deal.  Because before the 1994 midterm elections, he was still a liberal Democrat.  Don’t forget, they were still working on HillaryCare (the plan to nationalize U.S. health care) in 1993.

But here’s the important point: the Clinton plan was never intended to achieve a balanced budget. After the bill’s passage, the Congressional Budget Office estimated that the deficit would decline modestly — from $290 billion in 1992 to $200 billion in 1998. In the phrase of the era, there were still “deficits as far as the eye could see.”

He was still a big time Keynesian at this point.  And Keynesians spend money.  That’s why his projected deficits were as big as the Reagan deficits.  But then came the 1994 midterm elections.

Fast forward to 1995. The Democrats lost control of the House and the Senate, largely because of bruising budget battle. Clinton’s fiscal year 1996 budget again proposes $200 billion deficits every year for the next five years. So, again, the target in 1998 (when surpluses later emerged) was a deficit of $196 billion.

But Republicans immediately set the goal of achieving a balanced budget within seven years. After resisting for a few months, Clinton shocked many fellow Democrats by announcing that he, too, would embrace the idea of a balanced budget.

As The Washington Post editorial page put it at the time, Republicans had forced Clinton’s hand: “Mr. Clinton’s new position on the budget is much better than the old one. He should have taken it six months ago. The Republicans have driven him to say that he too wants, if not to balance the budget, at least to get the deficit into the neutral zone.”

The 1994 midterm elections were a huge vote of no confidence.  Which was a problem with the presidential election only 2 years away.  Enter Dick Morris.  Who pulled Clinton to the center.  Away from Big Government Keynesian spending.  Of course he had little choice with the Republicans in charge of both houses of Congress.  And then something happened.  He fell ass-backwards into some very opportune economic developments.

…the government ended up with a gusher of revenue that had little to do with Clinton’s 1993 budget deal:  capital-gains taxes from the run-up in the stock market, as well as taxes paid on stock options earned by technology executives. 

Clinton, in essence, was lucky to become president just as a revolution in computer and information technologies was unleashed.

From 1992 to 1997, CBO estimated, revenue increased at an annual average of 7.7 percent in nominal terms, or about 2.4 percentage points faster than the growth of the gross domestic product, the broadest measure of the economy. CBO Deputy Director James L. Blum in 1998 attributed only 1 percentage point of that extra tax revenue to the 1993 budget deal. The rest, he said, came from capital gains.

This is a very important point.  Where did that tax revenue come from that produced those surpluses?  Well, 1% came from the Clinton 1993 budget deal.  About 99% came from luck.  And the good luck just kept coming.

There were other factors as well, such as lower than expected health costs that reduced an expected drain on the budget. Clinton’s predecessor also had kicked in motion a huge decline in defense spending (which Clinton accelerated) and also had overseen a painful restructuring of the banking industry. Even a potential shock, such as the Asian financial crisis in 1997, brought the silver lining of lower oil prices that bolstered the U.S. economy.

The stars must have really aligned during the Clinton administration.  Because a lot of things well out of his control happened, giving him an extraordinary economy.  He truly fell ass-backwards into good times.  Which is why the Fact Checker basically calls Barbara Boxer a liar. 

Boxer literally wipes away any Republican contribution to the process — and also claims credit for creating 23 million jobs while ignoring broad historical changes in the U.S. economy that had little to do with inside-the-Beltway sausage-making. This is more than just spin; it is a rewriting of history that borders on the absurd.

Absurd indeed.  So is she lying?  Or is she just stupid?  It has to be one or the other.  As it must be for all of the other Democrats repeating this lie.

Stimulus Spending doesn’t Stimulate

Reagan’s supply-side policies posted some great economic numbers.  Keynesians point to the Clinton years as vindication for their policies.  But his economy had a lot more to do with the Republicans in Congress and dumb luck.  Barack Obama has outspent all Keynesian presidents to date and has the worst economy since the Great Depression

Even though the Great Recession has officially ended, they’re calling the recovery a jobless recovery.   Which should be comforting to those who are still unemployed.  The question is, of course, where are the jobs?  If government stimulus spending creates jobs, where are the jobs?

You can’t find them because they’re not there.  Because stimulus spending doesn’t stimulate.  It just makes a few people rich (like broadband Internet contractors in Montana).  Tax cuts stimulate.  And reducing government regulation stimulates.  Every time it’s tried.  In other words, supply-side economics stimulates.  Every time it’s tried.  And Keynesian economics fails every time it’s tried.  Including its latest failure under Barack Obama.

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