The Obama Administration was lying about the Success of the Stimulus Bill

Posted by PITHOCRATES - April 20th, 2013

Week in Review

President Obama promised us that if Congress passed his stimulus bill the unemployment rate wouldn’t rise above 8%.  Because million of people would go back to work immediately thanks to all of those shovel-ready jobs.  Well, the president signed it into law on February 17, 2009.  In October of that year the unemployment rate topped out at 10%.  And the president joked that those shovel-ready jobs weren’t as shovel-ready as they thought.  Still, they claimed it was a success.  And bragged about the millions of jobs they created or saved.  All the while the economy remained mired in one of the worst economic recoveries of all time (see Did Obama’s stimulus bill really work? Not even the gov’t knows by Sean Higgins posted 4/15/2013 on The Examiner).

Reason magazine’s Peter Suderman has a lengthy but eye-opening examination of President Obama’s 2009 American Recovery and Reinvestment Act — aka the stimulus bill — and why even after spending $833 million through it the economy continues to suck.

The article is a top-to-bottom dissection that exposes the many layers of folly involved. Several passages stand out but this one in particular is worth noting because it points out the central flaw in reports that argue the stimulus was a success: There is literally no way to measure those claims.

“According to the non-partisan Congressional Budget Office,” says Recovery.gov, the Obama administration’s stimulus website, “the Recovery Act supported as many as 3.5 million jobs across the country.” As the stimulus ran its course over roughly three years, the capital’s top newspapers kept printing similar, supportive-sounding figures from the budget office. “CBO Says Stimulus May Have Added 3.3 Million Jobs,” a Washington Post headline trumpeted in 2010. “CBO: Stimulus Added Up to 3.3 million Jobs,” declared a Politico headline in 2011. Senate Democrats touted the estimates as proof of ARRA’s success. So did the vice president…

The CBO estimated that the stimulus created or saved up to 3.6 million jobs. But CBO Director Douglas Elmendorf has also noted that if the real-world results were different — if the law created 5 million jobs, or if it created none at all — the agency wouldn’t know. At a March 2010 presentation, Elmendorf characterized the CBO’s follow-up reports as “repeating the same exercises we did rather than an independent check.” At the same event, Elmendorf was asked, “If the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis?” His response: “That’s right. That’s right.” (Emphasis added.)

You may not be able to measure how many jobs you saved but you sure can measure one thing.  The labor force participation rate.  The percentage of those who could be working who are actually working.  Which shows the true economic picture unlike the official unemployment rate.  Which just doesn’t count people if they leave the labor force.  Because they can’t find a job.  You see, for them to count you in the unemployment rate you have to be looking for work.  And if you gave up looking for work after a year or so of not finding work they don’t count you.  Which lowers the unemployment rate.  Even though more people are unemployed.

So how did the labor force participation rate respond to the stimulus bill?  Not good.  It suffered its steepest decline the year they passed the stimulus.  And continued in the longest and steepest free-fall during the Obama presidency.  These numbers show the stimulus was an abject failure.  And any talk contrary to this was nothing but wishful thinking.  Or outright lies.

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FT143: “When liberals say ‘unite and work together’ they really mean ‘divide and conquer’.” —Old Pithy

Posted by PITHOCRATES - November 9th, 2012

Fundamental Truth

President Obama didn’t Moderate any of his Positions after the Punishing Losses of the 2010 Midterm Elections

During President Obama’s victory speech following the 2012 election he said there are no red states and no blue states.  Just the United States of America.  Which was a common theme during all his campaign stops.  He kept saying that together we can do these great things.  If we unite we can overcome any obstacles.  Yet he did anything but unite people during his campaign.  Instead he was a great wedge driver.  To drive people away from each other.  And into opposing camps.  To foment anger between these disparate groups.  And to peel these groups away from the Republicans.

We heard compromise talk like this following the 2008 election.  And what happened then?  There was no uniting or working together.  When it came to the stimulus bill the President and Nancy Pelosi shut the Republicans out.  When the Republicans offered suggestions President Obama brushed them aside.  Saying elections have consequences.  And that the Republicans could make all the suggestions they’d like but it wouldn’t matter.  Because he wasn’t listening.  Nancy Pelosi acknowledged that the Democrats wrote the stimulus bill in its entirety without any Republican input.  Why?  Because they won she smirked.  The Democrats weren’t interested in any bipartisan compromise then.  So it isn’t likely they are now.  Unless it’s the kind of bipartisan compromise they like.  The kind where the Democrats get what they want.  And the Republicans surrender unconditionally.

So there’s ancient history (2008-2010) and the words from the recent campaign that tell us not to hold our breath for all of that uniting and working together to materialize.  It just won’t happen.  For the president didn’t moderate any of his positions after the punishing Democrat losses of the 2010 midterm elections.  So why would he after a triumphant victory of the status quo in 2012?

Democrats warned America that if Mitt Romney became President he would take the Country back to the 1950s

The Democrats have no interest in bipartisan compromise.  Because to compromise you have to give up stuff you want.  And let others have a little of what they want.  But when you look at the negative campaign ads of the past election there can be no compromise.  For the Democrats did not battle the Republicans in the arena of ideas.  They demonized their opponents for thinking differently than they did.  Looking for issues of opportunity to seize.  Such as the war on women.

Catholicism does not permit birth control or abortion.  Extreme positions to some, perhaps.  But not to Catholics.  Who choose to be Catholics.  When Obamacare forced Catholics to provide free birth control and the abortion pill in their health care benefits they took offense.  As did the Republicans.  For the First Amendment states in part, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”  And forcing Catholics to provide birth control and the abortion pill clearly prohibited the free exercise thereof.  So the Catholics, and the Republicans, protested this violation of a First Amendment right.  And the Democrats responded to this protest by calling it a war on women.  Where Republicans wanted to take birth control and access to abortion away from women.  As well as wanting women to die from cancer.

The Democrats helped organize the Occupy Wall Street movement to stoke up hatred for rich people.  In anticipation for the Republican nominee they were already planning to campaign against.  Mitt Romney.  A rich person.  But not just any rich person.  But an old rich white man.  Who worked in high finance.  Which, of course, tied him to Wall Street.  A man disconnected from the common people.  And from contemporary times.  The Democrats warned America that if Mitt Romney became president he would take the country back to the 1950s.  Take away women’s birth control and access to abortion.  As well as happily letting them die from cancer.  In addition to cutting taxes for rich people.  While raising taxes on the poor and middle class.  When he wasn’t busy closing down factories and shipping jobs overseas.  And, of course, stacking the deck against blacks, Hispanics and anyone else that wasn’t as white as he.

Liberals must Divide and Conquer as their Records don’t allow them to run any other Campaign

You see, the Republicans are hateful people.  For example, they’re bigots and homophobes because they oppose gay marriage.  So it’s okay to hate Republicans.  Because they hate gay people.  While at the same time they hate women because they want all women to be barefoot and pregnant.  In a marriage.  So on the one hand Republicans are hateful people for trying to prevent gay people from marrying.  While on the other hand they’re hateful people for trying to encourage women to get married.  Making marriage a fascinating issue.  For if gay people want it marriage is a beautiful thing.  An expression of love between two people.  But for single women who want a career it’s nothing less than slavery.  Pure male subjugation of women.

Odd, isn’t it?  How Democrats can be on both sides of the same issue.  For they can both love and hate marriage.  And they can hate Republicans for both opposing and promoting marriage.  How can that be you ask?  Easy.  For marriage is not what’s important to Democrats.  What’s important to them is using marriage to demonize Republicans.  It’s about the hate.  And the opportunity to drive a wedge between people.  To drive people into opposing camps.  That have a common enemy.  Republicans.

Democrats don’t have a great success record for their policies.  They can’t hold up the Carter years as a success.  For they were horrible.  They like to point to the Clinton years as vindication for their policies.  But his economy was helped by Japan’s Lost Decade.  And an inflationary binge that caused the dot-com bubble.  As well as the run up to the subprime housing bubble.  Neither of which burst during his presidency.  Though he was largely responsible for them.  And the Democrats couldn’t point to anything in the Obama years as a success.  So they didn’t run on their record.  But attacked their opponent.  By demonizing Mitt Romney.  Getting one group after another to hate Mitt Romney and the Republicans.  And to vote against them.  Not for the Democrats’ successful policies.  For they had none.  So when liberals say ‘unite and work together’ they really mean ‘divide and conquer’ as they have always done.  As they always must do.  For their records don’t allow them to run any other campaign.

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Green Energy Insiders pocketed most of the Stimulus Money

Posted by PITHOCRATES - November 4th, 2012

Week in Review

According to the Left it’s the Republicans who enrich their friends in corporate America.  But it wasn’t the Republicans that passed a near $1 trillion stimulus bill to enrich their friends in corporate America.  No.  That was the Democrats.  And they really enriched their friends.  Their friends in green energy.  Those corporations that were supposed to create the jobs of the future.  That created no jobs (see Examiner Editorial: Insiders get rich on Obama’s green energy stimulus posted 10/31/2012 on The Examiner).

According to a Washington Examiner analysis of publicly available data, corporate insiders at the 15 publicly traded green energy companies that received federal stimulus subsidies pocketed tens of millions by selling their stock after the government’s money poured in and before their companies’ values plummeted.

The Obama administration gave more than $700 million in grants and guaranteed an additional $500 million in loans to publicly traded green energy companies through its 2009 stimulus package. If Obama had invested all that money in a Standard & Poors index fund of the top 500 publicly traded companies, his investment would have seen a 73 percent return since he took office. In contrast, the Obama “green energy” stimulus portfolio has fallen by 78 percent — performing about five points worse than green energy companies that didn’t get subsidies.

The insider trades by officers and directors of these companies tell us still more. They cashed out a net $63.9 million in stock gains before their companies’ stock prices collapsed…

This analysis does not include some of the best-known Obama energy failures. Solyndra, for example, blew through more than $500 million in taxpayer-guaranteed loans before it could even go public. Another high-profile failure, First Solar, is not included because it sold off much of its $3 billion in federal loan guarantees to third parties before it laid off 30 percent of its workforce and its stock price declined by more than 90 percent from its 2011 high. The company’s head, Michael Ahearn, has extracted more than $329 million in stock sales since 2009 all by himself.

The problem with green energy is that it’s not economically viable.  Few investors put their money in these ventures because investors are smart and know how to invest money wisely.  Which is why the government is pouring money into these companies.  Because no one else will.  For these are not wise investments.

So where’s the outrage?  The stimulus bill was greater than the money spent under TARP.  The program to bail out all those troubled assets.  Those toxic mortgages.  That infuriated the masses so much they showed up outside some bankers’ homes with pitchforks and torches.  Spawning the Occupy Wall Street movement.  And the whole 99% against the 1%.  But these green energy scandals?  You can almost hear the crickets chirping as you read about them in the few papers that write about them.  Why?

That’s a rhetorical question.  We all know why.  Except for a very few exceptions the media is liberal.  And will actively support Democrats.  And attack Republicans.  That’s why a larger financial scandal gets less coverage than a smaller one.  And the smaller one only got that coverage because in that coverage they failed to tell the whole story.  It wasn’t the bankers that forced these borrowers into subprime mortgages.  It was the government who forced the bankers to approve the unqualified for mortgages or else.  Basically saying their lending practices were discriminatory and that if they didn’t change they would find themselves out of the mortgage business.  So how do you qualify the unqualified for mortgages?  With subprime lending.  Which they did.  And kept doing after Fannie Mae and Freddie Mac bought those toxic mortgages from them and unloaded them on unsuspecting investors.  Which is the part they don’t tell the people with the pitchforks and torches.  That it wasn’t the bankers who were responsible for the subprime mortgage crisis.  It was the government.

And this is why the media doesn’t care about the green energy scandals.  They can’t revise the facts to blame them on the Republicans.  So they just ignore them.

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Despite President Obama’s Stimulus Bill Caterpillar hired Workers in China instead of U.S.

Posted by PITHOCRATES - August 12th, 2012

Week in Review

Remember the Obama stimulus plan?  To pay for all those shovel-ready jobs?  And pull the economy from recession to robust economic growth?  That was going to save or create 3.5 million jobs?  President Obama even said that the Caterpillar CEO said he would start rehiring some of the 20,000 employees laid off recently if Congress passed the president’s stimulus bill.  Well, the Congress passed the president’s stimulus bill.  And it appeared Caterpillar did go on a hiring spree.  In China (see Caterpillar exporting China-made goods by Ernest Scheyder posted 8/8/2012 on Reuters).

Caterpillar Inc (CAT.N) has begun exporting Chinese-made machinery to the Middle East and Africa, part of a plan to offset a dip in China’s economic growth, a top official at the company said in an interview…

China’s economy has been pressured this year by a drop in its domestic property market and high inflation, with the economic growth rate slowing to 7.6 percent in the second quarter, the slowest pace in more than three years.

That is reflected in waning demand for the machinery Caterpillar makes at its 18 Chinese plants, and caused a glut of inventory.

How about that?  Caterpillar is building equipment in China to export to the Middle East and Africa.  Pity they didn’t build that equipment in the U.S. for export to the Middle East and Africa.  That would have added to the president’s ‘win’ column in creating jobs.  And he needs it.  For all the talk about the jobs he ‘saved’ or created his overall record since being president isn’t good.  According to The Washington Post there are fewer people working today than when he took office.  Making him a net destroyer of jobs.  Not a net creator of jobs.  Further proof that the president’s economic policies are a failure.

Guess the president’s state capitalism isn’t as good as the Chinese’s.

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Keynesian Policies gave us the Subprime Mortgage Crisis, Solyndra and Inflation while the Free Market gives us Jobs

Posted by PITHOCRATES - September 30th, 2011

The Problem with Washington is that there are too many Elitists who Think they are Smarter than Us

Now we know why we have slow economic growth.  Apparently it’s par for the course after a financial crisis (see Phony Fear Factor by Paul Krugman, Keynesian Economist, posted 9/29/2011 on The New York Times).

We might add that major financial crises are almost always followed by a period of slow growth, and U.S. experience is more or less what you should have expected given the severity of the 2008 shock.

So why do any spending?  Why have any stimulus to stimulate growth that won’t come.  Because “major financial crises are almost always followed by a period of slow growth…”  If true then we could have gotten here without that $800 billion stimulus bill.  And we could have avoided that debt ceiling debate.  And the subsequent downgrading of U.S. sovereign debt.  All because we were spending money trying to alter slow growth that was going to happen anyway.

But the Keynesian will say, “Just think how bad things would have been if we didn’t spend that $800 billion.  And how better things would be if we had just spent more.”  How do you argue with that?  When spending fails it’s because we didn’t spend enough.    By this logic, then, spending as a policy can never fail.  Even when it fails.

If slow growth is more or less what you get were they then lying?  When they said they would keep the unemployment rate below 8%?  If Congress passed the stimulus bill?  Or did they just not understand how bad things were?  Because their understanding of economics is that bad?  Or was George W. Bush so much smarter than them that he was able to hide how bad things were?

And it also, of course, reflects the political need of the right to make everything bad in America President Obama’s fault. Never mind the fact that the housing bubble, the debt explosion and the financial crisis took place on the watch of a conservative, free-market-praising president; it’s that Democrat in the White House now who gets the blame.

But good politics can be very bad policy. The truth is that we’re in this mess because we had too little regulation, not too much. And now one of our two major parties is determined to double down on the mistakes that caused the disaster.

Who was it that pushed subprime lending to get people who couldn’t afford a house into a house?  Whose policies were those that made home ownership available to everyone, not just those with good-paying jobs that could pay their mortgage payments?  Who was it that brought suits and protests against lenders for ‘redlining’ poor and minority communities by not approving mortgages for those who could not qualify for a mortgage?  The Republicans?  The so-called servants of the wealthy?  Or the Democrats?  The so-called champion of the poor and disenfranchised?

Buying risky mortgages from banks allowed banks to make risky loans.  And who was buying those risky mortgages?  Fannie Mae and Freddie Mac.  That was government policy.  Keynesian policy.  Keeping interest rates low and removing risks from the normal risk takers in the mortgage industry.  There could not have been a Subprime Mortgage Crisis without these Keynesian government policies in place.  And we know that conservative Republicans aren’t Keynesians.  That’s why Keynesians hate conservative Republicans.  Especially when they hold up further stimulus spending in Congress.

The problem with Washington is that there are too many elitists who think they are smarter than us.  And these elitists want to double down on the mistakes that caused this crisis.  Already the Obama administration has been talking about boosting subprime lending.  Incredible.  This after that very same policy caused the worst recession since the Great Depression.

After the Benefit of a Cheap Euro runs its Course the Depreciated Euro turns into a Liability

The Keynesian’s answer to everything is more spending.  And when someone warns about igniting inflation with all of their easy monetary policy they call those people misinformed.  Monetary policy doesn’t cause inflation.  Greedy business people do.  By raising prices.  And supply shocks.  Like the OPEC oil embargo of the Seventies.  They point to the Eurozone and say, “See?  Their central banks have been keeping rates low to stimulate spending.  And where is the inflation?”  Here, apparently (see Euro-Zone Inflation Surges by Paul Hannon, Dow Jones Newswires, posted 9/30/2011 on NASDAQ).

The annual rate of inflation in the 17 countries that share the euro surged to its highest level in almost three years in September, while the number of people without work fell slightly.

The European Union’s official statistics agency Eurostat Friday said consumer prices rose 3% in the 12 months to September, up from 2.5% in August and was well above the European Central Bank’s target of just below 2%.

Prices rose faster than at any time since October 2008, and more rapidly than economists had expected. Those surveyed last week by Dow Jones Newswires had estimated that prices rose 2.5%. The last rise in the annual rate from one month to the next that was of a similar scale was in March 2010, when it picked up to 1.6% from 0.8%.

With a depressed economy businesses haven’t been able to raise their prices.  But what they couldn’t do their central bank has.  Put so much cheap money into the economy that they depreciated the Euro.  Which is another way to cause inflation.  Eventually.  After the benefits of a cheap Euro (making cheap exports) run its course.  And the depreciated Euro turns into a liability (higher input prices in the manufacturing process).

This always happens in Keynesian economics.  Yet the Keynesian ignores this reality and doubles down on the failed policies of the past.

Government Policies Favor Green Energy over Oil and Gas because Government Elitists are in Control

Keynesian economic thought is the prevailing though in most governments.  For a reason.  They’re expansionary policies.  And put government in control of that expansion.  Government officials don’t care if they work.  They just like the power it gives them.  The control over the economy.  And an open checkbook to buy votes.  So governments everywhere put Keynesians into their administrations.  Which give the Keynesians legitimacy.  People accept what they say.  Because if government adopts what they say they must know what they’re saying.

But Keynesian thought is wrong.  History has shown this.  The Austrian School of economics has a far better track record of success.  But that is not a popular school among expansionists.  Because it leaves the economy to the free market.  Not to elitists in government.  Who think they know better than the free market.

An example of this elitist intervention into the free market is government’s choice of green energy as the smart investment of the future.  Which has been failing even with heavy subsidies.  While the hated oil and gas industry, on the other hand, is creating jobs (see Gassing Up: Why America’s Future Job Growth Lies In Traditional Energy Industries by Joel Kotkin posted 9/27/2011 on Forbes).

But the biggest growth by far has taken place in the mining, oil and natural gas industries, where jobs expanded by 60%, creating a total of 500,000 new jobs…

Nor is this expansion showing signs of slowing down. Contrary to expectations pushed by “peak oil” enthusiasts, overall U.S. oil production has grown by 10% since 2008; the import share of U.S. oil consumption has dropped to 47% from 60% in 2005.  Over the next year, according to one recent industry-funded study, oil and gas could create an additional 1.5 million new jobs.

What makes this growth even more remarkable is that the month of August posted zero new jobs.  So if there were no new jobs while oil and gas was creating hundreds of thousands of jobs, hundreds of thousands of jobs in other industries must have been disappearing.  Such as in that government-backed green energy sector.

How about those “green jobs” so widely touted as the way to recover the lost blue-collar positions from the recession? Since 2006, the critical waste management and remediation sector — a critical portion of the “green” economy — actually lost over 480,000 jobs, 4% of its total employment…

The future of the rest of the “green” sector seems dimmer than widely anticipated. One big problem lies in cost per kilowatt, where wind is roughly twice as expensive and solar at least three times as expensive as electricity produced with natural gas. Given the Solyndra  bankruptcy  and their inevitable impact on the renewables industry, it’s also pretty certain that the U.S., at least in the near term, will not be powered by windmills and solar panels.

Natural gas is a clean burning fuel.  It’s so clean we use it in our homes.  In our stoves.  And our furnaces.  It’s cheap.  And it’s plentiful.  We’re getting it out of American ground that can put hundreds of thousands of Americans to work.  Without loan guarantees.  And they can bring it to market at market prices.  Without any subsidies.  It’s the hanging softball of energy policy.  But what are we pursuing?  Green energy.  A sector that is bleeding jobs.

The relative strength of the energy sector can be seen in changes in income by region over the past decade. For the most part, the largest gains have been heavily concentrated in the energy belt between the Dakotas and the Gulf of Mexico. Energy-oriented metropolitan economies such as Houston, Dallas, Bismarck and Oklahoma City have also fared relatively well. In energy-rich North Dakota there’s actually a huge labor shortage, reaching over 17,000 — one likely to get worse if production expands, as now proposed, from 6000 to over 30,000 wells over the next decade.

Why are we subsidizing green startups when we have an energy belt almost the size of the Louisiana Territory?  A labor shortage of 17,000?  And a plan to increase wells from 6,000 to 30,000 (an increase of 400%) in one state?  This is real economic growth.  Created with no government help.  I mean, if there is one thing the Obama administration isn’t known for it’s being a friend to the oil and gas industry.

So this is an industry government doesn’t help.  If anything government hinders it with heavy regulation.  And yet the gas and oil industry is blowing government-subsidized green energy away.  There’s a lesson here.  Free market works.  And when government intervenes into the market you can bet on them picking a loser.

Industry experts say that the shift in energy exploration is moving from the Middle East to the Americas, with rich deposits of oil and gas uncovered from Brazil to the Canadian oil sands.

Much of the new action is on the U.S. mainland, including the Dakotas, Montana and Wyoming. Increasingly, there’s excitement about finds in long-challenged sections of the Midwest such as Ohio. The Utica shale formation, according to an estimate by Chesapeake Energy, could be worth roughly a half trillion dollars and be, in the words of CEO Aubrey McClendon, “the biggest to hit Ohio, since maybe the plow.”

Ohio now has over 64,000 wells, with five hundred drilled just year. Recent and potential finds, particularly in the Appalachian basin, could transform the Buckeye State into something of a Midwest Abu Dhabi, creating more than 200,000 jobs over the next decade.

A Midwest Abu Dhabi?  Creating 200,000 new jobs?  And that’s just in the oil and gas business.

The energy boom also has sparked a spate of new factory expansions, including a $650 million new steel mill to make pipes for gas pipelines. Other local firms are gearing up to make up specialized equipment like compressors.

This is real economic growth.  Created and sustained by the private sector.  Without any stimulus funding or subsidies.  The way of the Austrian School of economics.  But is anathema to expansionist Keynesians.  That’s why government policies favor green energy.  Like they favored subprime lending.  Because government elitists are in control.  Not the free market.

The Genius Elite have given us the Subprime Mortgage Crisis, Solyndra and Inflation in the Eurozone

The government bet wrong on green energy.  As smart as they are.  And as smart as their Keynesian advisers are.  Is there a lesson here?  Yes.  They are not that smart.

The oil and gas industry is booming.  Why?  Because there is enormous demand for oil and gas.  For all the Keynesians’ lament over the lack of demand you’d think they’d jump on this.  But no.  They ignore it.  Instead they impose oppressive regulations.  Impose moratoriums on Gulf drilling.  And do more to impede this industry than to help it.  To please the environmentalists.  And their friends in green energy.

The genius elite have given us the Subprime Mortgage Crisis, Solyndra and inflation in the Eurozone.  The Keynesian way.  Whereas the free market is finding domestic sources of real energy and creating jobs.  The Austrian School way.  Which was also the American way.  Once upon a time.  And it can be again.  If we listen more to the market.  And less to the Keynesian elites.

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Obama Delivers his $447 Billion Political Stimulus Plan to Congress

Posted by PITHOCRATES - September 12th, 2011

Had the $800 Billion Stimulus worked we wouldn’t need the $447 Billion Stimulus

We have a plan. Rather, Congress does. President Obama delivered it today. And he reiterated that they must pass it now. That there was no time for political games. Like he was doing. Saying basically that if the Republicans don’t pass it they don’t want to help the economy. And, by extension, they hate the American people. For only those who hate the American people could deny them jobs (see Obama urges no “political games” on jobs plan by Laura MacInnis and Matt Spetalnick posted 9/12/2011 on Reuters).

President Barack Obama called on Republicans not to play “political games” with his jobs plan as he pressed for swift passage of a $447 billion package he hopes will revive the U.S. economy and boost his re-election prospects…

He took aim at Republicans who have resisted many of his economic initiatives in the past.

“We can’t afford these same political games, not now,” Obama said.

Economic initiatives in the past? Like that $800 billion stimulus? You know, if that had worked we would not need another stimulus. But we apparently need another stimulus. So the previous stimulus must have failed. And, if so, why would this stimulus be any different?

It would appear that the only one playing a game now is the president.

Stimulus Sleight of Hand: Taking from the Private Sector to Stimulate the Private Sector

So let’s take a look at what the president calls stimulus. First of all, where is that $447 billion going to come from (see Obama proposes tax hikes on wealthy to pay for $447B jobs bill by Sam Youngman posted 9/12/2011 on The Hill)?

The White House said Monday that President Obama wants to pay for his $447 billion jobs bill by raising taxes on the wealthy and business.

Oh. He’s going to pay for his jobs bill by raising taxes on the job creators. I mean, let’s face it, poor people don’t create jobs. Rich people do. And businesses. And why aren’t they creating them now? They have no idea what cost this administration is going to levy on them next. Like a tax hike to pay for another stimulus bill.

The stimulus will be temporary. But you can bet those tax hikes won’t be. They’ll be permanent. And a disincentive for rich people and business owners alike to risk their money to create jobs.

The administration would tax the income investment fund managers make, known as “carried interest,” as regular income instead of as capital gains, which has a low 15 percent tax rate. This is another long-standing administration goal that has been resisted by Wall Street as well as some Democrats.

The administration estimates the capital gains change would provide $18 billion in revenue.

In other words, he wants to chase what investment capital we have out of the country.

A lot of people lose money in the stock market. Because it’s risky. It’s like gambling. Where there is no such thing as a sure thing. So those who take big risks often lose big. Even Donald Trump has filed for bankruptcy protection a couple of times. That’s why when they do win they need to win big. To cover all of those times they don’t win. But when you raise the tax rate on those winnings from 15% to 33% (the current top marginal income tax rate), it’s going to make investors think twice. That’s an increase of 120%. They may not just whistle a happy tune and pay it. You see, the funny thing about capital, it’s mobile. You can move it. And park it.

European investors are parking their money in U.S. banks at a negative interest rate while they wait out the European sovereign debt crisis. American investors can just as easily move their money out of the country. And wait for a more favorable investment climate before returning. Which won’t create jobs. Or provide tax revenue.

Another $3 billion would come from changing the way corporate jets depreciate. With a few other revenue raises, Lew indicated the total measures proposed by the administration would bring in $467 billion, $20 billion more than the cost of Obama’s jobs bill.

What is it with him and corporate jets? He sure hates those corporate jets.

So he will pull a half trillion dollars out of the private sector. So he can inject it back into the private sector. Less a small handling fee. And the usual gifts to his political cronies. Resulting in more debt. And very little stimulus. If any.

This is less stimulus. And more political sleight of hand. Taking from the private sector to stimulate the private sector.

The White House dug in on its refusal to say how many jobs the package would create, pointing instead to an estimate from Moody’s that said the bill would create about 1.9 million jobs.

Lew noted that he was not a part of Obama’s economic team when NEC director Christina Roemer and Vice President Biden’s former chief economist Jared Bernstein said that the original stimulus package would reduce unemployment to below 8 percent.

After months of being reminded by Republicans that the recovery act did not cut unemployment, which is now at about 9 percent, Lew said he thinks it is “dangerous to ever predict unemployment rates.”

If Moody’s prediction is accurate, that’s $ 235,263.16 per job. It would be cheaper just to give $30,000 to 1.9 million people. That would only cost $57 billion. And it would probably stimulate more. Of course, they won’t do that. Because that wouldn’t reward any political cronies.

And there’s a good reason why they’re not making any predictions. Because they know this stuff doesn’t work. They only made the unemployment rate prediction because they thought the economy would have fixed itself in short time. It usually does. That’s why they were in such a rush to pass it. They had to pass it before the economy recovered. They had no idea how bad things were. Or how their policies would make things worse. Because they have no idea of how the economy works.

And isn’t the refusal to make unemployment predictions an admission that they have no faith in what they’re doing? Vis-à-vis the economy, that is. For they have full faith and confidence in the political effects. They can predict the campaign donations this will generate. And the likely votes. But they won’t make these predictions public. For it will be admitting the truth of this political stimulus.

Stimulus that Works: Cutting Costs for Business

But someone knows how to create jobs. Not by putting more money into workers’ pockets. But buy cutting a business’ costs (see Detroit Sets Its Future on a Foundation of Two-Tier Wages by Bill Vlasic posted 9/12/2011 on The New York Times).

The newest Chrysler workers earn about $14 an hour, compared with double that amount for longtime employees on the same shift. With the economy slumping and job creation once again a pressing issue in the White House and Congress, the advent of a two-tier wage system in Detroit is spiking employment for one of the country’s most important manufacturing industries…

What was once seen as a desperate move to prop up the struggling auto industry is now considered an integral part of its future. The demand for $14-an-hour manufacturing jobs is providing Detroit’s Big Three automakers with a ready pool of eager new employees. Last year, Chrysler was flooded with inquiries about the jobs here, and it froze the list after receiving 10,000 applications.

So someone understands. American cars weren’t selling because they couldn’t compete in the market place. They couldn’t sell the cars they had. And they certainly weren’t going to expand production. But cut labor costs and look what happens. They can compete in the market place again. And create jobs.

So far, about 12 percent of Chrysler’s 23,000 union workers earn the lower wage, and over all, 4,000 or so of the 112,000 U.A.W. members are second-tier hires. Those numbers are expected to grow — and in fact can increase significantly even under the current contract. The jobs are central to the contract talks now because they are viewed as a critical element of the industry’s continued recovery.

The benefits for the lower-tier workers are scaled back as well. They get a maximum of four weeks paid time off a year, versus five for the longtime workers. And instead of the guaranteed $3,100-a-month pension a full-paid worker receives after age 60, the new hires have to build their own “personal retirement plan” based on contributions from the company of less than $2,000 a year.

This is stimulus that works. Cut costs for business. And business creates jobs. Which is the goal of stimulus.

Raising taxes on business won’t cut costs for business. So it won’t stimulate. Raising taxes on business to pay for a stimulus bill will tap the brakes on the very economy they’re trying to stimulate. And what is government spending that doesn’t stimulate? Pork. Earmarks. Rewarding political cronies.

Keynesian Stimulus Spending stimulates Politics, not Economic Activity

Let the political games begin. And the lying. The latest stimulus is no different from the first stimulus. It will fail. Only it will be less of a failure. The only good thing we can say about it.

Detroit has shown the way. If you want to create jobs. If you want to stimulate the local economy. You cut costs. You don’t raise them. And you do it in a way where there is little uncertainty. The two-tier wage system is here to stay. The automotive companies can plan on this cost certainty.

You know another name for this? Supply-side economics. That’s right. They fixed the car companies on the supply side. Not the demand side. That’s why they won’t take this model and apply it to the rest of the economy. That would go against every Keynesian fiber in their body. But they did in Detroit. Because they had to save the UAW. And things were so bad in the U.S. automotive industry that they had to drop politics this one time. But they will be damned if they’ll concede defeat and stop their Keynesian ways everywhere else. I mean, if they did, how, pray tell, would they reward their political cronies?

Keynesian stimulus spending stimulates politics. Not economic activity. Whereas supply-side economics stimulates economic activity. Not politics. So you can see why those in government are Keynesians. Because spending our money before we can is more important than our economic wellbeing.

 

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Keynesian Policies are giving us Great Depression Unemployment with no Hope of Economic Recovery

Posted by PITHOCRATES - September 4th, 2011

Real Unemployment is Greater than the Unemployment Rate for about half of the Great Depression 

The unemployment numbers are bad.  But few realize just how bad they are.  The real unemployment numbers.  Not the official unemployment rate released by the government (U-3).  Because that number doesn’t count a lot of people who can’t find a full time job (see Unemployed face tough competition: underemployed by Paul Wiseman and Christopher Leonard posted 9/4/2011 on the Associated Press).

America’s 14 million unemployed aren’t competing just with each other. They must also contend with 8.8 million other people not counted as unemployed – part-timers who want full-time work…

And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren’t counted as unemployed because they’ve stopped looking for work. Once they start looking again, they’ll be classified as unemployed. And the unemployment rate could rise.

Combined, the 14 million officially unemployed; the “underemployed” part-timers who want full-time work; and “discouraged” people who have stopped looking make up 16.2 percent of working-age Americans…

If you look at the unemployment rate during the Great Depression (1929 to 1941), this more real rate (16.2%) is greater than the unemployment rate for about half of those years.  From 1932 until 1936, the rate was 23.53%, 24.75%, 21.60%, 19.97% and 16.80%.  After dropping down to 14.18% in 1937, it went back up to 18.91% in 1938.  It fell to 17.05% in 1939.  It was below 16.2% for only 6 years of the 13 years of the Great Depression.  So this 16.2% is bad.  Very, very bad.  And very, very real.

In a healthy economy, this broader measure of unemployment stays below 10 percent. Since the Great Recession officially ended more than two years ago, the rate has been 15 percent or more.

Even if you don’t use Great Depression standards this 16.2% is still very, very bad.

Eventually, lots of Americans…will start looking for jobs again. If those work-force dropouts had been counted as unemployed, August’s unemployment rate would have been 10.6 percent instead of 9.1 percent.

If it wasn’t for a counting gimmick to exclude long-term unemployed who gave up looking for work, the official unemployment rate would count all the unemployed.  And it would be 10.6%.  Not the ‘official’ 9.1% reported.  Of course, throw in the underemployed and it’s back up to 16.2%.

If Taxes and Regulations were Good for the Economy, we wouldn’t have Real Unemployment of 16.2%

No doubt the employment picture is far worse than the media has reported.  And that Recovery Summer was purely political propaganda.  To put a positive spin on some really wasteful ‘stimulus’ spending.  Spending that was more pork and earmarks than stimulative.  And President Obama is going to address a joint-session of Congress to tell us how he’s going to fix the economy.  No doubt urging more of the same that hasn’t worked thus far (see Cheney dismisses Obama’s jobs speech: ‘Don’t think it will get the job done’ by Vicki Needham posted 9/4/2011 on The Hill).

Former Vice President Dick Cheney suggested Sunday that the White House should adopt Reagan-era tax and regulatory policy to spur economic growth…

“The Obama administration is doing exactly the opposite, they’re loading on more regulation on the private sector in respect to how the economy functions,” he said.

They say if it ain’t broke, don’t fix it.  But if it is broke then we should probably fix it.  And based on the real unemployment numbers, the Obama policies are broke.  And need to be fixed.  And a good place to start would be to back off on all of their regulations.  And stop with the new taxes.  We know they’re bad for the economy.  For if they were good for it, we wouldn’t have a real unemployment rate of 16.2%.

President Obama will address a joint session of Congress on Thursday to outline a jobs plan likely to include a call for more infrastructure spending along with an extension of the payroll tax cuts, unemployment benefits and tax incentives for business to pick up hiring…

The president used his weekly address to push passage of an extension of the surface transportation bill to spur highway construction, bridge repair and the improvement of mass transit systems.

Haven’t we heard this message before?  Infrastructure spending?  As in ‘shovel-ready jobs’?  That was the whole point of the stimulus bill.  And being that we’re still talking about ‘infrastructure spending’, apparently it didn’t work.  So why return to a failed policy?

Infrastructure Stimulus Projects are like a Pill that Cures the Common Cold…in only 3 Weeks

Even Obama conceded there was no such thing as a ‘shovel-ready’ job.  Not with the regulatory red tape you have to go through before breaking ground.  Which costs millions of dollars.  So it’s not likely anyone spent millions of dollars over the years just in anticipation of a stimulus program.  Something unknown then that would pay for a project started without adequate funding.  Yeah, like that would ever happen.

But infrastructure work isn’t your everyday make-work kind of employment.  It takes skill.  And experience.  It’s not picking up trash along the side of the road that any unemployed person can do without extensive training (see Did the Stimulus Create Jobs? Not Always for the Unemployed by Megan McArdle posted 91/2011 on The Atlantic).

In the construction industry, there’s another wrinkle; many of the specialties in heavy construction are, at least as I understand it, not overfull with qualified applicants; finding young people who have the math skills and other academic talents necessary to be a modern skilled construction worker, and also want to skip college and apprentice with an outfit like the operating engineers, is something that a lot of the skilled trades worry about. 

I think a lot of people assumed that doing infrastructure construction projects would be a great way to soak up excess labor from the homebuilding industry, but there’s not actually that much overlap; knowing how to install drywall or do framing work does not qualify you for a job that requires sandhogs and specialty welders.  And it can take a long time to make journeyman in many of these professions.  This is also true of certain kinds of civil engineers and so forth. 

Cleary infrastructure projects are not the panacea the Obama administration thinks they are.  They are not ‘shovel-ready’ for the unemployed.  After years of regulatory compliance expenditures, highly skilled and highly specialized workers will break ground.  Which won’t employ a single person outside these specialties.  At least, not without years of training.  And working as an apprentice.  Which will be years down the road.  Which won’t stimulate anything in the here and now. 

This is like a pill that cures the common cold.  In only 3 weeks.  They have no effect.  And their ‘cure’ is purely illusionary.

The Era of Keynesian Big Government came to an End in 1980…for Awhile 

So we know what doesn’t work.  We know what policies are wrong.  Almost 3 years of Obama policies have told us that.  But it’s easy to point to failure.  To identify problems.  It’s a little more difficult to fix problems.  But the amazing thing is we don’t have to fix them.  We just have to stop causing them (see Free The Market by Peter Boettke posted 9/2/2011 on The European).

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design”, F.A. Hayk once wrote. We would we well-served to heed his call and reinvigorate the ideology of the free market.

There are a few schools of economics.  There’s the Keynesian school.  The majority of mainstream economists adhere to this.  As well as the Obama administration.  And then there is the Austrian school.  Which is more in keeping with economists like F.A. Hayek and Adam Smith

The Keynesians want hands-on government control and spending.  The Austrian school doesn’t.  Because they don’t think they are better and smarter than the average consumer.

The past thirty years proved the validity of Adam Smith’s assertion, “The natural effort of every individual to better his own condition…is so powerful, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.”

During “the age of Milton Friedman”, as Andrei Shleifer dubed it, key developments in economic freedom—deregulation in the US and UK, the collapse of communism in East and Central Europe, and the opening up of the economies of China and India—allowed individuals to surmount government meddling in the economy. From 1980 to 2005, there were marked, world-wide improvements in life expectancy, education, democracy, and living standards as integration into a world economy delivered billions of individuals from poverty, ignorance and squalor.

From 1980?  You know what happened at that time?  The era of Keynesian Big Government came to an end.  For awhile.  With the rise of Margaret Thatcher in the UK.  And the rise of Ronald Reagan in the USA.  Both were adherents to the Austrian school.  And because of that their nations exploded with prosperity.  Thanks to tax cuts.  And deregulation. 

Unfortunately, this began to reverse course around 2005.  Big Government began to return.  And it’s becoming bigger than it ever was.  We see this in declining Western economies.  And financial crises in these same Western economies (in Europe and the United States).  As they are imploding under excessive government spending.  And debt.

A setting of private property rights, free pricing, and accurate profit and loss accounting aligns incentives and communicates information so that individuals realize the mutual gains from trade with one another. Efficient markets are an outcome of a process of discovery, learning, and adjustment, not an assumption going into the analysis. That process, however, operates within political, legal, and social institutions. Those institutions can promulgate policies that block discovery, inhibit learning, and prevent adjustment, causing the market to operate poorly.

So rather than free market ideology being obsolete, what is needed is a reinvigorated ideological vision of the free market economy: a society of free and responsible individuals who have the opportunity to prosper in a market economy based on profit and loss and to live in caring communities. Yes, caring communities. The Adam Smith that wrote The Wealth of Nations also wrote The Theory of Moral Sentiments, and the F. A. Hayek that wrote Individualism and Economic Order also wrote about the corruption of morals in The Fatal Conceit. Our challenge today is to embrace the full scope of free market ideology so as to understand the preconditions under which we can live better together in a world of peace, prosperity, and progress.

Get government out of the private sector.  Let the private sector respond freely to market forces.  Be responsible.  And be kind to others.  Like they told us in kindergarten.

Keynesians don’t like the Masses, they just want to Rule over Them

Anyone looking objectively at the economy can see where the problem lies.  With government.  Their policies didn’t work in the Seventies.  And they’re not working now.  So why are they returning to failed policies of the past?  Because Keynesian policies grow government.  And those in government want to grow government.  For the money and the power.  And to stroke their egos. 

Keynesians are academics.  They have little real-life experience.  They didn’t run businesses.  Make payrolls.  They didn’t sell.  Or live on the other side of regulatory compliance.  Why?  Because they aren’t entrepreneurs.  They don’t have the ability to be creative.  So they elevate themselves above those who are.  To compensate for their inadequacies. 

They prefer privilege.  Entitlement.  Like the aristocracy in the Old World.  Where a good last name was all you needed for wealth and power. 

Just listen to them talk.  Their very words drip with condescension.  They don’t like the masses.  They don’t live with them.  They don’t vacation with them.  They don’t want to have anything to do with them.  Except to rule over them.  The way it should be.  In their world of privilege.

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FUNDAMENTAL TRUTH #79: “Tax cuts stimulate. Not tax hikes.” -Old Pithy

Posted by PITHOCRATES - August 16th, 2011

Government can only Spend what it Taxes away from the Private Sector

What stimulates?  Tax cuts?  Or tax hikes?  Ronald Reagan believed it was tax cuts.  But everyone one on the Left poo pooed Reaganomics.  ‘Trickle-down’ economics only stimulated rich people, they said.  Those on the Left prefer Keynesian stimulus.  Tax and spend.  To take some of that money the government pulls from the private sector.  And spend it to stimulate the private sector.

What did we learn from the great 2011 debt ceiling debate?  And the subsequent S&P credit downgrade?  This.  Government is spending beyond its means.  Those on the Left say this is due to insufficient taxation.  Those on the Right say we’re spending too much.  That’s neither here nor there for our purposes here.  I only mention it to emphasize a point.  Government can only spend what it taxes away from the private sector. 

For the government to stimulate the private sector economy, then, it must first tax money out of the private sector.  So let’s take a look at a proposed stimulus plan.  Let’s say the government revises the federal withholding tax rates so that there is a net 5% increase in the effective tax rate (tax revenue divided by income).  And let’s put these numbers into a chart like this:

 

Let’s say all numbers are millions of dollars.  The effective tax rate changes from 20% to 25%.  And tax revenue increases by $25,000.  (Effective tax in the above chart.)  That’s the additional amount they pulled out of the private sector.  That they will use for government stimulus spending.  Now the government has to process this.  Through a large bureaucracy.  Let’s say that these ‘overhead’ costs are 15%.  Subtract that from the stimulus amount.  And you have $21,230 left.  To stimulate the economy. 

So they pull $25,000 out of the private sector economy.  So they can inject $21,250 back into it.  Which means the net stimulus added is a negative $3,750.  That’s right.  They added money to the economy.  After removing a larger amount from it first.  And that’s Keynesian stimulus.

Keynesian Spending favors the Politicians, not the Private Sector

This is actually opposite of what a stimulus is supposed to do.  Which explains why Keynesian stimulus spending fails.  But it’s even worse than this.   Because those numbers above are for a best case scenario. 

They don’t take into account pork and earmarks that make up most of a stimulus bill.  Such as the Obama stimulus bill.  Which proved to be more a Democrat wish list of repressed wants for some 40 years than shovel-ready stimulus.  And the 15% overhead is something you see in the private sector.  Not in a government that pays $300 for a toilet seat.  So let’s factor these more realistic numbers in.

 

The numbers are much worse.  By increasing taxes 5% you actually pull 8.63% out of the private sector economy.  There is no stimulus.  That’s a net deficit.  And a lot of pork and earmarks for the politicians.  And to make things worse, this additional spending finds its way into baseline budgeting.  Which means that they increase the current deficit.  And all subsequent deficits. 

That doesn’t favor the private sector.  That favors the politicians.  Which is the goal of Keynesian stimulus spending.

The Beauty of Tax Cuts is that the Money doesn’t go through the Sticky Hands of Government

So we see that Keynesian stimulus favors the politicians over the private sector.  Is there another form of stimulus that actually favors the private sector?  As it turns out, yes.  Tax cuts.  Let’s look at cutting taxes instead of raising taxes. 

The beauty of tax cuts is that it doesn’t require the money to go through the sticky hands of government.  So a tax cut of $25,000 equals a stimulus of $25,000.  The money remains in the private sector.  And we pull no money out of the private sector.  So this is pure stimulus.

The net add to the private sector economy is 6.25%.  Which is 14.88% better than the Keynesian approach.  (Going from a 8.63% decrease to a 6.25% increase).  So it’s clear which way to stimulate is better.  It’s a no brainer.  So why don’t the diehard Keynesians admit defeat?  Simple.  Tax cuts don’t go through the sticky hands of government.

Tax Cuts stimulate the Private Sector, Keynesian Spending stimulates Government

The Keynesians will no doubt say this is an oversimplification of stimulus.  And it is.  But the fundamentals remain the same.  Government stimulus spending is funded by the private sector.  Either by higher taxes to pay for the stimulus.  Or by higher taxes to pay for the cost of borrowing the stimulus.  And if the government just prints the money for the stimulus, a depreciated dollar makes everything cost more in the private sector.  Whatever they do the private sector will lose in the long run.  Because they ultimately pay the bill.

Tax cuts don’t have this affect.  Because you don’t have to pay for tax cuts.  The money never belonged to the government in the first place.  So they don’t have to pay for it.  The private sector just gets to keep what is rightfully theirs.  But the Keynesians will cry that if you cut taxes you will increase the deficit.  Yes, you may.  But no more than you would by borrowing money to pay for Keynesian spending.  Either way the government is spending beyond its means.  The government should cut spending.  But if they don’t, they should at least pick the option that will stimulate the economy.  The option that grows the economy.

The goal of stimulus is to stimulate economic activity in the private sector.  And as the exercises above show, the best way to do that is to leave more money in the private sector.  Not less.  Tax cuts stimulate the private sector.  Unlike Keynesian stimulus.  Which only stimulates government.

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LESSONS LEARNED #78: “It’s a dishonest politician that sneaks sneaky legislation into a bill.” -Old Pithy

Posted by PITHOCRATES - August 11th, 2011

The Obama Stimulus Bill was mostly Democrat Pork and Earmarks

The American Recovery and Reinvestment Act of 2009 was a huge stimulus bill to create jobs.  And put people back to work.  It cost about $800 billion.  And it didn’t work.  Some say it didn’t work because it wasn’t big enough.  Others say it didn’t work because it wasn’t stimulus but rather a 40-year Democrat wish list of pet projects.  Which the Democrats could finally enact having control of the House, the Senate and the White House for the first time in a long time.  And they took control of this bill.  As Nancy Pelosi said, “We won the election. We wrote the bill.”

So what’s in the bill?  Well, President Obama said it would contain no pork.  No earmarks.  Just spending that would create ‘or save’ jobs.  Like infrastructure projects.  Rebuilding America’s roads and bridges.  But according to the Wall Street Journal, “Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects.”  They further note that of all the spending in the bill little would actually create jobs.  About “12 cents of every $1…even many of these projects aren’t likely to help the economy immediately.”

Take high-speed rail, for example.  The Washington Post noted the bill included “$8 billion for high-speed rail projects, for example, including money that could benefit a controversial proposal for a magnetic-levitation rail line between Disneyland, in California, and Las Vegas…”  One thing about big rail projects, they don’t stimulate.  Building railroads takes a long, long time.  The higher the speed, the longer the time.  Because high-speed trains have more costly infrastructure.  And dedicated track.  With no grade crossings.  And before you build anything you have to do environmental impact studies.  Then survey the entire route.  Then, once you have a proposed route, you can begin the engineering.  It could be years before any ground is broken. 

If any ground is broken.  Because currently high-speed rail is all pie in the sky.  Only two lines to date operate at a profit.  One in Japan (Tokyo to Osaka line).  The other in France (Paris to Lyon line).  All others require government subsidies in one form or another.  Because these are costly to build.  And costly to maintain.  So this is stimulus that won’t stimulate.  But it will set the stage for greater future government spending.  Making it more pork than stimulus.  Snuck into the bill by the Senate.  When the House bill went to the Senate.  For their turn to steal from the treasury.

Only Schools with Union Teachers did well in Stimulus Bill

The stimulus bill also included $90 billion for the Department of Education.  But language in the bill restricted the use of that money.  Quoting from the Wall Street Journal, “the House declares on page 257 that “No recipient . . . shall use such funds to provide financial assistance to students to attend private elementary or secondary schools.””

In other words, only schools with union teachers may use this money.  Dues-paying union teachers.  And the teachers unions support Democrat candidates.  Which makes this not quite stimulus.  But politics.  Profitable politics at that.  As some of this stimulus money will make it back to Democrat coffers thanks to those union dues.

According to Certification Map, education received some $90 billion in stimulus money.  And their website breaks down the spending:

  • $44.5 billion in aid to local school districts to prevent layoffs and cutbacks, with flexibility to use the funds for school modernization and repair (State Equalization Fund)
  • $15.6 billion to increase Pell Grants from $4,731 to $5,350
  • $13 billion for low-income public school children
  • $12.2 billion for IDEA special education
  • $2.1 billion for Head Start
  • $2 billion for childcare services
  • $650 million for educational technology
  • $300 million for increased teacher salaries
  • $250 million for states to analyze student performance
  • $200 million to support working college students
  • $70 million for the education of homeless children

For a bill not containing any pork or earmarks these look a lot like pork and earmarks.  I mean, they sure ain’t ‘shovel-ready let’s rebuild the infrastructure jobs’ like we were led to believe.  Sure, they may ‘invest in our future’ so we may ‘win the future’, but it doesn’t create jobs like a stimulus bill is supposed to do. 

This isn’t stimulus.  These are just Democrat pet projects.  Added to the bill in a moment of crisis.  To take advantage of the crisis.  To get the things they’ve been unable to get during the normal legislative process.

Never let a Serious Crisis go to Waste when Writing a Stimulus Bill

When you look at the bill this is what most of it is.  Just a bunch of Democrat pet projects.  Passed when they still had control of both houses of Congress and the White House.  And a delicious crisis.  For as Rahm Emanuel said, “Never let a serious crisis go to waste.  What I mean by that is it’s an opportunity to do things you couldn’t do before.” 

Sure, they’ve always hidden things in bills before.  But rarely does $800 billion of free spending come along.  They weren’t going to attach this pork to a bill.  This pork was the bill.  And it included a little bit of everything.  Including green energy.  Green Chip Stocks list this spending on their website:

  • $2.5 billion for energy efficiency and renewable energy research
  • $1 billion energy efficiency programs including energy-efficient appliances and trucks and buses that run on alternative fuel
  • $4.5 billion to boost the energy efficiency of federal buildings
  • $6.3 billion for energy efficiency and conservation grants
  • $5 billion to weatherize old buildings
  • $2.3 billion in tax credits for energy efficiency technology manufacturers

Last time I looked ‘research’ was not a ‘shovel ready’ project.  Neither are alternative fuel programs.  Or federal renovation projects.  Or the government granting process.  (It takes forever and a day for construction projects to start when there is federal money involved.)  And tax credits only help a few people work so they can build things that won’t sell at market prices.

Again, not stimulus.  But pork.  Earmarks.  Despite everything they told us. They weren’t going to create jobs and fix the economy.  They were settling their political accounts.

Democrats took Advantage of a Crisis to sneak Pet Projects into Law

This shameless Democrat spending spree (remember what Nancy Pelosi said – “We won the election. We wrote the bill”) helped to push the deficit into record territory.  Which caused S&P to downgrade our credit.  All because the Democrats took advantage of a crisis to sneak a lot of their pet projects into law.

It just goes to show you that you shouldn’t trust politicians.  And, based on the American Recovery and Reinvestment Act of 2009, you should especially not trust Democrats.  For they are quite sneaky.  And often don’t do as they say.  For the stimulus bill wasn’t going to have any pork or earmarks.  But in reality about 88% of the bill was nothing but pork and earmarks.  Which is a lot more than none.

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Democrats get Liberal Arts Degrees because there’s less Math Required

Posted by PITHOCRATES - May 25th, 2011

Mathematically Challenged when it comes to the Stimulus

You know it’s pretty bad when they can’t project a spending amount correctly when they themselves determine the amount (see Stimulus price tag once again lurches higher by Stephen Dinan posted 5/25/2011 on The Washington Times).

Congress’s chief scorekeeper said Wednesday that the price tag on President Obama’s stimulus law has risen once again, this time to $830 billion — or more than $40 billion more than first projected…

When it passed, the stimulus was expected to cost $787 billion over 10 years, with most of that being front-loaded. But the CBO has regularly adjusted that cost — usually upward — and now says the 10-year price tag will be $830 billion. That’s a $9 billion jump from the last estimate in February.

When you say you’re going to give everyone quality yet affordable health care you know there are a lot of guesstimates in the proposed price tag.  No one knows what the future holds.  So you know that actual costs are going to exceed whatever they project.  Because they can’t even guess the number right when they set the number themselves.

Imagine the stimulus bill as your grandparent coming over and giving you $20 so you can go out and buy something.  The grandparent gives you one of his or her $20 bills.  When your grandparent goes home that day, he or she has $20 less.  He or she spent $20.  A week later that spending was still $20.  A year later that spending was still $20.

You’d think that if the government put $787 billion into a fund for stimulus spending that they’d spend that money until that $787 billion was gone.  Simple, yes?  Instead, they accidentally spent more than they said they would.  It’s like they’re taking a test from a school textbook.  Only they have a teacher’s edition.  With the answers next to the questions.  And they still get the answers wrong.  Doesn’t give you much confidence in their number crunching abilities.

Republican Sponsored Tax Cuts Stimulated the Clinton Years

But those in Washington were always a little fuzzy with their math.  When they crunch the economic numbers for the Nineties, they show how higher taxes spurred economic activity (see The Graph That All Tax Hike Mystics Need to Grapple With by Romina Boccia and Curtis Dubay posted 5/25/2011 on The Foundry).

Economic growth was so impressive in the latter half of the ’90s, in fact, that some claim the Clinton-era tax hikes spurred the economy to prosper…

The data tell a different story. Growth in the first half of the decade following the Clinton tax hike was clearly subpar, and real wages actually fell. The economy didn’t take off until later in the decade, and not coincidentally after a 1997 Republican-sponsored tax cut.

Remember that Clinton‘s first term wasn’t a very good one.  Though he campaigned as a moderate, he governed as a liberal.  Remember Hillarycare?  The secret meetings to take over and nationalized U.S. health care?  That didn’t go over well with the voters.  The Democrats lost the House of Representatives at the midterm election.  And it was the republicans that yanked him back to the center.  And pushed for tax cuts.

As the Heritage chart shows, a closer examination of the economic growth data during the Clinton era reveals a very different story than the one Ezra Klein and the CBPP told. Despite the unusually favorable economic environment during the period, the Clinton tax hikes likely dampened real output and real wage growth. Economic growth, measured as real Gross Domestic Product (GDP), was a moderate 3.3 percent in the period from 1993 through 1996, and real wages actually fell for the entire period. In contrast, the 1997 tax cuts, which significantly lowered the capital gains tax rate, coincided with a period of strong business investment, strong real GDP growth at 4.4 percent, and strong real wage growth of 1.7 percent.

Before the Republican takeover of the House GDP did rise.  But real wages fell.  After the Republican takeover, both GDP and real wages rose.  Proving again tax cuts makes life better for the people.  Not tax increases.

The principles of economics still hold: If you make something more expensive, you get less of it. Taxes on capital and labor, ignoring all other factors, reduce economic and real wage growth. The real story of the Clinton-era tax changes is that the 1993 tax hikes resulted in slower economic growth than expected, while the 1997 tax relief unleashed economic and real wage growth—and a cottage industry of liberal history re-writes.

The numbers are all there.  Anyone can check them.  Just like the economic data from the Reagan years.  But the facts don’t help those who want to buy votes with continued spending.  So they rewrite history.  And belittle anyone who dares to disagree with them. 

Fuzzy, Pragmatic Math

When it comes to the economy, there are some like Raymond in Rain Man.  Brilliant people with their Ivy League degrees.  But put a dollar sign in front of something and they will inevitably get it wrong.  Like they did with the stimulus bill.  With Reaganomics.  With the Clinton years.  As they will get it wrong with Obamacare.  You see, their math has political ends. 

Their math is pragmatic.  It’s fuzzy.  So it can add up differently as needed.  In their world, the ends justify the means.  They want to raise taxes so they can spend and social engineer.  So the facts don’t mean what they appear to.  A low unemployment rate is too high under Reagan and Bush.  While a higher unemployment rate is not that bad under Obama.  A $200 billion deficit is too high under Reagan.  A $1.4 trillion deficit is not that bad under Obama.  And we can’t afford tax cuts for the ‘rich’ but we can afford to give everyone health care.  In short, anytime the flow of money increases from the people to Washington it’s a good thing.  Whenever that flow decreases it’s a bad thing.

That’s why getting the stimulus amount wrong doesn’t bother them.  Or that Obamacare will cost far more than they said it would.  Because both have or will increase the amount of money flowing from the people to Washington.  And that’s always a good thing in their pragmatic world.

www.PITHOCRATES.com

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