Posts Tagged ‘spending’


The New Obama Honeymoon

   Posted by: Robert    in News

News reports out of Washington yesterday continue to be deeply disappointing for anyone who believes, even a little bit, in spending cuts and deficit reduction.  Apparently seeking some version of prudence in putting off the debt ceiling fight until they can better make the case for spending cuts, Republicans have given Obama a blank check with a sticky note asking to talk to him about it later.  This strikes me in every way as being yet another example of Republicans giving Obama and the Democrats almost everything they want, in exchange for… I have no idea what.  It’s really starting to look as if the Republicans in Congress have completely lost their minds.

If there is a single upside to what the Republicans have managed to accomplish, it’s to lay bare once and for all the farce formerly known as the debt limit.  As a trip point for political and media chaos, the debt ceiling was an unbelievably potent tool.  Every few months for the past few years, we’ve had this highly compressed political dance of talking about the government running out of money and how we need to get serious about reducing the deficit.  At the end of the day, though, the whole thing ended up being nothing but political theater after the first couple of rounds made it obvious that Republicans would always blink first in the game of financial chicken.  When you get right down to it, the debt ceiling has been effectively unlimited for years.

By always being the side that blinks, Republicans have done an exceptional job of losing all credibility in the recurring battles over deficit reduction.  Everyone knows that when the going gets tough, the GOP backs down.  And while they used to at least frustrate the Democrats a little bit in their compromises, the fiscal cliff and debt ceiling “compromises” have been nothing but capitulation in exchange for trivialities.

Behavior like this is exactly why conservatives have no faith in Republican candidates and it is precisely why Republicans have so much trouble turning out their base.  Low conservative turnout for elections is a vote of no confidence in the Republican party.

As I’ve said before and will say again, when Republicans do the things that they say, they are unbeatable on the economy.  Republicans won huge in 2010 on a platform of economic issues.  Romney beat Obama handily among economy-oriented voters.  Americans want deficit reduction, debt reduction, and spending cuts.  The GOP doesn’t need to take their time to prepare that message; they have done that successfully.

What Republicans need to do is start acting like they believe in any of it.

And so as I understand it, May will come and with it will come the expiration of the unlimited debt ceiling.  The media, which will have ignored five more months of Republicans attempting to talk about spending cuts, will once again get all amped up over the financial crisis du jour and put Republicans back on their heels with cries that the GOP wants to cut off America’s financial legs.  Republicans, having never tried to spread their message by any means other than the mainstream media, will have no choice but to extend the unlimited debt ceiling again, while promising future talks about spending reduction, “for real this time, you guys!”  And so it goes, and so it goes…

Until the country plunges to its doom.

Tags: , ,


Re: Can the Federal Government Really Create Jobs?

   Posted by: Robert    in News

Over on Time Magazine, Barbara Kiviat asks the question, “Can the Federal Government Really Create Jobs?”  The answer she comes to is a bit surprising, in that it’s as close as I can imagine anyone from a major news outlet other than Fox News will come to saying that Obama is on a fool’s errand with his latest push to create new jobs.  In an article which is compellingly lucid, Ms. Kiviat concludes that “there are few obvious steps for a government looking to create jobs.”  Along the way, she things which are interesting, and which are certainly worth a closer look.

If we want firms to go out and hire, why not give them an economic incentive to do so? This could be done by flat-out paying companies to hire, or by reducing their share of payroll taxes (the money that gets withheld from workers’ paychecks to pay for Social Security and Medicare). Either way, adding a new worker becomes cheaper.

A position such as this one fits extremely well with what we know of the remarkable benefits of reducing taxes on businesses.  As we have seen repeatedly throughout history, lower taxes lead to a healthier and more productive economy.  There is, however, a noteworthy difference between lowering taxes and “paying companies to hire.”

Lowering taxes provides a sustainable benefit to businesses which they can rely on and pass along to employees in the form of greater hiring, higher wages, or to consumers in the form of lower prices.  “Paying companies to hire,” however, provides no such sustainable benefit.  Giving an incentive to hiring may cause a sudden rise in hiring, but it also keeps the tax burden high (indeed, probably higher, to pay for the payments) and encourages companies to hire people for terms which are effectively temporary, only permanent enough to qualify the company for the benefit.  Companies may profit, at the expense of greater noise in the job market and few new long term jobs.

Of course, what is certain is that the Texas approach of raising unemployment taxes is nowhere close to the right answer.  For companies which are already having trouble making payroll, adding additional costs will only further push businesses past the red line and generate further layoffs.  For companies that are uncertain whether or not to hire employees, the greater tax places a definite thumb on the “no” side of the scale as the penalty for overestimating their labor needs increases.

The conundrum: demand in the U.S. is overwhelmingly consumer-driven and people need to have jobs to feel like it’s once again safe to spend money. It’s a classic chicken-or-egg problem. Direct hiring by the government could, theoretically, sidestep the impasse. The question then becomes whether such a program creates more economic benefit than it does economic inefficiency by having the government dictate job creation. Consider that one criticism of the WPA was that it prevented people from moving to jobs where they would have been more economically productive — and actually slowed down the post-Depression recovery.

Much has been made throughout the recession of this so-called “chicken-or-egg” problem being a disaster of contrary incentives resulting in a death spiral to total economic collapse.  At every step along the way, that “conundrum” has been a justification for invasive government action: The only economic rules the federal government needs to follow are the ones that it doesn’t feel like ignoring.  By spending when nobody in their right mind would spend, by hiring when nobody in their right mind would hire, the government is in a unique position to prime the economy.  Or so the argument goes.

But like all good paradoxes, there are two sides to this story.  While the stock market downturn may have been a disaster for people who recently retired or who intended to retire in the near future, it was a boon to a younger generation of investors who are just beginning their economic journey.  In the age old adage of “buy low, sell high,” what better time could there be to buy than at the bottom of a recession?  What better time could there be for hiring than when labor rates are low?

In a free market, one person’s problem is another person’s opportunity.  As prices fall and investment becomes more attractive, new investors enter and prices eventually level off.  As the private sector creates value, that value fuels future growth in the economy.  From future growth comes future jobs, and long term recovery.

The government, by contrast, cannot participate in that process.  They produce no goods and they provide few services. Every dollar the government spends paying its employees came from taxing the private sector; taxing companies which could have given that person a productive, value creating job.  The idea of government hiring to create jobs is a broken window fallacy: Instead of having an employee who makes suits, you merely have an employee.  Nobody is better off.

Tags: , , ,


Jobs Saved?

   Posted by: Robert    in Uncategorized

Life is good for the federal government when they can make up whatever numbers they want to track the success of their stimulus money.  In an article which is making its way arond the news, it appears that the stimulus has created or saved around 650,000 jobs.  Though that sounds impressive, I am forced to wonder exactly what we have gotten for our money.

The new data released late Friday represents 156,614 federal contracts, grants and loans awarded to more than 62,000 state and local governments, companies, school districts, universities, non-profits worth a total of $215 billion.

So, that means 650,000 jobs were created on the basis of $215 billion in government spending.  Using simple division, that means each job cost the US government — and us, the taxpayers who are footing the bill –$330,769.23 per job.

Now, while $330k may sound like a pretty small sum of money to Wall Street tycoons, members of Congress, and the lovely Mr. Madoff, that is a rather large sum of money for the average American.  Recalling that the stimulus money was (supposedly) aimed at construction oriented infrastructure projects make the money per job seem even more excessive.  Even at union wages, I’ve never heard of a construction worker who makes that kind of money.

So where on earth is it all going?

Tags: ,


Stimulating Seniors

   Posted by: Robert    in Politics

Once again it appears that Obama is preparing to redistribute taxpayer’s money to a favored constituency, budget deficit or not.  The next stop on the Obama Money Train, it appears, are senior centers and nursing homes around America where he will come riding in with a pile of $250 checks, totaling to $13 or $14 billion worth of increased debt depending on who happens to be counting.  The move is already being applauded (of course) by seniors groups and the AARP, and has the support of top Democrats in Congress.  If the Associated Press is to be believed, it looks like there’s even Republican support, though they’re at least (pretending to be) looking at the increase in deficit spending with concern.

The money handout comes, supposedly, as a result of the formula used for calculating annual cost of living adjustments (COLA) for Social Security dictating that there would be no increase in payouts this coming year. COLA is based explicitly on inflation and is intended to make sure that the purchasing power of payments to beneficiaries will not diminish over time.  Falling gas prices and a stale economy have actually caused a slight bit of deflation over the course of the past year.  To offset the lack of an official increase from COLA, Obama apparently wants to give away $250 to “senior citizens, veterans, retired railroad workers and people with disabilities.”

Looking over the list of recipients reveals an interesting collection of intended payees.  Senior citizens are obvious recipients as they are the primary beneficiaries of Social Security.  People with disabilities also make sense, because many of them are eligible for Social Security as well.  The payment to veterans is a little surprising; I wouldn’t have thought that they are on Social Security any differently than the rest of us, though many do get government pensions.  And then there are the retired railroad workers; where did that come from?  Plus, looking over another article, it looks like maybe all retired government folk (and railroad workers) might actually receive the benefit, whether they qualify for Social Security or not.

I wonder how many other favored constituencies might be added to the list before it’s all over.

Of course, the correct number to add is something on the order of negative four.  COLA is meant to maintain a level of purchasing power for Social Security beneficiaries, not to be a perpetually increasing rate of wealth redistribution from the young to the old.  We should be thankful, in fact, for the stagnation, as it increases seniors’ purchasing power without driving the program closer to its already impending bankruptcy.

As for the notion mentioned in the article that seniors deserve more because the cost of drugs has gone up, why is the payout not $250 to everyone who buys prescription drugs?  If that was really the concern, tying the money to drug purchases is the only logical way to address it directly.  Of course, the cost of drugs is being handled a different way: Medicare D is seeing an increase, which will serve to offset the (supposedly) skyrocketing cost of prescription drugs.

It is probably to anyone’s political turmoil to vote against this latest round of absurdity.  Nevertheless, seniors are going to get exactly what they deserve under the law.  There is nothing unfair about honoring a standing agreement.  It is, however, quite unfair to the younger generations to siphon their money and change the rules at a time when wallets are already tight and nearly one in ten members of the working population is not actually working at all.

Tags: , ,


Change: Doing lots more of the same thing

   Posted by: Robert    in News

I came across a video today of part of a press conference given a couple of days ago by Obama regarding the stimulus bill currently working its way through Congress.  While I am certainly no fan of nearly anything he had to say and I continue to believe that the American Recovery and Reinvestment Act needs to be euthanized as quickly as possible, what caught me as most interesting were some of the specific arguments Obama made to justify the scope and character of the bill.  I was stunned that people would applaud arguments which effectively amount to saying that past excesses which Obama could not control justify the present excesses which Obama quite possibly can, particularly with those arguments coming from the man who has not been shy about telling us that he was elected on the winds of change.


When they say, “Well why are we spending $800 billion, we have this huge deficit,” first of all, I found this deficit when I showed up, number one.  I found this national debt doubled, wrapped in a big ball waiting for me when I walked into the Oval Office.

In this, Obama points out that the country does hold a rather large debt burden for which he became responsible on Election Day.  The tenor of his line and the response that he gets from the crowd show clearly that what he just said was meant to be a negative statement and a dig at Bush.  The negativity of this line is confirmed on Obama’s website which cites “Increasing Debt” as being a “Problem” which he campaigned to address.  I am uncertain how complaining about a doubling of the national debt under eight years of Bush can support an additional 9% increase in Obama’s first month.

Then there’s the argument, “Well, this is full of pet projects.” When was the last time that we saw a bill of this magnitude without earmarks in it? Not one.

So too here does Obama cite prior bad practices to justify another round of more of the same.  It is difficult at this point to recall any recent bill which hasn’t had earmarks of some sort attached to it.  This has, of course, been cited as a problem by pretty much everyone; Bush, Pelosi, McCain, and Obama have all said at various points that all of the earmark spending is ridiculous.  Yet, here the charge that this bill has gathered too many earmarks is basically dismissed as being the product of people who do not know how things work in Washington.  It’s what always happens, so why should it be a problem now?

Although I suppose that it technically qualifies, I don’t normally consider doubling down to be much of a sign of change.  I grow tired of hearing people defend the same exact things they previously denounced simply because it is a Democrat rather than a Republican who happens to be in charge.  But to hear past misbehavior used to justify current misdeeds is folly of the highest order.

Tags: , ,