Will Obama’s Stimulus Plan Work?
Barack Obama and his congressional allies are gambling that the largest public spending program since World War II and a new round of tax cuts will pry the U.S. economy from the recession’s iron grip and avert another Depression.
But what if they’re wrong?
Some conservative economists say that additional stimulus may only prolong the grief at best, triggering runaway inflation down the road and resulting in an even more bloated federal bureaucracy.
“I think the economy will recover regardless of what Washington does. But the long-term effect here will be to reduce the standard of living of the next generation because they will be saddled with all this debt,” said Chris Edwards of the libertarian-leaning Cato Institute.
Even without the new spending proposed by Obama, the U.S. has a $1.2 trillion budget deficit this year, he noted. “If that isn’t already enough of a Keynesian stimulus, what is?”
Early 20th-century British economist John Maynard Keynes argued that the government should intervene to avoid depressions by increasing its own spending and controlling interest rates. President Franklin D. Roosevelt based many of his New Deal spending initiatives on Keynesian theory.
But not all economists and politicians subscribe to that world view.
While there is broad support for some kind of major stimulus, the skeptics offer this as Exhibit A: The trillions hurled at the problem last year by Congress, the Bush administration and the Federal Reserve have yet to yield many tangible results.
Unemployment continues to climb, reaching a 16-year high of 7.2 percent in December and is expected to keep on rising through 2009. U.S. manufacturing remains in a serious slump. The decline in consumer spending in late 2008 is expected to continue.
I don’t believe this is going to work…at all. Significant amounts from the stimulus will go to “healthcare reform”, “education” and “roadbuilding”. Healthcare and education will do nothing to stimulate the economy in the short term (maybe education will do it over many years, but that’s a stretch). Roadbuilding is temporary employment at best and will also do little.
If we are continuing as a consumption-based economy, the best place for stimulus money is in the pockets of consumers.
Posted by Steve on January 18, 2009 at 0946 hrs
If we are continuing as a consumption-based economy, the best place for stimulus money is in the pockets of consumers.
Couldn’t agree more.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 0949 hrs
I was all for this stimulus plan until I read the breakdown details in USA Today this past Friday.
Based on the rhetoric we’ve heard for the last two months, how much of the $825 million do you think will go to “infrastructure”? How much to “rail” like Doyle talked about?
What about Obama’s talk of using the money to get energy independence? Converting auto plants to build wind turbines?
Well the answers are stunning. Only $90 billion to infrastructure. As a subset of that is $10 billion for “rail”. Only $58 billion for energy projects.
The rest? All giveaways to fund existing federal government programs pretty much or give away rebate checks to people. The details are here.
http://www.usatoday.com/money/economy/2009-01-15-obama-stimulus-plan_N.htm
This is not an “Investment in America”. This plan as currently written is using the federal government’s credit card to finance a ski vacation.
Do something bold you idiots. Enact the Picken’s plan and build the wind turbine farms in the West. Build a high speed rail grid across the country like Eisenhower did with the interstate highway system. I’m hoping whatever opposition is left can point out what a joke this bill is.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1024 hrs
Yeah, look at all the “stimulus” spending that was wasted during Roosevelt’s adminstration. The depression would have ended without creating all those ditch-digging jobs and entitlement programs. Who needs all those national park lodges built by the Civilian Conservation Corp? It was temporary employment at best and did little. And spending government money to electrify rural America was an even bigger waste—there were very few jobs out in the country that require electricity. The Democrats just used the depression as an excuse to turn this country into a socialist state, with social security and medicare making us all dependent on the federal government. Surely we would be better off today if those indigent people had been allowed to fend for themselves or die without reproducing. No wonder we’re the fattest, laziest nation in the world.
Posted by Ordinary Jill on January 18, 2009 at 1027 hrs
Jill,
Read where the money is going. The majority of it is not going to do FDR type infrastructure projects.
I’m conservative and could be all for this if it was going for those things. But it apparently is not. It seems like we’re basically just ensuring that people can continue to have the premium cable package.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1040 hrs
I’m a lot less interested in the tax cuts than I am in the government spending projects. I know it plays right into the hands of conservatives who decry Democrats as government-increasing devils, but I honestly believe that this is the most effective part of the stimulus plan. I’m perfectly willing to defer my middle-class tax cut for the government-paid infrastructure programs.
Posted by scott on January 18, 2009 at 1137 hrs
You’re kidding, right, Scott? Tell me how that works to get a consumption driven economy back on its’ feet in a short period?
Posted by Steve on January 18, 2009 at 1203 hrs
It would be one thing if the government cut it’s wasteful spending while providing a stimlus package, but they are not doing that. You have a double edge sword, waste in government spending and a stimlus spending. I can only see 2 things happening- higher interest rates and inflation or a collapsing economy.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1304 hrs
I’d bet on collapse.
Posted by Steve on January 18, 2009 at 1310 hrs
But what if they’re wrong?
The easy answer is,
What if they are right?
And Steve once again wins the most detached from reality award for;
If we are continuing as a consumption-based economy, the best place for stimulus money is in the pockets of consumers.
How do you think we got here?
Remember the stimulus money is just more borrowed money.
Buried in all this is the simple fact that we are just meeting a margin call.
But that would be politically impossible to swallow.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1352 hrs
Steve is right in that if you believe in the consumption economy then this package contains little to change the current situation.
On the other hand if you believe we need to get away from the consumption economy then this plan contains nothing at all, just more pork.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1358 hrs
“What if they are right?” No evidence to point to that, is there? We just threw in about a trillion dollars and it just got worse. Other countries have also put in billions and billions or dollars and nothing good has happened that is positive. The only thing we have so far is they spent the money and no one knows where the money went to.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1401 hrs
if you believe in the consumption economy
Aren’t all economies about consumption?
You know that little thing called demand?
If we are talking about consumer based consumption?
Who besides Kudlow, Laffer and a few other imbeciles believes that is going to get us out of this?
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1408 hrs
On the contrary, pjr. It’s ALL borrowed money. Of coursee there’s no value in any of it. It’s the middle man in a barter system. But I digress and as usual, you miss the point entirely.
So what is your alternative? continue to throw money down a Federal Pork Rat Hole? Give money to Jim Doyle to throw at WEAC and and the SEIU? You’re just pathetic. Don’t tell me I’m “detached from reality” if you don’t have an alternative.
Posted by Steve on January 18, 2009 at 1408 hrs
Not all economies are consumptive. North Korea is not. Cuba is not. Centrally-planned economies generally aren’t.
Posted by Steve on January 18, 2009 at 1411 hrs
No, all economies are not about consumption, pjr. A good chunk of the world in fact produces more than it consumes.
We have swung too far to towards consumption in our economy. All we need do is reduce our consumption and invest more. That will cause a great deal of short term pain, but ultimately that solution is going to be forced upon us anyways so we may as well get on with it and not make the situation any worse in the meantime.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1414 hrs
No evidence to point to that, is there? We just threw in about a trillion dollars and it just got worse.
First of all it is way over a trillion.
TARP and I believe most of the steps that have been taken up until now have been to make up for lousy business decisions by the guys who have been benefiting the most.
Look at this B of A/ML baloney.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1416 hrs
I also disagree with most of the decisions that have been made until now, but Paulson’s plan did have some theoretical merit and it can easily be argued that it was desirable to err on the side of having too much liquidity in the economy.
Most of what came before, however, was sold with the caveat that we needed to get our financial houses in order both privately and publically. The private side is beginning to take that step. Private spending is down, savings is up.
The public side is going kicking and screaming and threatening to drag everyone else down with them.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1423 hrs
So we should have let them fail? (I think so)
Come on, pj…what’s your alternative? You continue to criticize, but offer nothing
Posted by Steve on January 18, 2009 at 1423 hrs
Not all economies are consumptive.
No one consumes anything there Steve?
No, all economies are not about consumption, pjr. A good chunk of the world in fact produces more than it consumes.
Gee BBB what do they do with that excess production?
How does an economy that only has a supply side exist?
Or better yet why?
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1423 hrs
BV - your are correct. the biggest problem is bloated governmental bureaucracies.
Posted by Steve on January 18, 2009 at 1424 hrs
I’m going off to watch football. pjr, your ignorance is killin’ me.
Posted by Steve on January 18, 2009 at 1426 hrs
You continue to criticize, but offer nothing
Are you serious?
I have written strongly and consistently against all this bailout stuff since it became part of our reality.
Where have you been?Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1429 hrs
They export that production, pjr, and in return they get currency that they hope will not be devalued.
It is not possible, however, for one nation to forever run a production defecit. The value of a nation’s currency is ultimately dependent on its’ ability to produce.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1430 hrs
I’m going off to watch football.
And that is the most intelligent thing you have said all day.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1432 hrs
They export that production, pjr, and in return they get currency that they hope will not be devalued.
And why pray tell do they get currency for that production?
It is not possible, however, for one nation to forever run a production defecit.
You can’t blame us for trying, right?
The value of a nation’s currency is ultimately dependent on its’ ability to produce.
Always?
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1437 hrs
They get currency for that production because they sell it.
Yes, I can blame us for trying.
In the long term, always.
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1439 hrs
They get currency for that production because they sell it
.
Isn’t that the consumption part?
Who’s on first?
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1449 hrs
Exported, pjr. A few too many beers, perhaps?
Posted by .(JavaScript must be enabled to view this email address) on January 18, 2009 at 1453 hrs
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