We're getting snookered. This is bad. Who remembers the "Troubled Assets Relief Program" (TARP), 700 billion in spending approved just months ago? Well, that's not interesting anymore. Silence on TARP. Now another 800 billion from the latest American Recovery and Reinvestment Bill. This will work!
TARP was supposed to right the ship. That's how it was sold, to the sceptical public (remember?). And yet, no discussion anymore, nothing. And now a new bill presumably because we have a new administration (TARP was Bush, and therefore failed), and it's another 800 billion. What about TARP? Sold to us in the same way: huge spending necessary to avert disaster. Months later we can't even remember what happened to the money, or why it was approved.
In the meantime our debt grows to proportions never seen before, and our elected officials play these games with the public. Why not, the public has a short memory...
Tuesday, February 10, 2009
Monday, February 9, 2009
The Great Gamble (or, the dangers of spending)
I thought Obama did a good job tonight, in particular in explaining how projects (e.g., green energy projects) serve dual purposes as job creators, along with providing longer term benefit later. This is of course the argument for the 1950s era infrastructure spending: repairing a bridge creates jobs today, and creates repaired bridges tomorrow.
An AP fact check on "pork" was a little deflating. But what the heck, Obama is a politician. And I thought he was pretty persuasive, and stopped the momentum of the Republicans, who I've argued previously have settled in to a minority role as the fact checkers themselves.
And, reality check, no Republican support in the House and little in the Senate is to be expected. They got voted out of office for being big spenders. Tells us something about the American electorate; like, if the stimulus bill is perceived to fail, say hello again to the GOP. Spending is politically dangerous. 800 billion dollars is potential political suicide. The deficit is massive thanks to the Republicans and soon to be more massive thanks to the Democrats. The Democrats had better hope they understand how to stimulate the modern economy, at least get it in the ball park, or Obama's a one term president. I hate to be Machiavellian, but it really is dangerous to write such a fat check against the American tax payers unless you've got good reason to expect success. I don't agree with the do-nothing strategy (I've said in prior posts, let's try to optimize job creation by sector), but in pure political terms this may in fact be the beginning of the new Republicans. Massive spending on top of a trillion dollar deficit is tricky business, especially when you're navigating the murky waters of the future global economy.
An AP fact check on "pork" was a little deflating. But what the heck, Obama is a politician. And I thought he was pretty persuasive, and stopped the momentum of the Republicans, who I've argued previously have settled in to a minority role as the fact checkers themselves.
And, reality check, no Republican support in the House and little in the Senate is to be expected. They got voted out of office for being big spenders. Tells us something about the American electorate; like, if the stimulus bill is perceived to fail, say hello again to the GOP. Spending is politically dangerous. 800 billion dollars is potential political suicide. The deficit is massive thanks to the Republicans and soon to be more massive thanks to the Democrats. The Democrats had better hope they understand how to stimulate the modern economy, at least get it in the ball park, or Obama's a one term president. I hate to be Machiavellian, but it really is dangerous to write such a fat check against the American tax payers unless you've got good reason to expect success. I don't agree with the do-nothing strategy (I've said in prior posts, let's try to optimize job creation by sector), but in pure political terms this may in fact be the beginning of the new Republicans. Massive spending on top of a trillion dollar deficit is tricky business, especially when you're navigating the murky waters of the future global economy.
Saturday, February 7, 2009
Obama, Pragmatist?
Gail Collins offers in the NYT today an apology for Obamaites, attempting I assume to both placate and wisen them up. I'm hardly worried about Obama's presidency this early on, but it is interesting how public support has slipped both for him (from 80s to 60s, though this is typical), and for the stimulus bill which, if not passed, he's declared could lead to economic catastrophy. Wow. What happened?
Here's the problem. Obama won office with promises of change in Washington. Within weeks, Democrats like Nancy Pelosi crafted a spending bill that even the down-and-out Republicans found big holes to poke and big political points to gain. It's not that the Republicans were that brilliant, mind you. The House bill was just that bad. In other words, weeks after Bush exits and change enters, it's more politics as usual. The initial House stimulus bill was so embarrassing that Obama contacted Pelosi, requesting removal of funding for contraceptives and resodding of the White House Mall. Good for him.
Even so, large swaths of proposed spending are still earmarked for goverment and health care sectors, which are suffering about a third of the unemployment that is wreaking steady havoc on manufacturing and construction. It's hard not to recognize the tension with, on the one hand, rhetoric about immediate action to stave off economic catastrophy, and on the other, spending nearly a trillion tax payer dollars in a manner that, so far, has been difficult to defend as straightforward stimulus. If we are headed for catastrophe, why is it still politics as usual?
We're used to hearing by now that political pragmatism is the antidote to partisan bickering and gridlock. It's what the smart politicians do, we're told. Indeed the pragmatist label has adorned Obama's politics since if not his presidential campaign at least his tone while President-Elect, and mostly it still sticks. But the latest poll numbers suggest that "pragmatism" cashed out only as compromise on spending packages that are increasingly viewed with sceptism is politically hazardous. It's also, substantively speaking, inaccurate. Obama will be a pragmatist not because he accepts compromises that assuage political parties but because he adheres to the notion that partisan interests should be subjugated to practical ones in times of crisis. Pushing through flawed legislation by courting votes isn't enough. The truly pragmatic standard is in fact much higher.
Obama must explain how the current 800 billion dollar package will in fact create jobs and help the economy. We need plain language about how the deficit increase will get offset by job creation. (Liberal media mouthpieces like Rachell Maddow have proclaimed recently how it's so obvious that spending just is stimulus. She means that stimulus just is spending. On the latter, not the former, we all agree. Tax cuts are of course spending too. No worries, Rachell.) So, we need our new President to work us through the logic of the bill, or explain what the Hill needs to do to fix it, or scrap it. That's pragmatism. The stimulus package is a tool that we must understand will solve the current problem.
"Ideas are tools" was a slogan of the 19th century American pragmatists. Whatever works, is what ought then to be regarded as True. Generations of thinkers have poked holes in this idea on theoretical grounds, but for our current conundrum, ideas-as-tools is much better than ideas-as-abstractions. This is particularly true with the economy (and especially the complex, global economy), because it's increasingly hard to peer into the future to see how ideology will work in complicated contexts. This is why the Keynesian versus supply side debate seems so stale these days; who knows any more what will work? Pragmatists will start with what we know -- say, the data in the Congressional Budget Office reports -- and work bottom up towards some practical solution, however it looks through the lens of ideology.
But regardless of how we view the larger philosophical issues here, it's clear that political pragmatism understood as simply passing more spending legislation, skewed this way and that to make politicians happy, is hardly confidence inspiring. This is just politics as usual. For 800 billion tax payer dollars, we deserve more.
Here's the problem. Obama won office with promises of change in Washington. Within weeks, Democrats like Nancy Pelosi crafted a spending bill that even the down-and-out Republicans found big holes to poke and big political points to gain. It's not that the Republicans were that brilliant, mind you. The House bill was just that bad. In other words, weeks after Bush exits and change enters, it's more politics as usual. The initial House stimulus bill was so embarrassing that Obama contacted Pelosi, requesting removal of funding for contraceptives and resodding of the White House Mall. Good for him.
Even so, large swaths of proposed spending are still earmarked for goverment and health care sectors, which are suffering about a third of the unemployment that is wreaking steady havoc on manufacturing and construction. It's hard not to recognize the tension with, on the one hand, rhetoric about immediate action to stave off economic catastrophy, and on the other, spending nearly a trillion tax payer dollars in a manner that, so far, has been difficult to defend as straightforward stimulus. If we are headed for catastrophe, why is it still politics as usual?
We're used to hearing by now that political pragmatism is the antidote to partisan bickering and gridlock. It's what the smart politicians do, we're told. Indeed the pragmatist label has adorned Obama's politics since if not his presidential campaign at least his tone while President-Elect, and mostly it still sticks. But the latest poll numbers suggest that "pragmatism" cashed out only as compromise on spending packages that are increasingly viewed with sceptism is politically hazardous. It's also, substantively speaking, inaccurate. Obama will be a pragmatist not because he accepts compromises that assuage political parties but because he adheres to the notion that partisan interests should be subjugated to practical ones in times of crisis. Pushing through flawed legislation by courting votes isn't enough. The truly pragmatic standard is in fact much higher.
Obama must explain how the current 800 billion dollar package will in fact create jobs and help the economy. We need plain language about how the deficit increase will get offset by job creation. (Liberal media mouthpieces like Rachell Maddow have proclaimed recently how it's so obvious that spending just is stimulus. She means that stimulus just is spending. On the latter, not the former, we all agree. Tax cuts are of course spending too. No worries, Rachell.) So, we need our new President to work us through the logic of the bill, or explain what the Hill needs to do to fix it, or scrap it. That's pragmatism. The stimulus package is a tool that we must understand will solve the current problem.
"Ideas are tools" was a slogan of the 19th century American pragmatists. Whatever works, is what ought then to be regarded as True. Generations of thinkers have poked holes in this idea on theoretical grounds, but for our current conundrum, ideas-as-tools is much better than ideas-as-abstractions. This is particularly true with the economy (and especially the complex, global economy), because it's increasingly hard to peer into the future to see how ideology will work in complicated contexts. This is why the Keynesian versus supply side debate seems so stale these days; who knows any more what will work? Pragmatists will start with what we know -- say, the data in the Congressional Budget Office reports -- and work bottom up towards some practical solution, however it looks through the lens of ideology.
But regardless of how we view the larger philosophical issues here, it's clear that political pragmatism understood as simply passing more spending legislation, skewed this way and that to make politicians happy, is hardly confidence inspiring. This is just politics as usual. For 800 billion tax payer dollars, we deserve more.
Wednesday, February 4, 2009
Supply Side Logic
A private email from a friend of mine... which I'm making public now:
"Kensyian stimulus--spending for spendings sake--doesn't
work--because it takes money from the most productive job-creating sectors
of the economy and redistributes it to the least productive sectors (low
income workers and government). Plus, it destroys incentives for business
formation, work, savings and investment. Government can borrow, tax and
print money. All three of these actions create drag on the private job
creating sections of the economy, either by increasing the cost of capital,
decreasing incentives to work, save and invest, or by devaluing the currency
(inflation).
The practical non-ideological approach to economic recovery involves cutting
marginal tax rates, sound money and deregulation. Ask Coolidge, Kennedy,
Reagan and the much maligned Bush circa 2002. You want a depression or
mighty stagflation raise taxes and/or spending. Ask Hoover, Roosevelt,
Carter and Bush 2008 and his Dem congress (Frank, Dodd etc.)
Nothing they are doing now will work. Look for Carter era stagflation (low
growth and high inflation within a couple years). Maybe worse."
"Kensyian stimulus--spending for spendings sake--doesn't
work--because it takes money from the most productive job-creating sectors
of the economy and redistributes it to the least productive sectors (low
income workers and government). Plus, it destroys incentives for business
formation, work, savings and investment. Government can borrow, tax and
print money. All three of these actions create drag on the private job
creating sections of the economy, either by increasing the cost of capital,
decreasing incentives to work, save and invest, or by devaluing the currency
(inflation).
The practical non-ideological approach to economic recovery involves cutting
marginal tax rates, sound money and deregulation. Ask Coolidge, Kennedy,
Reagan and the much maligned Bush circa 2002. You want a depression or
mighty stagflation raise taxes and/or spending. Ask Hoover, Roosevelt,
Carter and Bush 2008 and his Dem congress (Frank, Dodd etc.)
Nothing they are doing now will work. Look for Carter era stagflation (low
growth and high inflation within a couple years). Maybe worse."
Capping Salaries is Capitalism
Conservatives may be squawking lately about Pres. Obama imposing executive salary caps at 500K a year when their firms have accepted bailout tax payer money, but it's a great incentive for the private sector to avoid the turn left towards socialism. It's not Adam Smith, but it's surely a pointer towards the market economy, not away from it.
Why? It's logical, that's why. If your firm has a business model that does not require bailouts, then by all means, pay your executives what the market will allow. Fat cats are the by-product of wide open, entrepreneurial, anyone-can-be-anything societies. Bill Gates. It makes sense. On the other hand, if you need government to operate, you should expect now to be governed. We can hardly accept businesses wanting subsidies for failure and free market principles for salaries. That's not capitalism.
And so, I applaud the salary caps. It's a nod towards capitalism.
Why? It's logical, that's why. If your firm has a business model that does not require bailouts, then by all means, pay your executives what the market will allow. Fat cats are the by-product of wide open, entrepreneurial, anyone-can-be-anything societies. Bill Gates. It makes sense. On the other hand, if you need government to operate, you should expect now to be governed. We can hardly accept businesses wanting subsidies for failure and free market principles for salaries. That's not capitalism.
And so, I applaud the salary caps. It's a nod towards capitalism.
Sunday, February 1, 2009
On Print Media
The New York Times ran an obviously self-referential op-ed Wednesday on the demise of newspapers from a steadily increasing Web readership. I read the NYT and the Wall Street Journal newspapers, and the thought of a world absent physical newspapers borders on fear. A world without newspapers?
It's understandable that news consumers have turned to digital content; it's mostly freely available, easy to access, and ubiquitous now that broadband is a commonplace in American homes and offices. I don't blame the new generation for turning to the Web for their news fix these days. It makes sense. And newspapers, like so many other products pulled from the shelves of consumer markets, are perhaps just the latest victims in the ongoing history of failed business models. Their readers are the hapless dinosaurs watching the darkening sky, faintly aware that it signals an end and some new beginning.
If the newspapers fail -- and many of them are suffering and on the verge -- we'll have lost something that can't be replaced by so many Web pages. For those who know the joy of fetching the morning newspaper, holding in hand the new day, thumbing through the world of events and information and commentary, look up. See the sky darkening as unsustainable business models die their slow but ineluctable deaths. And know also that the paper you hold retains a value that changing consumer markets does not explain, or describe.
It's understandable that news consumers have turned to digital content; it's mostly freely available, easy to access, and ubiquitous now that broadband is a commonplace in American homes and offices. I don't blame the new generation for turning to the Web for their news fix these days. It makes sense. And newspapers, like so many other products pulled from the shelves of consumer markets, are perhaps just the latest victims in the ongoing history of failed business models. Their readers are the hapless dinosaurs watching the darkening sky, faintly aware that it signals an end and some new beginning.
If the newspapers fail -- and many of them are suffering and on the verge -- we'll have lost something that can't be replaced by so many Web pages. For those who know the joy of fetching the morning newspaper, holding in hand the new day, thumbing through the world of events and information and commentary, look up. See the sky darkening as unsustainable business models die their slow but ineluctable deaths. And know also that the paper you hold retains a value that changing consumer markets does not explain, or describe.
Thursday, January 29, 2009
The Democrat's Dilemma
Republicans and Democrats share a history of legislative shenanigans, to be sure. And though Republicans are suddenly sounding reasonable when discussing the pork in the latest stimulus bill on its way to the Senate (after passing in the House 244 - 188, with all Republicans voting against), the traditional Republican mantra of tax relief for the upper and upper middle class would certainly be a bad proposal in today's recession.
But, again, Republican talking points today seem much more reasonable. Contra Bob Herbert, who writes in the NYT today that we should all just stop listening to the minority party (nice spirit of bi-partisanship, Mr. Herbert), I think the minority party, in its opposition, is helping improve the pork-ridden bill and hence is serving the public's interest.
They're doing this in two ways. One, they're caterwauling about the obvious pork in the bill. Indeed some of the more egregious examples of pork have already been removed, like hundreds of millions for contraceptives under the guise of a family planning expansion promoted by House Speaker Nancy Pelosi. (Give initial credit for removal of this lu lu to George Stephanopoulos, who raised this issue in an interview with Pelosi on ABCs "This Week". Also it was President Obama who, officially, requested it be dropped. Bravo.) Resodding the White House lawn also got nixed.
Two, they're asking the hard questions about where the stimulus actually resides in the stimulus bill, questions that I think point to real problems that the majority Democrats seem curiously sanguine about, given the severity of the economic crisis.
For instance, the Congressional Budget Office released a troubling analysis of the proposed bill, calculating that only about 20% of the 816 billion will be spent in fiscal 2009. So much for shovel ready. And there's the troubling fact that, of this, only about 30 billion is tagged for infrastructure spending.
So, where is the money going? Well, to entitlement programs and special interest groups, of course:
And on and on.
To be sure, some of this spending is laudable, and provides funding for worthy goals (like funding the arts, or modernizing the Smithsonian). But if it's really job creation that we're trying to accomplish, it's hard to understand the distribution of funds. For example, the unemployment rate for government workers is a mere 2.3% today, and in the education and health sectors it's only 3.8%. Yet fully 39% of the 550 billion allocated for spending -- the rest is tax relief -- targets these sectors. This is particularly puzzling when we consider the unemployment rates in the sectors hit hardest by the recession: 8.3% in manufacturing, and 15.2% in construction. As Alan Reynolds of the CATO Institute points out today in the WSJ, "If the intent of the plan is to alleviate unemployment, why spend over half of the money on sectors where unemployment is lowest?" Hmm.
So, here's the Democrat's Dilemma. They don't need the lowly Republicans to pass President Obama's stimulus plan; it'll likely sail through the Senate without major modification just as it did the House. And then it'll be law. But, if it's judged a failure in the coming years, they'll be solely responsible for it. Republicans, for their part, can look reasonable by simply pointing at the facts of the bill. They may get blamed for throwing out the spirit of bi-partisanship, but they have the pork in the bill and the puzzling distribution of funds to keep talking about. No one will care about their stubbornness today, if in a few years the stimulus is viewed as a Democratic christmas tree, full of entitlements and goodies for Americans, but a very flawed piece of legislation given its ostensible purpose.
And so it goes. As Speaker Pelosi put it, "We won, we write the bill". Indeed.
But, again, Republican talking points today seem much more reasonable. Contra Bob Herbert, who writes in the NYT today that we should all just stop listening to the minority party (nice spirit of bi-partisanship, Mr. Herbert), I think the minority party, in its opposition, is helping improve the pork-ridden bill and hence is serving the public's interest.
They're doing this in two ways. One, they're caterwauling about the obvious pork in the bill. Indeed some of the more egregious examples of pork have already been removed, like hundreds of millions for contraceptives under the guise of a family planning expansion promoted by House Speaker Nancy Pelosi. (Give initial credit for removal of this lu lu to George Stephanopoulos, who raised this issue in an interview with Pelosi on ABCs "This Week". Also it was President Obama who, officially, requested it be dropped. Bravo.) Resodding the White House lawn also got nixed.
Two, they're asking the hard questions about where the stimulus actually resides in the stimulus bill, questions that I think point to real problems that the majority Democrats seem curiously sanguine about, given the severity of the economic crisis.
For instance, the Congressional Budget Office released a troubling analysis of the proposed bill, calculating that only about 20% of the 816 billion will be spent in fiscal 2009. So much for shovel ready. And there's the troubling fact that, of this, only about 30 billion is tagged for infrastructure spending.
So, where is the money going? Well, to entitlement programs and special interest groups, of course:
- 2 billion for child care subsidies
- 50 million to the National Endowment for the Arts (NEA)
- 400 million for global warming research
- 2.4 billion for carbon capture projects
- 650 million for digital TV conversion coupons
- 87 billion for Medicaid
- 1 billion for nutrition programs
- 66 billion for education spending
And on and on.
To be sure, some of this spending is laudable, and provides funding for worthy goals (like funding the arts, or modernizing the Smithsonian). But if it's really job creation that we're trying to accomplish, it's hard to understand the distribution of funds. For example, the unemployment rate for government workers is a mere 2.3% today, and in the education and health sectors it's only 3.8%. Yet fully 39% of the 550 billion allocated for spending -- the rest is tax relief -- targets these sectors. This is particularly puzzling when we consider the unemployment rates in the sectors hit hardest by the recession: 8.3% in manufacturing, and 15.2% in construction. As Alan Reynolds of the CATO Institute points out today in the WSJ, "If the intent of the plan is to alleviate unemployment, why spend over half of the money on sectors where unemployment is lowest?" Hmm.
So, here's the Democrat's Dilemma. They don't need the lowly Republicans to pass President Obama's stimulus plan; it'll likely sail through the Senate without major modification just as it did the House. And then it'll be law. But, if it's judged a failure in the coming years, they'll be solely responsible for it. Republicans, for their part, can look reasonable by simply pointing at the facts of the bill. They may get blamed for throwing out the spirit of bi-partisanship, but they have the pork in the bill and the puzzling distribution of funds to keep talking about. No one will care about their stubbornness today, if in a few years the stimulus is viewed as a Democratic christmas tree, full of entitlements and goodies for Americans, but a very flawed piece of legislation given its ostensible purpose.
And so it goes. As Speaker Pelosi put it, "We won, we write the bill". Indeed.
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