The Sovereign Mind

Free thought on politics and real life

Posts Tagged ‘stimulus

Cash For Clunkers: Simply Unsupportable

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For those who don’t know, the government will give you $4,500 to trade in your old clunker and buy a brand new car. Sounds like a good deal, but as far as public policy is concerned, the program is simply unsupportable.

There are two reasons that proponents give to support the program:

1) The program supposedly helps the environment by getting gas guzzlers off the road and replacing them with newer, more efficient cars. It is debatable whether the program has any positive impact on the environment at all. And even if it does, the minimal impact begs the question: what else could we have spent that money on that would have helped the environment much more? It’s a little like going out to an expensive restaurant, and then justifying the expense by saying, “Well, we had to eat, right?”

2) The program is supposed to help stimulate the economy by getting people to buy new cars. Even those who see through the environmental argument often agree that it has succeeded in that purpose. And I don’t disagree, but let’s look at the issue more closely.

First, let’s start with the basics: Every dollar that the government spends is a dollar out of the pockets of a tax-payer. That should be obvious, but it seems that we sometimes forget this basic fact, maybe because we don’t see our tax bill increase at the passage of these sorts of programs. But it is true, whether the money comes from tax-dollars directly, or is borrowed (and therefore will be paid by future generations of tax-payers), or is printed (which we pay for because of the inherent devaluation of existing currency). There is no escaping the fact that there is no such thing as free money.

With this is mind, can this program be considered as anything more than taking money away from people who don’t want to buy a new car, and giving it to someone who does? The government is essentially telling you, “If you aren’t going to buy a new car, we’ll take your money and give it to someone who will.” By doing this, the government subverts the dichotomy that, during a recession, it is in each individual’s best interest to save money, but it is in the economy’s interest that we spend. I don’t blame the government for attempting to find ways to stimulate the economy during a recession, but giving people the choice of spending money or losing it is beyond over-reach.

So we must ask ourself this question: is it more important to (slightly and artificially) stimulate a sector of the economy for a very short period of time, or is it more important to respect our freedom to save or spend our money as we please? Maybe some in congress may disagree, but it seems to me that the answer to that question is obvious.

Written by Mike

August 9, 2009 at 9:04 pm

Obama: I’m Responsible, But It’s Not My Fault

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Obama, on the AIG debacle:

So, he’ll take responsibility, but wants everyone to know it’s not his fault. That’s some new politics for you.

Meanwhile, Dodd says it is his fault:

Personally, I think this whole issue is way overblown. Yes, the bonuses are misplaced in these times, but a contract is a contract, and the government shouldn’t get in the business of overturning contracts, no matter how bad they are. This is why the provision was added to the bill. All that is reasonable. The part that bugs me is that politicians, especially the president, are falling over themselves to feign outrage over something that was already anticipated and accounted for in the bill. If it was not anticipated, why was the clause added?

The same candidate that criticized McCain because he made a big deal about earmarks which weren’t a significant part of the budget, and the same party that criticized Republicans for making a big deal out of a few million here and few billion there in the stimulus bill, are now apparently outraged over 150 million–a drop in the bucket.

That’s what you get when you don’t read the bill before you enact it.

Written by Mike

March 18, 2009 at 9:07 pm

Unilateral Bipartisanship

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David Axerlrod on Meet the Press (my emphasis added):

MR. GREGORY: All right, so how was [the Republican party’s] influence felt [in the stimulus bill]?

MR. AXELROD: Well, I think in tax–in terms of tax cuts. I think the tax cuts reflect some of their, their thinking. I mean, we agreed with them in terms of tax cuts to help small businesses get through this. They–their–the AMT is now added. The AMT fix is now added to this. The, the, the Web site was suggested by Representative Cantor, the leader of the opposition in the House.

Maybe I’m reading too much into this, but I don’t think so. Notice the words he struggles with. He wants to portray the tax cuts as concessions to Republicans, but at the same time does not way to give away the credit for their inclusion from the Democrats. The worst thing Democrats could do right now is concede the point that Republicans have been making for a long time: that Democrats are against tax cuts. But at the same time they want to be able to point to the tax cuts as evidence of concessions to the Republicans. They’re walking a fine line and getting away with it for the most part.

My impression of the Democratic view of bipartisanship: “We welcome ideas from across the isle, as long as they are also our ideas.”

I don’t blame Democrats for wanting to limit the Republican influence on this bill. Let’s face it: they won that right in November. But don’t try to portray it as bipartisan because a Republican suggested a website. Because, you know, clearly the success or failure of the stimulus package hinges on

Written by Mike

February 17, 2009 at 7:35 pm

The Economic Surge

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“History doesn’t repeat itself, but it does rhyme.” — Mark Twain

Rewind to a few years ago, and the buzzword was “surge”. The president was pushing for a surge in troops to stabilize Iraq. The Democrats, including the then-senator Obama, opposed opposed it feverishly. Republicans were saying that they were voting for defeat in Iraq. Fast-forward to a few months ago, after things had improved in Iraq, when Obama said this:

Katie, I have no idea what would have happened had we applied my approach, which was to put more pressure on the Iraqis to arrive at a political reconciliation. So this is all hypotheticals. What I can say is that there’s no doubt that our U.S. troops have contributed to a reduction of violence in Iraq. I said that– not just today, not just yesterday, but I’ve said that– previously. What that doesn’t change is that we’ve got to have a different strategic approach if we’re going to make America as safe as possible.

So, basically, the surge worked, but things might have been even better had they tried Obama’s approach. It’s a tough political tight-rope, but Obama overcame it because the war in Iraq in general was unpopular, so some people gave him the benefit of the doubt.

Today, Obama wants to execute an economic “surge” by injecting almost a trillion dollars into our economy (put on credit). Almost all Republicans oppose it, but it will be signed by the President shortly. Democrats say that Republicans are voting for America to fail (sound familiar?). Many pundits say that the Republicans have put themselves in a risky position. There are only two possibilities, they say:

1) The economy recovers, and the Republicans appear to have been trying to stop the economic recovery, and being against the American people.

2) The economy gets worse, and the Republicans are vindicated to opposing a bill that they correctly predicted would not help, and the “we have to do something” line is proven to be a nonsensical political argument.

But they ignore another possibility. I believe the economy will recover, but as any logician will tell you, just because Y follows X does not mean that X caused Y. It will be difficult to tell whether the stimulus package really helped or not, although Democrats will insist that it did. Republicans will find themselves in the position that Democrats did just a few months ago: defending the opposition to a policy that appeared to have succeeded. I can see them saying something like this:

“Yes, the stimulus might have helped, but think of how much it cost us. We didn’t get a chance to try our plan, which would have been less costly and helped get us out of the recession more quickly.”

Even if technically true, that is a difficult political argument to make. But, it worked for Obama on the Iraq surge, so will it work for Republicans?

No. The difference is: the people will not give the Republicans the benefit of the doubt as they gave Obama, since the Republicans are seen (rightly or not) as having caused the mess in the first place.

The bottom line: it’s tough to be a Republican these days. You lose when you win and lose when you lose.

(Note: Very rarely do I consider raw political analysis like this to be very worthwhile, but given the similarities of this situation and the Iraq surge situation, I found it interesting.)

Written by Mike

February 14, 2009 at 7:36 am

What’s Wrong with the Recovery and Reinvestment Act?

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One word: “and”

To understand my point, imagine that you wake up one morning to the sound of rushing water. You find that your basement is quickly filling with water, coming from somewhere that you can’t identify. In a panic you call the number for the first plumber you can find in the phone book, and he agrees to come immediately.

After the plumber inspects the situation, he said, “Well, this is serious, but I think we can fix it and find someone to clean everything up.”

“How much is that going to cost me?” you ask nervously.

“Well, I’d say around 900 billion dollars,” he responds.

“What?! For a flooded basement?”

“Yes, and a few other things that need to be taken care of.”

You watch as a roofer truck drives up, followed by a delivery truck for the local appliance store, followed by a few other trucks, and lastly comes a sodding company.

“What are they doing here?” You ask.

“Well, I noticed that your shingles are looking pretty old. I wouldn’t be surprised if you have some leaks up there, so we’ll have to redo the whole thing. And your furnace is not Energy Star compliant, so we’ll be replacing that. And you must be loosing a lot of heat out of those old windows. The new ones you’ll be getting will save you a lot of money on your utility bill, along with the new lighting we’ll be putting in. And, your lawn could use some help. It’s very unsightly. The sodding company will take care of that.”

“But I don’t want any of that!” You respond angrily, “I just want the water to stop and my basement cleaned up!”

“Sorry pal, this is a package deal. Do you want your basement fixed or not? We don’t have much time.”

I probably don’t have to explain what I mean by that analogy, but I will just to belabor the point. As the title of the stimulus bill states, there are two purposes to the bill:

  1. Stimulate the economy to help us recover from the recession we are in
  2. Make other investments designed to help us in the long term

Stimulus must be fast. We have to inject enough money to create jobs and jump start the economy. The main measure of success is how many jobs are created, and how quickly.

On the other hand, investment implies a long term outlook. Just as you would with any of your personal investment, smart investors will take the time to do their homework. They want to be sure the investment will pay off in the long term, and that they will be getting the most bang for the buck. Most of the time, the short term gain from investing is small, so there is usually not a sense of urgency.

So how can you do these two things at the same time? They are counteracting. The result is a bill that is too watered down to stimulate, and too hasty to be a good investment for the long term.

The logical conclusion is to separate the two. Let’s pass the Recovery/Stimulus portion of the bill now, and then hash out the Reinvestment portion when we have time to debate and consider our options more carefully.

So what should we put off until later? I’ve analyzed the information from the Congressional Budget Office, a non-partisan office intended to give law-makers feedback on the budget consequences of bills. Their analysis is that only 65% of the money in the bill will be spent in the next two years. Even with that broad definition of stimulus, there is a lot in the bill that is not stimulus, but is being pushed into this bill as an attempt to get it passed quickly, without much debate. Some of these measures might be worthwhile, just as the new roof might be worthwhile for the poor guy with a leaky basement. But we should make sure these investments are the best they can be, and that means a separate bill that does not have the urgency attached.

So what can we get rid of from this bill? I looked at the CBO report, and specifically targeted any portion of the bill which does not cause at least 30% of so to be spent in the next two years. After removing those parts, we can decrease the cost of the bill by 112 billion dollars, but only decrease the amount of spending in the next two years by 20 billion. That would significantly increase the percentage of the bill that is actually stimulus. Here are the pieces I’ve identified:

Spending Item Total Amount (in millions) Amount spent in next 2 years
Distance Learning, Telemedicine, and Broadband Program 2825 467
Wireless and Broadband Deployment Grants 2,825 250
Energy Efficiency and Renewable Energy 18,500 2,635
Other Energy Programs 17,350 3,388
Federal Buildings Fund 7,500 1,300
Health Information Technology 20,231 521
Innovative Technology Loan Guarantee Program 8,000 1,680
Clean Water and Drinking Water 8,116 2,333
Other Transportation 16,100 4,300
Housing Assistance 11,129 3,217
Total 112,576 20,091

Some might argue that in a bill this size, why make such a fuss over a mere 112 billion? If your sympathetic to that argument, please read the question again a little slower. However, my number is only obtained by assuming we can either leave in or remove entire sections as they exist now. We could save even more by looking at each section individually and seeing what sub-parts we could leave for later, and which parts are truly stimulus. Lastly, we can look at what parts of this bill will be spent soon, but not on creating jobs. Considering that as the bill exists currently, each job will cost us over $200,000 to create each job, there ought to be some of that in there as well. That number has been attacked as “Limbaugh math”, but I have yet to hear the argument for why we should be OK with spending so much money on each job.

David Axelrod, advisor to Obama, responded to that number like this on This Week with George Stephanopoulos:

He’s missing the fundamental point. We’re not just spending money to create jobs; we’re investing money to strengthen this economy. We’re investing in areas like energy independence. We’re investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need. We’re investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country, and we’ve been very careful about that.”

Agreed, but if we want to be careful about that long-term investment, why try to push it through on the back of short-term stimulus?

Answer: because they know that if they don’t milk the current crisis for all that it’s worth, they might have a tough time getting these programs through later, when everyone’s thinking more clearly.

But there’s still hope. The bill has to get passed the Senate, and I hope is will be passed… without the “and”.

Written by Mike

February 2, 2009 at 7:00 am