“Let them eat pork”

This was too good to pass up (because, you're wrong Senator Schumer, the American people do care) .

Who Said It?

Genuine bipartisanship assumes an honest process of give-and-take, and that the quality of the compromise is measured by how well it serves some agreed-upon goal, whether better schools or lower deficits. This in turn assumes that the majority will be constrained — by an exacting press corps and ultimately an informed electorate — to negotiate in good faith.

If these conditions do not hold — if nobody outside Washington is really paying attention to the substance of the bill, if the true costs . . . are buried in phony accounting and understated by a trillion dollars or so — the majority party can begin every negotiation by asking for 100% of what it wants, go on to concede 10%, and then accuse any member of the minority party who fails to support this 'compromise' of being 'obstructionist.'

No, it's not some bitter Republican congressman after being left out in the cold, unable to actually provide any meaningful input to the "stimulus".

That quote belongs to President Obama. Ironic, no?

Of course the ordeal we've just witness involved so many pages of legislation passed in such a short time, there was no chance we could have really had "an exacting press corps" or "an informed electorate." And it will be no surprise when we realize the "true costs [were] buried in phony accounting and understated by a trillion dollars."

(h/t Mark Hemingway @ NRO's The Corner).

Stimulus Link Roundup

Things worth reading about the Stimulus that I didn't manage to work into my last post.


What's In The Bill
- Michael Grabell, ProPublica: The Stimulus Plan: Where the Money Would Go
- Karen Yourish & Laura Stanton, The Washington Post: Taking Apart the $819 billion Stimulus Package


How We Got In This Mess In the First Place
- John B. Taylor, The Wall Street Journal: How Government Created the Financial Crisis; Research shows the failure to rescue Lehman did not trigger the fall panic.
- Scott S. Powell, Barrons: The Culprit Is All of Us; The government's meddling got us into this mess.
- Julia Finch, The Guardian: Twenty-five people at the heart of the meltdown ...


Why It Won't Work
- Stephen Dinan, Washington Times: CBO: Obama stimulus harmful over long haul
- Robert Stacy McCain, American Spectator: It Still Won't Work
- Mario Rizzo, ThinkMarkets: The Macroeconomic Knowledge Problem
- Russell Roberts, Cafe Hayek: Corrupt
- The Daily Beast Big Fat Story: Six New Stimulus Woes


What's Hiding In the Bill
- Betsy McCaughey, Bloomberg: Ruin Your Health With the Obama Stimulus Plan
- James C. Capretta, NRO's The Corner: The House’s Hidden Employer Mandate


What Should We Be Doing Instead?
- Alex Adrianson, Heritage InsiderOnline Blog: The Case for Free Market Solutions to the Economic Crisis
- Russell Roberts, NPR: Economists Offer 2 Takes On Obama Stimulus Plan
- Russell Roberts, Cafe Hayek: Inconceivable.


And, finally, the Wisdom of Hayek:

The theory [...] which I contend is largely the product of such a mistaken conception of the proper scientific procedure, consists in the assertion that there exists a simple positive correlation between total employment and the size of the aggregate demand for goods and services; it leads to the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level. Among the various theories advanced to account for extensive unemployment, this is probably the only one in support of which strong quantitative evidence can be adduced. I nevertheless regard it as fundamentally false, and to act upon it, as we now experience, as very harmful.

- Friedrich August von Hayek, in hisNobel Prize Lecture. (h/t Don Boudreaux)

Final Plea Against The Largest Spending Bill In History

With Obama about to sign this thing at an invitation-only event tomorrow, I'm days, if not weeks, late to post this, but here it goes:  Here are my arguments for why H.R 1, the American Recovery and Reinvestment Act of 2009, better known as the "Stimulus" and gaining recognition as the "Generational Theft Act of 2009" is a really bad idea.


1. $787 billion (that's billion with a B!) is a lot of money.

And all that money has to come from somewhere. The government can either raise it by taxing or taking on debt. Or they can print more money. No one (or few people) are talking about the negative effects of these three possibilities. If we print more money, we get inflation. Borrowing more puts our credit rating at risk and leaves future taxpayers to have to cover the principal and the interest. And raising taxes moves capital from the private sector (the sector we are trying to stimulate!).


2. $787 billion is a lot of money.

OK, so, I repeat myself. But I want you to understand how big that number is. It's $787,000,000,000.00. If you had a pile of that much money in one dollar bills and you stacked it, you'd get about a fifth of the way to the moon. (So, it's literally an astronomical number).

If you had one second for each dollar in that sum, you'd have enough seconds to make up about 24,325 years. Humans started writing things down only 6,000 years ago. 24,325 years is a lot of seconds.

Put yet another way, with Obama's $500,000 executive salary cap now in place, using the $787 billion, you could hire 1,574,000 executives. That's a lot of fat cat executives making a cool half million a year.

Finally, the "Stimulus" costs about $5,700 per taxpayer. How many ways can you think of of how you might prefer to spend $5,700?


3. The government has a really poor track record.

Question: How well did the government do at spending vast sums of money on the Iraq War, Katrina recovery, and Boston's Big Dig?

Let's go ahead, and for the sake of argument, propose that by magic the Congress has really out done themselves here and only a mere 1% of this bill is going to get lost to fraud. But wait, 1% would be nearly 8 billion dollars. Add together the Gross Domestic Product of Nicaragua and Belize. You'll come to about 8 billion. More realistically (based on, say, Katrina figures), we'll see fraud and other waste eat up something like 12% of this bill. So, maybe $100 billion. Yes, billion.

Add on top of this the fact that the government wants to spend much of this as quickly as possible, and we're just setting ourselves up for poor oversight and fraud, waste, more fraud, and more waste.


4. The government doesn't have the information it needs.

Let's guess that between members of Congress, their advisors and the President and his advisors we've had 2,200 people work on this bill. Let's further suppose each of these people had equal weight in putting together the bill such that each person allocated the same amount of money within the bill. That means they each had to allocate more than $350 million. Now consider how you would allocate $350 million dollars - more than a third of a billion - to best help our economy. You probably have no idea. Neither, I'm sure, do they. It's just too much money to know how to precisely use it well. There's too much going on in the economy for an individual to know enough to make meaningful macroeconomic decisions like this. (Note: Arnold King expands on this argument better than I do, here.)

By contrast, when we interact with the economy as private citizens, amazing things happen. We all know our individual niche needs and desires and we can use the information we each individually have to produce some amazingly complex, but still largely efficient, systems. In fact, there are even rewards for being more efficient. But, when a relatively small number (say 2,200 instead of 300 million) are calling the shots they lack this information and these rewards for efficiency.

And to make matters worse, this bill was rushed. The bill was debated for less than an hour in the House to limit input from the Republicans. The pre-conference version of the bill was finalized less than 72 hours before the Senate voted on it. (And, if you could read the bill's legalese at a pace of one page per minute, it would take you more than 16 hours just to read the thing.) And if you divide the bill's cost by the number of seconds spent working on it, you come to one million dollars per second. How do you adequately put in safeguards for prudent spending when the rate is $1,000,000.00 / second?!


5. History says it won't work.

Despite (or because of) the massive spending of the New Deal, the Great Depression lasted ten long years. The Pelosi/Reid/Bush "Stimulus Checks" of last year haven't made a dent in this current recision. Neither have the hundreds of billions used under the TARP program.

Or, looking outside the U.S., Japan spent the 1990s trying to revamp their economy by Keynesian style defecit spending on infrastructure. It didn't work.

And finally, if you look at the historical data - government spending does not create jobs.


6. It's not stimulative.

At least not most of it. Most of it is useless pork. (Here are some more examples.)

Most seem to be putting the "stimulative" portions of the "stimulus" at about 20% of the bill. It makes you wonder why we aren't passing this bill instead.

And for the claims (falsehoods?) about how we, absolutely, positively, must pass this NOW and get money moving NOW, almost half the bill's spending doesn't take place until after 20 months.

Bruce McQuain of QandO puts it well when he terms the bill as "Long On Pork And Relief - Short On Stimulus And Jobs".

Stimulus, Illustrated

My inspiration (and, data) comes from Suitably Flip's post by the same name. I wasn't wild about the style of his graphic (spheres? word art?), so I gave it my own make over.

Anyway, here's a graphic I think helps bring some perspective to the Stimulus (it's alternative name — the "Generational Theft Act of 2009" — is appropriately gaining ground) heading to the Senate. I think it's worth sharing. Click for larger.



Referenced "more info" links:

• http://readthestimulus.org/


• http://www.cato.org/fiscalreality


• http://www.cafehayek.com/hayek/stimulus/

Stimulus Round Up

Plenty has already been said on the Stimulus Bill. Rather than adding to that volume, simply some links to those that I think get it right:

Lawrence Kudlow, January 5, Goldilocks Needs Tax-Reform, Not Populism:

Yes, corporate profits are slowing and jobs are softening. Despite 52 months of ongoing jobs gains and 1.3 million new payrolls in the past year, December jobs registered only 18,000 and the unemployment rate ticked back up to (a still historically low) 5 percent. Despite years of gains from a booming business sector, corporate profits are in fact falling at about a 6 percent clip.

But the last thing we need now is root-canal economic populism from the campaign trail and the mainstream media telling us that Americans are unhappy. Unhappy? According to a Gallup Poll released last week, "Most Americans say they are generally happy, with a slim majority saying they are 'very happy.'" They're also prosperous. According to Investor's Business Daily, household wealth in the U.S. soared 51 percent to $58.6 trillion in last year's third quarter from $38.8 trillion in 2002.

...

The key thing to remember is that businesses drive the economy. Businesses create jobs and incomes for consumers to spend. Today's John Edwards/Mike Huckabee anti-business populism sounds more like William Jennings Bryan than Adam Smith. It's absolutely crazy. They attack Wall Street and investors, which is another way of attacking capital. Without capital investment, there will be no new business, no new jobs, and no middle class.

Amity Shlaes, January 16, Stop Bush, Democrats Before They Save Our Economy:

President George W. Bush, briefed by experts, may take up the stimulus concept as early as this week. In coming months, the candidates will lean hard on the experts as they battle over questions such as whether the next middle-class tax credit should be refundable (Democrats), or not (Republicans).

This is perverse. The real question about tinkering should not be "how?" but "why?" The persistence of the stimulus habit, and the endorsements by experts, makes it worthwhile to review such previous interventions and their consequences.

Back in the early 1990s, great economies confronted trouble. The savings-and-loan crisis, a recession and disappointing productivity numbers all darkened the U.S. future. In Japan, banks were foundering, and the real estate bubble had popped. The Nikkei stock index was plunging.

...

Fortunately, Republicans and conservative Democrats tamped Clinton's domestic project down into nothing. For the rest of the decade, the Clinton team mostly stayed out of the tinkering business, with spectacular results.

Japan, by contrast, heeded the U.S. and the experts and dutifully "stimulated" the economy for years.

Late in the decade, Prime Minister Keizo Obuchi dumped billions of dollars into the economy on public works projects and tax cuts in the name of recovery. Because his Liberal Democratic Party had so many followers in rural areas, within the keiretsu business conglomerates, and among bureaucrats, the outlays were especially wasteful. A number of stimulus packages and Bridges to Nowhere later, the Japanese economy slept on.

Louis R. Woodhill, January 17, Stimulus and Superstition
- What the economy doesn’t need now is more government mistakes.:

With recession concerns mounting, politicians and pundits have started proposing programs to “stimulate” the economy. All of these plans involve some combination of additional short-term government spending and one-time transfer payments to people who would be expected to spend the additional money. But there is one small problem with these proposals: They are based on economic superstition.

Recessions are periods of falling gross domestic product. They are presumed to be caused by falling demand, and it is assumed that the stimulus measures being proposed will increase demand. In fact, they will do no such thing. Similar programs were tried in the U.S. in the 1930s, Japan in the 1990s, and again in the U.S. in 2001. They all failed. The belief that government spending and deficits stimulate demand is a superstition.

...

Recessions don’t just happen. They are caused by government mistakes. When recession looms, the answer isn’t superstition-based stimulus programs, but to correct the mistake. Economies need three things from government: incentives, money, and certainty. Right now, the main problem seems to be certainty. The solution is to make the 2003 tax cuts permanent and to stabilize the value of the dollar. If we do that, we can stop talking about stimulus programs.

Senator Bob Corker, January 30, Economic Stimulus Bill is "Nothing But a Political Stimulus":

"What I see in this package is nothing but a political stimulus,” said Corker. “It's a stimulus to make the American people think that we, as a body, are doing something to actually cause the economy to be stronger.

“Not to be misunderstood – I'm a strong believer in low taxes and creating a structure in this country that people can count on to move ahead and to make investments, but with that has to be the reality that spending has to be under control."

“…We in this body will never deal in my generation with paying for the $150 billion. But the next generation might, I doubt it. It would actually be $329 billion in 20 years at present rate. And the generation after that, $722 billion."

Link Roundup - 1/20/08

• More good news about Iraq. Complete with pictures. Keywords: progress and impressive.
  
  
• The Bush stimulus program is an awful idea. Romney's also weighed in with his proposed plan. I wish he'd back up his tax cut proposals with spending cut proposals, but I do welcome this difference between his and Bush's:
  

  
  [Romney's plan] centered on several permanent tax cuts…permanently reducing the rate for the lowest income tax bracket to 7.5 percent from 10 percent, retroactive to 2007. He also wants to eliminate Social Security payroll taxes for workers over 65 and eliminate capital gains and dividend taxes on households earning less than $200,000 a year. He also would permanently reduce the corporate tax rate to 20 percent from 35 percent over two years and allow businesses to depreciate the value of new equipment purchases faster.
  

  
  versus:
  

  
  President George W. Bush earlier on Friday called on Congress to enact a package of temporary tax cuts and other measures estimated to cost up to $150 billion.
  

  
  
  
• Do Democrats really want to return to the Cinton era? I can't even imagine what would happen if papers surfaced documenting the Bush administration had intent to "expose lifestyles, tactics and motives of [opponent] lobbyists" and "track personal information about interest group leaders, such as their home phone numbers, addresses, 'biographies, analysis of credibility in the media, and known relationships with Congresspeople.'"
  
  
• Meanwhile, Grassley's investigation continues to give me the heebeegeebees. I loathe the prosperity gospel movement. I think the prosperity gospel's message is wrong and that its theology is dangerous. But, these people pushing the prosperity gospel are still religious institutions that Congress has no business investigating.
  
  
• Finally, Iran: Still a threat.