In Harry Reid’s Senate, this qualifies as dereliction of duty, as the Majority Leader said himself on Monday in defense of his frantic deal-making to get 60 votes. “I don’t know if there is a Senator that doesn’t have something in this bill that was important to them,” Mr. Reid said at a press conference that offered an unintentional commentary on modern democracy. “And if they don’t have something in it important to them, then it doesn’t speak well of them.” – Wall Street Journal, December 23, 2009

It kinda makes you feel warm all over, that our Congressional leaders are representing their constituents, selflessly doing what’s best for America in line with the consent of the governed (55% opposed according to latest Rasmussen poll). 

 Have you seen some of the commercials for Ally bank, where a man asks one little girl if she wants a pony and she gleefully says yes, so he hands her a toy pony.  He then asks the next girl if she wants a pony and she says yes, so he calls out a live pony.  The first girl, crestfallen, says, “You didn’t say I could have real pony.” To which he replies, “Well, you didn’t ask.”  By now you probably know how Blanche Lincoln of Arkansas and Evan Byah of Indiana feel.  They didn’t ask for a bribe in return for their vote on the health care bill, and like the creep in the commercial Harry Reid tells the world what a couple of saps they are for not doing so.

While Obama’s first stimulus plan lies sputtering on the ground, and he and his team tee up another one, they fail to realize that many small businesses that create most of the new jobs in this country, simply do not know what all this (health care, cap and trade, stimulus after stimulus) is going to cost them.  Until they do, this uncertainty is what is keeping many of them from doing any hiring.  How can you hire a new person when you no longer know how much your existing staff is going to cost when the music stops?  So the unemployment picture will drag on no matter how may stimulus plans Obama rams through.

Coming to Their Senses

This is not over yet. The House version and the Senate version still have to be reconciled in committee.   In the House Bart Stupak says he has 30 Democrats ready to vote against the bill, if his amendment against abortion is tampered with.  The chumps in the Senate that Harry just made fools of, may re-think their support. The far left demands a public option be put in.  Lieberman and a few others vow to vote against any public option. In addition, the members of Congress, when they return home to their districts, may not find them full of good cheer this Christmas, as incensed constituents express their opinions on why every Democrat in the Senate doesn’t understand 55% opposition, while they vote yea.  Better watch out for flying fruitcakes, they can be lethal.

The Trick

You may have heard the Obama Administration touting the number of jobs they have saved or created through the stimulus and other economic policies.  I am reminded of the old comedy routine:

Comic: (Stands alone on the stage snapping his fingers, then whistling while he clasps his hands and wiggles his fingers)

Straight man: (Walks on stage as if to pass the comic, sees him and stops) “What are you doing?”

Comic: “Keeping away the elephants.”

Straight man: “There isn’t an elephant within miles of here.”

Comic: “See, it’s working.”

There isn’t an economist around who knows how to count a job saved.  There appears to be an informal survey among those who receive stimulus money to report how many jobs were saved by them receiving the funds.  Do you think they may be encouraged to tell the government what it wants to hear?  Here is my take on Obama’s performance.

Obama:  “If we don’t approve this stimulus package immediatelywe’ll be in deep tapioca.”

Citizen: “What are you doing?”

Obama: “Saving jobs.”

Citizen: “It’s impossible to measure a job saved.”

Obama: “See, it’s working.”

The Treat(?)

Third quarter economic growth came in at 3.5%.  That’s the good news and Obama is quick to credit the stimulus package that has hardly been spent.  But if you look more closely at the numbers a large portion of the growth comes from:

• A sharp slowdown in inventory reduction.  In other words, businesses don’t have much inventory left.
• “Cash for Clunkers” program which is over and whose stimulative effect will not continue
• The crushing effect of the debt that Obama is blissfully piling on has not been felt yet

Is it a real treat to a double dip to come?

BOO!!!

This just in, President Bush recently admitted that his administration saved 150 million jobs.  When asked about this he tried not to take credit:

“I would talk Americans I met on the street and they would tell me that, well, sometimes they just felt like quitting their jobs.  ‘Why should I keep gettin’ up in the morning every day and going to work, when I could just sit home and get a free house, free car, like that lady in Florida said to Obama.  I couldn’t believe she said that, but he said he would have his staff get back to her.’  I would just tell the fella, that he needs to take care of himself and his family.  The American economy is strong and it will pull out of this.  That’s why I fought to cut your taxes.”

Truth be told, the man did not quit his job.  Another job saved by President Bush, and there are millions more like it.  Amazingly, it was all done without a stimulus package!!!

I know this story is hard to believe, but if you are skeptical, just go up and ask anybody who currently has a job and ask them, “Have you ever felt like quitting your job in the last eight years?”  and you will have your answer.  President Bush saved millions of jobs.  Film at 11PM.

The Democratic mayor of Lexington, Kentucky appeared on Fox News to discuss the money he is asking for to stimulate the economy.  Despite being asked three times, he dodged and never answered the question about how many jobs would be created.  Wasn’t that the whole point of the stimulus plan, to create jobs?  His hodgepodge of athletic field construction, and garden walkability enhancement are pork, plain and simple.

Am I alone in thinking that we will be hearing a lot more of these stories?  Also, consider the number of people needed in the government to oversee this kind of massive spending, who do not currently exist.  Anyone want to bet on the amount of fraud and mismanagement of massive proportions we are about to see as your children’s future is squandered?

“Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse” — Barack Obama, Op-ed piece in Washington Post, Feb. 5, 2009

Each day we wait…The most massive increase in government spending in the history of the Republic was passed on Friday night by the Senate, making it ready for President Obama’s signature.  Even Senator Sherrod Brown, had a private plane take him from his mother’s wake to cast the deciding vote on Friday night.

No Time to Read the Bill

Despite the enormity of this deficit spending increase that will saddle our children and our children’s children with a huge debt burden, and despite promises from President Obama concerning transparency and time to adequately review legislation, no one had the time to read this bill before it was passed.  You don’t believe me?  Do the math.  In 48 hours there are 2,880 minutes.  The stimulus bill is over 1,100 pages long.  So if you did nothing else for the 48 hours, you didn’t sleep, you didn’t eat, you didn’t go to the lavatory, you would have about 2 1/2 minutes to read and comprehend each page in the bill.

As President Obama said in the Post, we have no choice, this is URGENT!  So naturally, President Obama was standing with pen ready as soon as the Senate passed the bill.  It was raced up Pennsylvania Avenue to the White House to the waiting Chief Executive, or not.

• Friday night – President Obama does not sign the bill
• Saturday – President Obama does not sign the bill
• Sunday – President Obama does not sign the bill
• Monday – President Obama does not sign the bill

Pretty urgent, huh?  “Each day we wait to begin the work of turning our economy around, more people lose their jobs.”  So I guess the crisis has passed?  I guess losing more jobs no longer matters?

Do you think it might have been prudent to give the members of Congress and the American people the extra four days to review the bill before signing it? Of course it would be prudent, but the more we examine this the more it becomes clear that this is not about stimulus.  It is about rushing through a bevy of liberal spending programs under the guise of an emergency precisely so that it would not receive the scrutiny it deserves, because if it did, most Americans would be outraged.

The reason for delaying the signing for four days, is to get the most political mileage out of the signing.  Signing it on Friday, Saturday, Sunday, the Monday holiday, would simply not have the news coverage for President Obama to bask in.

American’s Interest or Self Interest

So despite all the rhetoric, the American people get a massive debt burden, the Democrats in Congress get all the spending goodies that have been stored in the closet waiting for the right crisis opportunity, and President Obama gets just the right amount of limelight.  Is that the change you were hoping for?

The neatly dressed man from Washington, tapped Joe the Plumber on the shoulder and said, “Good news, sir, you’re part of the stimulus program.”

“How, so?” Joe asked.

“Well, you’re a plumber, right?”

“Yes.”

The man from Washington grinned and snapped open his attache case and pulled out a contract.  “We need to have the Community Pool repaired.  It’s a ‘shovel ready’ project that will get the country moving again.  But we need to start right away.  So sign here.”

Joe’s business was a little slow so he looked over the contract, felt confident he could meet the requirements, signed on the dotted line and said, “I’ll get started right away.”

A Few Weeks Later

Joe was walking around the project with the building inspector, getting the final approval on the project.  As they completed their circuit, the man from Washington showed up.  “How’s it going?”

“It’s looks like we passed the inspection,” Joe said, “and we’ll be cleaning up now.”

“Great,” the young man said pulling two envelopes out of his attache case.  “Here, you go.”

Now Joe recognized what looked to be a check so he opened that first.  “Wow, that was fast.”  Smiling, he folded it over and put it in his shirt pocket.  He then looked down at the other envelope, and glanced quizzically at the government man, who was looking at the pool, “What’s this?”

“That? Oh, that’s your tax bill.”

“Tax bill?  What tax bill?”  Joe ripped open the envelope. “$19,000!!! What the hell is this?”

The Washington man looked sadly at Joe.  “Well how did you think the stimulus package got funded?  The Federal government gets its money from taxes.”  Getting no reaction from Joe, he burst out laughing, “Did you think Uncle Sam was sitting on some massive inheritance? Do the math: $800 billion bailout, 3.5 million jobs, that’s $228,000 per job.  Since you only got one month’s work out of this we divided it by 12, thus $19,000″

“How am I supposed to pay for this?”

The Washington man looked genuinely insulted.  “Don’t worry about it.  There’s no time limit.  What you can’t pay, your kids will pay, and then your grand kids.”  He snapped closed his briefcase, shook his head as he turned to walk away and muttered, “What an ingrate.”

President Barack Obama, took office with historically high approval ratings.  Congress ended its last session with historically low approval ratings.  So why is Barack Obama, the head of the Democratic Party, taking a back seat on the economic stimulus bill while Nancy Pelosi calls the shots?

President Obama campaigned on ending the divisiveness in Washington, as did George Bush, but bipartisanship is far more than dinner parties with conservative columnists, cocktails with leaders of Congress, welcoming ideas from Republicans that will eventually be ignored by Speaker Pelosi.  If bipartisanship was one of your themes, pay attention, there was bipartisanship on the stimulus vote, it was bipartisan opposition.

Taking family planning and some sod for the Washington Mall out of the package, does not magically turn this turkey into a stimulus.  It’s time for President Obama to do some arm twisting within his own party or his critical first 100 days will be a flameout.  Take a lesson from history, Presidents Carter and Clinton both took office with large Democratic majorities in Congress and tried to please them and neither could.  Clinton had a Republican Congress two years later and ended up with a pretty successful presidency.  Carter didn’t.

It’s your administration Mr. President, don’t let Nancy Pelosi snuff it out.

The vaunted stimulus package is heading for a vote in the House. It’s time for Republicans to lay it on the line and by that I mean they should all vote against it. Sure, if they do the media will come at them, guns blazing:

• “It’s the same old partisan politics”
• “They’re listening to Rush Limbaugh”
• “They are not giving the new president a chance”
• “They are going against the historic moment by trying to deny our first African American president his right to govern”
• “They’re just a bunch of racists”

But here’s how it should play out.  If this bundle of Democratic handouts will really fix the economy, then let the Democrats carry the ball.  They have the President, the House of Representatives, and the Senate.  They do not need any Republican votes to carry it, and the Republicans should not filibuster it.  If it doesn’t provide the promised stimulus, it will be entirely their responsibility and they will have to face the voters with that record in 2010.

If the Republicans sign on, in the “spirit of bipartisanship”, and it succeeds, Obama and the Democrats will take all the credit, because they control Congress and the Presidency.  If it fails, they will say that Republicans also voted for it, so re-elect me because we tried and we will keep on trying.  It’s heads the Democrats win, tails the Republicans lose.  This is not a stimulus package, it a package to consolidate Democratic power.

This package rewards those groups that helped elect Obama and the Democrats.  There’s money for:

• Hollywood
• Education (read teachers unions)
• National Endowment for the Arts
• Bicycle paths
• Birth control

Does anyone know how these things will stimulate the economy?  The purpose of this plan is to reward those who helped elect the Democrats to make sure they stay on board for 2010.  Find more groups to give handouts to so they will also vote Democratic.  Once they have a lock on power, they can wait forever for the economy to finally correct itself.  If the Republicans question that, the Democrats can point to the Roosevelt administration and how long it took to end the Great Depression.

If, however, the Republicans stand firm then the Democrats will soon realize they are standing naked with this blatant goody bag for their supporters.  The do not want to have all the responsibility for this if it fails, and based on what’s in there it will.  So they will retreat to the drawing board and work with the Republicans to craft something that will actually work.

If this is the administration of hope and change, why do they have to reach back 85 years for ideas on how to deal with the economy?  Many of the things they are pushing are the very things that did not work then.  The way out of this morass is to cut taxes, increase the money supply, and shrink the government, maybe not immediately, but as soon as the economy starts moving.

The tax cut side of the Obama stimulus package relies on what will be $500 per individual and $1000 per couple.  Do you remember the stimulative effect of the $300 tax rebate of 2008?  If you think about it, it comes out to about $10 per week for an individual and $20 per week for a couple.  Here in New York that will get the lovely couple a pizza pie, some soda, and a couple of dollars change.  Wow!  I can see the hiring binge that the pizza parlors, the sauce and cheese vendors, and the cardboard box makers will embark upon.  We should have 4.1 million new jobs in no time.

But the class warfare crowd just can’t bring themselves to admit that the elimination of the capital gains tax, and an across the board tax rate cut is the best way to stimulate the economy, because some people who are wealthy might get a tax cut when they’re the people we’re supposed to be soaking.  As for me, I much prefer the rich to put their money in play, rather than give it to the government to spend as those bureaucrats see fit.  I just don’t think they are that good at it.

What do you think?

At 06:00 this fine Saturday morning, the Obama folks released an analysis by their economic team of how their economic stimulus package is supposed to work (see full text here).  Quite frankly, I think there would be more stimulus from handing out coupons to Starbucks for a good shot of Joe, than this stimulus plan suggests.

Among the first things to catch my eye was the following statement:

“It should be understood that all of the estimates presented in this memo are subject to significant margins of error.”

There’s nothing like a good caveat to start off an explanation of how you’re going to spend nearly $1 trillion.  It brings to mind the old economic joke of how economists have successfully predicted eight out of the last five recessions.  While I understand the need to explain that these economists don’t have a crystal ball, you wish they were sitting at the table with a much smaller pile of our chips.

The thrust of the plan calls for “ substantial investments in infrastructure, education, health, and energy. “  To me that translates into bigger government than we have now.  Infrastructure is largely government owned.  There is also a significant lag effect in infrastructure projects.  Education is also government run.  After over $1 trillion in spending by the Department of Education, our education system is no better and probably worse than when it started.  Teacher employment has skyrocketed with the goal of making class sizes smaller with no demonstrable improvement in learning.  So, let’s pour more money into that arena and make sure we saddle communities with higher property taxes for years to come.  Sounds great!  Where do I sign up?  But, it does make the teacher’s unions happy.

Another chunk of the stimulus packages is to provide:

“State fiscal relief designed to alleviate cuts in healthcare, education, and prevent increases in state and local taxes.”

In other words, let’s take money from one government entity and give it to another, the reason being so that they don’t have to run a deficit at the state level.  Instead, we’ll run a deficit at the federal level.  Brilliant!

When you look at the charts, here’s where it really gets interesting.  The plan says it will take 5 years for unemployment to return to a 5% level, which is higher than pre-recession levels and it will reach this level with or without a stimulus package.  The difference is that the stimulus package will provide faster relief in the intervening period.  Their forecast is that unemployment will peak at 8% in 3Q09 with the stimulus, and at 9% in 2Q10, without the stimulus.  So we are to spend ¾ of a trillion dollars for a 1% improvement in the unemployment rate, for four years.  That’s an additional $193 billion a year for four years to get us to the same place we would be without the stimulus.  What the analysis doesn’t show is the stimulative impact on the economy of not having a $775 billion dollar deficit to pay off after the economy recovers.

The analysis then addresses the effect of tax stimulus:

“It is important to note that the jobs effects of temporary broad-based tax cuts would probably be considerably smaller. Large proportions of temporary tax cuts are saved, blunting their stimulatory impact on output and employment. The prototypical recovery package only provides for the first two years of the Making Work Pay tax cut. Our analysis assumes that households treat the tax cut as permanent in determining their short-run spending.” {emphasis added}

I would take that argument a step further.  As we saw earlier in 2008, there was a minimal stimulative effect from the $300-$600 tax credit that was issued.  Given a finite dollar amount, as the proposal states, most people are inclined to save rather than spend it.  I would argue that tax relief of any fixed dollar amount, that would be realistic as we can’t give everyone a check for $1 million, is going to have a limited stimulative effect on the economy.  However, when you cut tax rates, the stimulative effect is genuine and long lasting.  Why?  In the Obama plan, the tax relief is $500 or $1000, depending on if you file individually or jointly.  If I know that I am getting $500, regardless of how much I work, the stimulative effect of the $500 depends on what portion of my income that is. But like the $300, it is likely going to be used in these times for saving or paying down debt.  The fact that I may, and I repeat, may get another $500 next year, isn’t likely going to make me splurge on a new car.  However, if I know that my taxes will be lower on every dollar I earn, because of lower tax rates,  I am encouraged to produce more, work more, keep more, and spend more.

From an article in Reason this past Monday before Obama’s speech:

“Lets break this down. Its nice to see that the change we can believe in won’t alter the way Washington plays games with taxpayer money. We can give Obama the benefit of the doubt until we hear from him later this week, but if “officials” are really committed to “historical and empirical evidence” of how to get out of a recession, they won’t stimulus spend. Japan spent 10 years–its “lost decade”–trying to spend its way out of recession and wound up doubling unemployment and increasing the debt level above GDP. “Historically” real tax cuts for the wealthy and business world increased productivity and national growth, but they aren’t politically savvy, so we’re unlikely to see those too.”

So the search is for “popular” tax cuts, not effective tax cuts.

If you ask someone today which president is most responsible for the Great Depression, the answer will likely be Herbert Hoover.  However, Hoover was president for only three years of the Great Depression, while Roosevelt was president for eight of those years.  So while Hoover, without question, make some key errors that made the situation worse, Roosevelt couldn’t find his way out of the problem for almost three times as long, and yet the Democrats are using Roosevelt as a model but saying we have to do it bigger.  Are you getting a little concerned now?

Obama can use this to his advantage.  Just like Roosevelt and Hoover, Obama can and will blame the economic problems all on George W. Bush, for as long as Obama remains in office.  No matter what he does or fails to do, he can point to Bush and then to the Great Depression and say, hey, these things take a long time to fix.

Another point the Reason article makes is that recipients of the Obama tax cuts are very likely to be people who do not pay income taxes:

“While Americans know better what to do with their money than the federal government, many people got those checks who didn’t pay taxes in the first place, so they got other people’s money back. That redistributory system doesn’t encourage growth, it just hands out money.”

Americans do know better what to do with their money.  So here’s my prescription for the economic problem:

• Make the Bush tax cuts permanent
• Explore making the tax cuts deeper, going back to the rates that Reagan put in place starting the longest peacetime expansion in history.  Face it folks, if you want to get the economy moving, you have to give tax relief to people who actually pay taxes.  That’s were the money is, and it will be put to work to invest in businesses and create jobs, not to pay off the credit cards.
• Start dismanteling the federal government.  It is too big, it spends too much money, programs that start never end, and it is eating up too much of the economy.
  • Why is education a federal issue?  Kill the Department of Education
  • Why is the Department of Agriculture as big as it is when only 2%-3% of the population work in agriculture
  • Why are food stamps a federal program rather than being at the state or local level?
  • Why can’t we fix Social Security and Medicare.  The average return on Social Security investments is about 1%-2% per year, which is dismal
  • Why was the Grace Commission report, prompted by Reagan and finding about $400 billion in savings, largely ignored?
  • Why is our tax code, that is estimated to cost taxpayers $200 billion per year to comply with, not replaced with a flat tax?
• Kill the uncertainty overhanging the economy.  Tell businesses that the bailout window is CLOSED. Go back to running your businesses like you should, or face the consequences of your actions.  Government should clearly state what it will do and what it won’t do.  Without that, everyone will sit on the sidelines waiting for the other shoe to drop.

Once people stop waiting to hear what the government plan is, they will set about doing what they have to do for themselves.  Many of the problems that got us into this mess were caused by the government (Fannie, Freddie, Community Reinvestment Act, bailing out this company but not that one, keeping interest rates too low for too long, enormous deficit spending).  How any sane person thinks that “only the government” can get us out of it, escapes me.  This great country has enjoyed tremendous growth and prosperity through much of its history, with government playing a very small role.  But government programs and initiatives (New Deal, Great Society) have saddled us with a host of problems that we will be dealing with for many years to come.  It’s time that when the doorbell rings and we open it to hear, “I’m from the federal government, and I’m here to help you,” that we slam the door and follow the age old advice, “If you want something done right, do it yourself.”