The American Spectator

Baz| 2.8.09 @ 6:13PM

From an economic stimulative perspective, what's the difference between Lockheed Martin engineering contracts and IT, electrical, or civil engineering contracts?
I would definitely like to see more infrastructure spending, but I don't understand this thinking that if we spend on military, it WILL have a stimulative effect, but if we spend on civil engineering projects, it WON'T. From an economic standpoint, what's the difference?
Also, your Cato open letter link is dead.
But we've been listening to the Cato institute since the Reagan years with very mixed results. A few years up, a few years down.
I'd be very curious to see how the Cato responds to Moody's and the CBO's economic multipliers ranging from 0.75 to 1.02 for tax cuts and up to 1.75 for spending programs. 1.75 is real bang for your government buck. 1.02, not so much.
Truthfully, the only time in my life when I wasn't concerned for my job was 1996-2000, so I vote where my bread is buttered.

Jimmie| 2.8.09 @ 8:01PM

Baz, the economist from Moody's that the current administration touted has come out very strongly against the stimulus plan and says that the multipliers are quite simply wrong.

Common sense alone tells you that a Keynesian solution for anything other than an extremely short period of time is foolishness.

Robert Speirs| 2.8.09 @ 9:25PM

Actually, elections DON'T have consequences. If McCain were president, he would be doing exactly the same thing Obama is, but the Democratic Congress would be obstructing him for political advantage. And McCain's plan wouldn't work either. Elections!! Ha!!

Baz| 2.8.09 @ 10:03PM

With all due respect, Keynesian economics ran this country with the strongest economy the world had ever seen for nearly 50 years. 50 years before Milton Freidman ever got noticed inside the DC beltway.
Lets also not forget how we came to Keynesian systems. A lack of regulation on labor, business, and securities trading led to high concentrations of wealth and economic power, so that when the paper economy they had made collapsed, vast bodies of wealth evaporated, and the government needed to act.
That said, Keynesian systems are only as reliable as the systems to manage it; it fell apart in the late 70's for a lot of reasons.
And common sense is a terrible economic predictor. Possibly one of the worst. Ask Steven Levitt or Stephen Dubner.
And what do you do when taxes are zero, and the economy still has trouble? Who's responsible for infrastructure? Would you have economic life in America be survival of the fittest, Calvinistic "short, nasty, and brutish" fiefdoms? Because that's what it sounds like.

Tennwriter| 2.9.09 @ 12:24AM

Jharp,
Its pretty clear, Mr. Speirs was discussing economic policy, so you then move it from econ policy to other aspects of the Presidency.

I'm not sure he's right. Sure McCain would likely be doing the same thing, and the R's would be supporting him, but I think he could have gotten the D's on board as well. So McCain would already have this horrid stimulus bill passed.

It actually kind of makes me glad that Obama won.

moron| 2.9.09 @ 8:09AM

I certainly do not like the "maverick" McCain. But he would be doing the same thing?? McCain was a zero pork guy, and he would put forth a bill with 80% pork, the same pork bills not passed when attached to other bills in the past, under the direction of the Queen and King of pork, Pelosi/Reid.

You drama Queens are stretching a bit there.

Robert Rosencrans| 2.9.09 @ 9:13AM

It's an old game. Tell the victim the poison you are offering is cow's milk.

Robert Rosencrans| 2.9.09 @ 9:17AM

Without comment, or the need for it, the read of the day.
http://mises.org/story/3331
President Obama is under the impression that history owes him $1 trillion right now to spend on whatever he wants. His language is strident and full of irritation that anyone would question his right to live out his personal dream of being Franklin Roosevelt to George Bush's Hoover. This, he says, is what the election was all about.

The arrogance reminds me of George Bush after 9-11, who similarly believed that history owed him a gargantuan war in the tradition of FDR. And look how that arrogance led to disgrace and loss, as he unwittingly presided over the destruction of American prosperity while searching for bugbears abroad.

It just goes to show you that the presidency is something like a drug. It makes people lose all connection to reality. Part of the reality that Obama needs to recognize is that the New Deal was a calamity far worse than the initial market downturn that began it. He needs to stop basing his policies on dumbed-down civics texts versions of events and consider the economic logic.

With his rhetoric and policies, he has decided to demonize private enterprise, just as FDR did, as a way to present government as the great savior. Now, think about this. If there is a way out of the recession, it will have to be provided by private enterprise. It will come by new businesses, business expansions, entrepreneurship, new technology, and this will be the source of lasting jobs and prosperity.

You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools! These activities amount to capital consumption. They are not sources of investment. You can say that they are stupid tasks or wonderful tasks, but it is not a matter of ideology as to whether such public projects will make us all wealthier. They will not. They drain the sources of wealth from society. They represent a cost, not a blessing.

That was also true of Bush's dumb stimulus program. He was only bailing out his friends at our expense. The effect was to give a little longer life to institutions that were failing anyway. It's pathetic that the Republicans ever went along with it. You will notice that the scheme didn't actually work.

Well, Obama is doing the same thing, though rewarding a different set of friends. This is not wealth production. This is wealth consumption. Do enough of this nonsense and you can destroy the livelihoods of an entire generation.

Americans are proud of their system of government, but consider what it has given us this time around. We had an outgoing president who thought it was his right to grab as much as he could while leaving. Now we have a new president who thinks that the election entitled him to grab as much as he can, right from the beginning. We get looted by the state coming and going. It all amounts to one massive war on prosperity and freedom.

Particularly culpable here are the official historians who have for generations heralded FDR as the great savior. It is a case study in how a civic lie can appear and fester for decades. The fact is that the New Deal did not work. It prolonged what might have been a troubling two-year downturn into a horrifying blow to world prosperity that ended up in a war that killed countless millions. It was one of the greatest acts of wreckage in world history.

And Obama is inspired by this? He wants to repeat it?

I'm not so cynical about human affairs that I believe that errors must be endlessly repeated. Obama can put a stop to his madness. He needs to know — someone must tell him frankly and openly — that his current path is going to lead not to recovery, but to an extension of suffering, and untold amounts of it.

The biggest threat facing the American economy right now is rarely even discussed. It is the massive buildup of paper bank reserves in the last quarter of 2008. This was Bush's doing. He ordered the Fed to print like mad. Fortunately for us, the banks are still holding on to these reserves. When they start lending again, the result could be hyperinflation of Confederate-dollar proportions.

Hence the priority of the Obama administration should be to first do no evil, and second to find some means for withdrawing those reserves from the banking system before they wash through the economic structure and destroy the dollar. There is still time. He must act. Yes, that will lead to bank failures. That's good! It will lead to business failures. That's good and essential too.

$28 $21

There simply is no choice. If he acts now, he could find that recovery will come before his second term. This is precisely what happened with Reagan. He was fortunate to have advisers who insisted that he let the liquidation happen rather than attempt to fix the recession of 1981–82 with huge new government spending programs.

In any case, the hardest work to do here is intellectual. Obama's head is filled with myths and lies, not only about FDR and the New Deal but also about the government's power to repair the existing economic problems. With this model in his head, he can only do evil. This must change.

Nothing is inevitable. He can turn on a dime. The main message: do not repeat the actions of FDR, lest you destroy what is left of American liberty and prosperity.

Bill| 2.9.09 @ 10:15AM

First .. the citizens of this country know how best to spend their own money. So cut taxes and that will stimulate the economy as it always has in the past. Tell me what government program the government ever ran successfully. Social Security will be the next big disaster to hit the fan.
Second, and Republican who votes for this turkey should be thrown out of the party.
Third, elections do have consequences and so I am going to enjoy watching the dems continue to mess up the country until the citizens once again have a brush with common sense and throw them out of office. Republicans for the next few years can only try to limit the damage. The rest of us need to be in prayer for their support. God still rules his creation.

DSS| 2.9.09 @ 10:50AM

The most aggravating feature of this debate is the obfuscation and sham being put on the American public. Two primary things are at work here. First, politicians don't want to risk being seen doing nothing--even if that is best--during an economic downturn. So they will do most anything--even the wrong thing--just to crow that they felt the citizens' pain and acted boldly. They don't want to risk being seen as doing too little compared to the "catastrophic nature" of the crisis. So they are more than willing to risk spending too much and mortgaging the future for political safety.
The biggest travesty is the naked willingness to use a crisis situation and personal economic fear to justify and ram through a massive spending bill that has little to do with improving the aggregate economy. This has simply become a means to circumvent normal appropriations processes. Many of the expenditures included would never survive the normal process. They must be hidden in a 700 page bill that few will bother to read.
This is change we can believe in? It looks and smells like crass, dishonest politics from my humble vantage point.

Louis Jenkins| 2.9.09 @ 11:15AM

DSS- agreed. Can anyone explain how the Stimulus is going to be repaid? Let's see, three generations of tax payers, but then that pool or resource is getting less in size as the population ages out. Turn up the speed on the Treasury printing presses Scotty, "No wait, Capum! She cun na take anymore!!"

jharo| 2.9.09 @ 11:22AM

"Can anyone explain how the Stimulus is going to be repaid?"

Yes, I can. The debt will be lumped in with the $5 trillion George Bush frittered away. And will be paid back with tax dollars.

Only this time the spending will generate tax dollars unlike Bush's debacle that we have nothing to show for.

DSS| 2.9.09 @ 11:41AM

I would like for those bright-bulbs here supporting this so-called stimulus bill to help me understand some things I seem to be unable to understand.
1. How does $50 million to the National Endowment for the Arts provide stimulus to an economy in recession?
2. What about the $380 million for a nutrition program for the poor? Remember the criteria-- temporary, timely and targeted/
3. $15 billion for Pell grants
4. What about 5.2billion for ACORN?
5. $300 million for violence against women?
6. How about $650 million for digital-TV coupons and $90 million to educate "vulnerable populations"?
7. $150 million for the Smithsonian
8. $34 million to renovate the Dept. of Commerce building
9. $500 million for improvement projects for the NIH facilities

The list could go on and on. This is the reason so many of us are angry about this bill. So much of it is bogus as it relates to improving an economy in recession.

Stan Redmond| 2.9.09 @ 11:51AM

Jharp: It's not YOUR money or the government's money to spend as you please. You need to get over the belief that all money belongs to the government and after they take what we they want, then we get the rest. How'd [sic] tax cuts work the past 8 years? FABULOUSLY. There was huge economic growth. The house of cards STARTED by the government via Fannie, Freddie, CRA, et al collpased under the bloated bureaucrats that used those policies and organizations as a personal piggy bank to buy low income votes. Tax cuts WILL work (regardless of net effect it's still OUR money). Reduce business hurdles. Eliminate rediculous evironmental standards forced down our collective throats. And EDUCATE the public that GOVERNMENT CAN'T FIX ANYTHING!!! GOVERNMENT DOES NOT CREATE JOBS... The economy does not exist to serve the government.

Robert Stacy McCain| 2.9.09 @ 12:07PM

That liberal trolls are filling the comments field with fingerpointing at Bush tells you all you need to know about why Obama's efforts at bipartisan "civility" are a waste of time.

It might help if some people would read Bruce Bartlett's excellent book, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. The failures of the Bush administration were due to the simple fact that Bush was never a conservative.

Peter McGrath| 2.9.09 @ 12:17PM

Rosencrans has it exactly right. The confluence of events - the "Perfect Storm" - that threatens to derail the world economy - is the collapse of the banking system (whose origin is fed meddling in the mortgage markets) coupled with Obama in the White House and Democrat majorities in both Houses (with resultant government ascendance at the expense of the rest of the formerly free economy).

To fix the collapse of the private economy, we must ratchet government spending down and dramatically lower corporate, capital gains, income, death and payroll taxes. It is the only logical solution to the current crisis.

Instead, we are - incredibly - heading in the opposite direction. What our national government is now doing is the most ruinous, wantonly reckless course of action it could possibly take. The resultant worldwide suffering may possibly rival the Great Depression. Just wait until the Dems let the Bush tax cuts expire in 2010.

The sad, cynical conclusion one must reach is that our national leaders care nothing for the suffering caused by their policies. Rather, they seek expansion of their political base, knowing that creating more reliance on government subsistence (from entitlements or "make work" government union jobs) ensures continued Democrat majorities in both Houses.

Any American who accepts this equation is either (i) complict (i.e., part of the Left's elite power structure), (ii) defeated (a prole, a living dead person caught in Orwell's dreary, socialist trap), or (iii) a fool (e.g., Arlen Specter).

DSS| 2.9.09 @ 12:18PM

I am not an apologist for President Bush. However, I find it diffilcult to let misinformation be submitted as honest, thoughtful reflection. Too many have short memories when it comes to the economic challenges that faced our country and President Bush in the early part of his presidency. We were entering an economic recession following the bursting of the "dot com bubble". We endured a terrorist attack on American soil which also dealt a blow to our economy and markets. On top of that were the numerous corporate scandals which rocked confidence. How's that for a beginning? The amazing thing to me is how well our economy recovered and thrived following this trilogy of disaster. The truth is-- the economy has done very well between the book-ends of the recession at the beginning and at the end of the Bush years. There was low inflation, low interest rates and sustained GDP growth. The average unemployment under President Bush was actually LOWER than under President Clinton.

Do a reality check. There are ebbs and flows to a national economy. We experience times of strong growth and we experience recessions. It is a fact of economic life. The government can do little, if anything, to help, but it can do a great deal to mess things up.

Are you looking for a scapegoat? Try the likes of Pelosi, Frank, Reid and Dodd.

Indiana Alex| 2.9.09 @ 12:20PM

Social Security is fine? This is an excellent example of a successful government program. It is currently bankrupt (meaning that it can't pay future obligations in its current form, liberals, this means bankrupt), Yet this is what liberals throw out as a government success story.

In that case, i think this bill will work as well as Social Security. It will take money from one place, put it in another.

It doesn't take much for liberal success.

Thomas| 2.9.09 @ 12:32PM

I think that people are missing the point here. Government produces nothing. Its sole purpose is to provide a means for the citizenry to spend their money collectively to produce things that would be inefficiently produced strictly by the private sector, i.e. roads, military defense, etc.. To do this the government collects reasonable taxes from the citizenry and dispenses it in the way that a majority of the citizens wish it dispensed. Thus it is sound governmental policy to propose a project and them go to the citizens and ask for money. However, this no longer happens in America.

At the federal level, it is doubtful that even 51% of the citizens are in favor of spending any money on a crayfish museum in Louisiana, or a hot dog museum on Coney Island, or a water park in Florida. The same can be said for all levels of government. One of my favorites is government donations to charity. Not only do local governments give money to charities with which their constituents do not agree, but they squander money that was given to them in good faith to benefit ALL of their constituents. But our governments are comprised of people and people usually take the easy way out. It is usually much easier to simply give away money in the hopes that it will either prevent a problem from arising or to solve a problem. However, some problems can not be solved with government money. The current economic crisis is one of them.

The problem is not that there is an insufficient amount of money in circulation, it is that too much of it is tied up in investments that are currently producing too little return. Part of this is due to the collapse of the overly inflated housing market, part is due to an over use of credit rather than of capital, part is due to bad fiscal management in the private sector and part is due to the fact that federal, state and local taxes eat up far too large a portion of middle class income [somewhere between 35% and 50% of the average middle class income]. So the governmental answers to all of this is to take more money in taxes, encourage the over use of credit, artificially inflate the housing market, reward fiscally irresponsible private sector businesses and, while we're at it, let's give even more money to charitable (?), or at least special interest, groups. And we'll do that by printing more money, thereby guaranteeing inflation that will decrease the buying power of the people and businesses and increase the future tax burden of the citizenry to pay off this debt. Sounds good to me, how about you?

As for increasing funding for the military, I think that is a swell idea. Considering the state of the world today, we may well need additional men and military hardware. Also, it would do the same thing that WWII did for Roosevelt's New deal, take a significant portion of the unemployed manpower of America out of the job market and into a productive government program.

Think about it for while.

Robert Rosencrans| 2.9.09 @ 12:48PM

The government appears to be coalescing into a military financial strike at the private markets. Then end result is guaranteed . There will be hearings where none of the players who helped create the mess will face any scrutiny or criticisms. A new breed has taken over our society. Their theories can not be questioned by anyone who doesn't agree with them. In fact, we've reached a dictatorship. As he stated, "Screw you, we won."

http://www.heritage.org/Research/Economy/wm2276.cfm
y JOHN B. TAYLOR

Many are calling for a 9/11-type commission to investigate the financial crisis. Any such investigation should not rule out government itself as a major culprit. My research shows that government actions and interventions -- not any inherent failure or instability of the private economy -- caused, prolonged and dramatically worsened the crisis.
[Commentary] David Gothard

The classic explanation of financial crises is that they are caused by excesses -- frequently monetary excesses -- which lead to a boom and an inevitable bust. This crisis was no different: A housing boom followed by a bust led to defaults, the implosion of mortgages and mortgage-related securities at financial institutions, and resulting financial turmoil.

Monetary excesses were the main cause of the boom. The Fed held its target interest rate, especially in 2003-2005, well below known monetary guidelines that say what good policy should be based on historical experience. Keeping interest rates on the track that worked well in the past two decades, rather than keeping rates so low, would have prevented the boom and the bust. Researchers at the Organization for Economic Cooperation and Development have provided corroborating evidence from other countries: The greater the degree of monetary excess in a country, the larger was the housing boom.

The effects of the boom and bust were amplified by several complicating factors including the use of subprime and adjustable-rate mortgages, which led to excessive risk taking. There is also evidence the excessive risk taking was encouraged by the excessively low interest rates. Delinquency rates and foreclosure rates are inversely related to housing price inflation. These rates declined rapidly during the years housing prices rose rapidly, likely throwing mortgage underwriting programs off track and misleading many people.
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Adjustable-rate, subprime and other mortgages were packed into mortgage-backed securities of great complexity. Rating agencies underestimated the risk of these securities, either because of a lack of competition, poor accountability, or most likely the inherent difficulty in assessing risk due to the complexity.

Other government actions were at play: The government-sponsored enterprises Fannie Mae and Freddie Mac were encouraged to expand and buy mortgage-backed securities, including those formed with the risky subprime mortgages.

Government action also helped prolong the crisis. Consider that the financial crisis became acute on Aug. 9 and 10, 2007, when money-market interest rates rose dramatically. Interest rate spreads, such as the difference between three-month and overnight interbank loans, jumped to unprecedented levels.

Diagnosing the reason for this sudden increase was essential for determining what type of policy response was appropriate. If liquidity was the problem, then providing more liquidity by making borrowing easier at the Federal Reserve discount window, or opening new windows or facilities, would be appropriate. But if counterparty risk was behind the sudden rise in money-market interest rates, then a direct focus on the quality and transparency of the bank's balance sheets would be appropriate.

Early on, policy makers misdiagnosed the crisis as one of liquidity, and prescribed the wrong treatment.

To provide more liquidity, the Fed created the Term Auction Facility (TAF) in December 2007. Its main aim was to reduce interest rate spreads in the money markets and increase the flow of credit. But the TAF did not seem to make much difference. If the reason for the spread was counterparty risk as distinct from liquidity, this is not surprising.

Another early policy response was the Economic Stimulus Act of 2008, passed in February. The major part of this package was to send cash totaling over $100 billion to individuals and families so they would have more to spend and thus jump-start consumption and the economy. But people spent little if anything of the temporary rebate (as predicted by Milton Friedman's permanent income theory, which holds that temporary as distinct from permanent increases in income do not lead to significant increases in consumption). Consumption was not jump-started.

A third policy response was the very sharp reduction in the target federal-funds rate to 2% in April 2008 from 5.25% in August 2007. This was sharper than monetary guidelines such as my own Taylor Rule would prescribe. The most noticeable effect of this rate cut was a sharp depreciation of the dollar and a large increase in oil prices. After the start of the crisis, oil prices doubled to over $140 in July 2008, before plummeting back down as expectations of world economic growth declined. But by then the damage of the high oil prices had been done.

After a year of such mistaken prescriptions, the crisis suddenly worsened in September and October 2008. We experienced a serious credit crunch, seriously weakening an economy already suffering from the lingering impact of the oil price hike and housing bust.

Many have argued that the reason for this bad turn was the government's decision not to prevent the bankruptcy of Lehman Brothers over the weekend of Sept. 13 and 14. A study of this event suggests that the answer is more complicated and lay elsewhere.

While interest rate spreads increased slightly on Monday, Sept. 15, they stayed in the range observed during the previous year, and remained in that range through the rest of the week. On Friday, Sept. 19, the Treasury announced a rescue package, though not its size or the details. Over the weekend the package was put together, and on Tuesday, Sept. 23, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before the Senate Banking Committee. They introduced the Troubled Asset Relief Program (TARP), saying that it would be $700 billion in size. A short draft of legislation was provided, with no mention of oversight and few restrictions on the use of the funds.

The two men were questioned intensely and the reaction was quite negative, judging by the large volume of critical mail received by many members of Congress. It was following this testimony that one really begins to see the crisis deepening and interest rate spreads widening.

The realization by the public that the government's intervention plan had not been fully thought through, and the official story that the economy was tanking, likely led to the panic seen in the next few weeks. And this was likely amplified by the ad hoc decisions to support some financial institutions and not others and unclear, seemingly fear-based explanations of programs to address the crisis. What was the rationale for intervening with Bear Stearns, then not with Lehman, and then again with AIG? What would guide the operations of the TARP?

It did not have to be this way. To prevent misguided actions in the future, it is urgent that we return to sound principles of monetary policy, basing government interventions on clearly stated diagnoses and predictable frameworks for government actions.

Massive responses with little explanation will probably make things worse. That is the lesson from this crisis so far.

Mr. Taylor, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of "Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis," published later this month by Hoover Press.

Quincy| 2.9.09 @ 1:26PM

To those who insist the Bush tax cuts did nothing to help the economy, you're wrong. The Bush tax cuts weren't cuts at all. They were a tax transformation, moving the drag from the income tax to the inflation tax. Yes, inflation is a tax. Now, Obama is proposing cranking up the inflation tax even further without corresponding tax rate cuts.

Will every lefty reading this who's ever railed against stagnating wages for the middle class please stand up? Good, now kick yourself in the rear repeatedly if you support the Obama "stimulus" plan, because you're supporting a plan that uses the inflation tax to keep the poor and middle class down. Congrats!

megapotamus| 2.9.09 @ 1:56PM

Many Bush economic policies were seriuously flawed. Criticism of those policies was consistent and strident from the Right, especially that element of the Right we might call AmSpecism or Tyrellism. Yes, many of those policies have failed and brought us to where we are today. Is it because, as the New Dealers would have it, Bush tore off the guiding yoke of regulation so his buddies, the Malefactors of Great Wealth, could make worthless loans and palm them off on federal institutions? Um, no. The regulations on finance were not pruned in any sense, rather they were mutated and expanded now DEMANDING that financial institutions make deals so obviously worthless that no one in the private sector (with their own money) would make them. Don't believe it? M'kay! As stated so well above, the stimulus will be passed. It needs not single Republican. It needs not the merest nod to anything but the collective will of the Democrats and collective they are. Hoo-daddy! So we shall see. And we are not talking years or even months but weeks. If we actually CAN spend our way out of debt, everything is cool. If not, well, that will be plain to even the most dense of the Obots. We call this Reality Therapy. It is 100% effective. And sometimes fatal. Forward!

Quincy| 2.9.09 @ 2:52PM

jharp -

Inflation *WILL* be a consequence of this stimulus. That's an absolute fact when the correct, non-Keynesian definition of inflation is used. Inflation is monetary. When money is printed in excess of economic output, it taxes value away from existing dollars. This is inflation. This is the reason wages are stagnating in inflation-adjusted dollars, and have done so since the Bush administration and Republican congress got addicted to spending.

Now, the Democrats, the supposed party of hope and change, are using fear-mongering to inflict upon the citizenry a heaping pile of the same ol' ****. This economic stimulus looks absolutely Bushian to those of us not invested in the two party farce.

Economically, Bush was a lefty. So are most Republicans nowadays. Democratic partisans have a vested interest in portraying the neo-cons as hardcore free marketeers, but this is a fiction. R's and D's embrace the same economic poison, and higher doses of it aren't going to have a different effect.

The stimulus is a plan to make the lives of some Americans better by making the lives of other Americans worse. Those of us who work hard for our money will see ourselves indirectly taxed now and into the future so that others may profit. It's immoral and ineffective.

Mike| 2.9.09 @ 2:55PM

JHarp....
Like every liberal and every spineless Democrat that I have met you lay blame on everyone else but your own. It was a Democrat dominated Congress that created this mess and it was a Democrat President named Bill Clinton that pushed the first snowflake down the hill that started this avalance. It was Clinton's administration that passed the fair housing act of 1993 that made it a punishable offense to deny mortgages to individuals from under represented communities in home ownership.
Has anyone else noticed that the stock market plummeted once 'Bama started leading the polls? Who wants to pay capital gains taxes?
Glad this "sucker is going down" with this empty suit president!

Theophilus| 2.9.09 @ 3:17PM

92.8% of Americans have jobs. Cutting their taxes will stimulate the economy. Spending their money and their grandchildren's money is a bad idea.

skep41| 2.9.09 @ 3:28PM

OOPS! Too late. The time to stand up for conservative values was when supposed conservatives were in power. Now that we have completely lost control of the agenda because of our own lassitude and stupidity, we can only renounce all attachment to material possessions, get our begging bowls and wait for the government to decide...everything! At least we'll get free abortions.

Quincy| 2.9.09 @ 3:45PM

jharp -

"True. Though it is likely the economic output lags in relation to the increase in the money supply it is not a fact that it has to happen. It's more of a case of how much it lags."

Wrong. Inflation occurs when a money supply increase is enacted *concurrently* with a decrease in economic output. Since the dollar is currently backed by the full faith and credit of the US Treasury, the full economic output, as represented by GDP, is considered to be the value to which the number of dollars is compared. To keep the value of the dollar steady, the number available to spend has to track pretty closely with GDP. When the number of dollars produced outpaces GDP, inflation occurs. When GDP outpaces the number of dollars produced, deflation occurs.

The inflation and economic destabilization of the Bush era goes back to two things, a loose money supply and an irrational increase in credit fueled by it. The correct option is to stabilize the dollar by bringing the amount of money in circulation back in line with the pre-bubble relationship to GDP, taking, say, 1997 as a baseline. Given the severe contraction in credit caused by the uncovering of the irrationality, this means printing a certain amount of money to counteract it.

The stimulus package will throw the currency further out of balance by putting a massive amount of new dollars into circulation, making it one of the worst choices we can make. Those who work and save will be punished by the value loss in their existing dollars, while those who live in perpetual debt will see a temporary windfall followed by a cash flow pinch caused by the devaluation of their incomes. Nobody wins except Washington.

David J| 2.9.09 @ 3:47PM

Yes dropping tax rates DOES work (it increases revenue to the US Treasury), but ONLY if you don't OVERSPEND! Tax breaks are incentives to create jobs and for the private sector to spend money... but, of course, if you don't cut spending also you go deeper into debt. Why can't Democrats understand this simple concept? Of course tax breaks will help. Of course massive spending will prolong the agony we will suffer. Why is that so difficult to understand?
Perhaps BAZ can come up with an answer for me.

David J| 2.9.09 @ 3:50PM

JHarp - are you saying that since you opposed the war effort, you want to break the USA and bring her down? Is this a revenge thing for you?

Todd| 2.9.09 @ 3:58PM

jharp,
Being the brainwashed liberal Obamaniac you are, you are unable to see reality as it is and believe in fantasyland economics Socialist style. You refuse to believe Fannie Mae with the protection of Barney Frank and Chris Dodd is a huge cause of what happened because everything must be blamed on Bush. What is your rationale for thinking this? You refuse to believe it, no other evidence is needed in your pathetic little mind. Than you have the gall to lecture us to read something when anyone who is on this site is reading and we don't give a crap what you think really. I guarantee you things will be much different 2 years from now when people realize just how inept Obama as a President is along with the disgraceful leadership of Pelosi and Reid in Congress. You are just another bloodsucking liberal who wants to take from those that actually produce useful things.

bill| 2.9.09 @ 4:06PM

jharp. you missed the boat of course. did you miss 9/11 and the financial impact of it. how much do you think it would cost if we fought the terrorists on american soil. liberals have been running both the senate and house since 2006. the deficit grew quite a bit under their watch. you seem to forget that fannie mae and freddie mac made horrible loans as pushed by barnie frank and ilk. read how much in tax revenues came into the treasury after the so called tax cuts for the rich. our family income is between 50k and 60k and the tax cuts were a great help. liberals blame everyone except themselves.

jrharp| 2.9.09 @ 4:10PM

"how much do you think it would cost if we fought the terrorists on american soil."

A lot less than $1,000,000,000,000. That's $1 trillion.

And less than 4,500 American's would be dead.

And less than 30,000 American's would have been maimed and wounded.

And the terrorists weren't in Iraq.

Any other stupid questions?

Quincy| 2.9.09 @ 4:17PM

jharp -

"You are I are really not far apart. "

Wrong, we're lightyears apart. I believe that the big spending of economic leftists in both parties got us into this mess and that means there's no possible way the stimulus package can help reverse the trend. You believe, well, this: "Everybody wins. We are out of choices. Whether you like it or not."

I have no doubt that you believe this because you went to school to learn about econ and finance. You probably learned a lot of Keynesian theory and are trying to apply that to the current situation. Too bad you're trying to apply fantasy to reality. Keynesian theory doesn't take into account that the price system and the currency are media that transmit information, and that pump priming disrupts this transmission and results in bad decision making on the part of economic actors.

The stimulus will fail and it will make us all poorer along the way. Look at the US during the Great Depression, and at Japan for the last two and a half decades. Both kept poor and made poorer by the very actions Obama is proposing now. This is reality, get with the program.

Todd| 2.9.09 @ 4:21PM

jharp,
So your evidence is you went to school so you know everything there is to know and you can lecture us with your great intellect. There are hundreds of articles from many reputable sources that show the destructive role of Fannie Mae in this crisis and how the Democrats prevented any reform that Bush had requested years earlier. You don't want to know about it because it doesn't fit into your leftist worldview. Excuse me if I am not impressed. Btw, I have a MBA and majored in Accounting and minored in Finance and have worked in the Investment and Finance Industry as a Research Analyst so I am quite positive I know more than you about Economics.

Todd| 2.9.09 @ 4:32PM

Another thing jharp, no doubt you believe in the government multplier effect like idiots like Robert Reich are out there promoting. If that was reality, why not having unlimited spending if it actually produced more than it cost? The theory is ridiculous and has been disproven and nothing more than propaganda by left-wingers to expand their power and control over the economy. The same thing goes for the global warming scam coming from the enviromarxist.

Quincy| 2.9.09 @ 4:53PM

jharp -

It's clear you spent your time studying fantasy and propaganda. The lies you continue to repeat have been disproven for almost have a century by the work of F.A. von Hayek, Milton Friedman, and others.

However, since you are so convinced of the correctness of your assessment, and keep insisting that the asinine notion that the stimulus will be a win for everyone and is "our only hope" is the truth, I really see no further point in banging my head against the wall.

Good day.

Quincy| 2.9.09 @ 4:55PM

That should be almost *half* a century. I should proofread before hitting submit.

Todd| 2.9.09 @ 4:59PM

jharp,
Obviously you want to believe FDR saved us from the Great Depression with all his great policies. Many economists disagree with that assertion, how about reading this article just released today by UCLA economists that states his policies prolonged the depression by 7 YEARS!
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

Now Obama wants to follow the lead of FDR with new New Deal policies that will without doubt prolong the recession or even cause a depression. Don't give me this garbage we must pass this ridiculous stimulus because we have no choice and something has to be done. Obama's attempt at fear mongering to pass this garbage is pathetic.

ashok| 2.9.09 @ 5:03PM

I think the Republicans in Congress are doing fine - better than fine, actually. The points you made - notwithstanding your list of 4 things to do - they've made, and made pretty effectively. Boehner's list of things wrong with the bill when it was in the House got a lot of publicity. And McCain blasted Obama yesterday, and there was no getting around the fact that 3 liberal defectors aren't really something the party can do much about at this juncture.

I'm actually mad at conservative/alternative media right now, because the base is getting the news - I've been getting hit over the head with it many times over and over - and while people like you are doing an awesome job of creating the media we need (thank you so much for the updates on the RNC convention), I don't see any evidence that we're expanding our audience.

In fact, what I do see is this: bloggers and conservative journalists lecturing to Republicans what they should be doing, over and over again. And I'm not saying you and others are wrong to do this, to a degree. But it's wearing thin with me, esp. when I've seen how Kos reached out to a ton of other liberal bloggers, talked about winnable races and got people to support the candidates in those races, and then didn't stop reaching out.

Except for Pajamas, I don't really see an attempt to connect the GOP, conservatives and libertarian inclined citizens, and media. If you want to fault the GOP for anything, fault them for not telling the base to go read City Journal and The New Criterion and Little Green Footballs. Fault them for not recognizing how deep a hole we're in, where the media can create what they call history through cheap liberal sentimentality.

But if we're gonna fault them for that, then we gotta wonder about when we could have stepped up to the plate to merit attention. I don't know that we've done a good enough job. Part of me is looking at that point you made about CATO, and thinking: "couldn't there be a series of posts about basic economics by some blogger that nearly every conservative should have read?" Why does every battle have to be fought all over again, as if it is impossible to ask people to have an education?

Todd| 2.9.09 @ 5:06PM

I should say the study was released actually back in August 2004 but the date on the link is for today. Anyways, this study is a big slap down to people like jharp who worship FDR and the New Deal. Read it and weep if you dare jharp!

Todd| 2.9.09 @ 5:11PM

I thought I would copy the first 3 paragraphs from the article because I think they really cut to the chase of the argument. The last sentence is very relevant to this garbage stimulus bill being forced on us. I would advise everyone to read and understand this article to counteract the propaganda of the left.

Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

Robert Rosencrans| 2.9.09 @ 5:16PM

A Gallup poll declares that a majority (51%) support the stimulus bill. However, when you dig into the poll you find that it isn't true, with only 17% believing that the plan will make the economy a lot better. Forty seven percent feel it will make it a little better. The more the public finds out about PORKULUS the more they don't like it.

http://www.gallup.com/poll/114097/Americans-Support-Stimulus-Major-Changes.aspx

Regardless of their attitudes about the stimulus plan, Americans remain significantly concerned that the plan would not stimulate the U.S. economy quickly enough.

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Moreover, Americans have fairly low expectations for the plan's ability to turn around the economy. Just 17% say the plan would make the economy a lot better, while another 47% say it would make the economy a little better. Seventeen percent (including more than a third of Republicans) go so far as to say the plan would make the economy worse.

D.Hinde| 2.9.09 @ 5:47PM

Ok folks, math is math and you can't change. You owe $10000.00 in credit card debt, right?? You go to the bank to borrow $10000.00 to pay off the 10 grand, right?? Well guess what, you are still 10grand in debt, only difference is a one time charge of interest and it goes down as you pay it back. So my point is this, you can NEVER SPEND YOUR WAY OUT OF DEBT, PERIOD!!!! The problem with our government that it has never learned to cut corners, as we out here in real life do. Obama is nuts with this program that he has, just like the author of this article said, IT WILL NOT WORK!!!!!! What part of no don't you understand???? Obama is smart true, but he is smart almost to the point of being extremely stupid!!

Scott Shugart| 2.9.09 @ 7:12PM

Holy smokes "JHARP" catch a breath. I hope you weren't spending the entire afternoon convincing everyone of your brilliance while being paid to actually do something?

Ron Schoenberg| 2.9.09 @ 8:52PM

I'm really an ordinary person, at least with respect to these issues, and can't render a professional opinion. I'm an econometrican, 15 years for a software company, and now on my own giving advice to hedgefunds, but that doesn't mean I know anything about economics.

With that said, though, some of of the stuff I've read here is a bit off at least with respect to my own experience. For example about the lack of importance of government and the talk about reducing taxes on business. One thing I know for sure is that the software company I worked for couldn't have survived with the government. We couldn't have distributed any product without government built airports. I don't think it's an exaggeration to assert that just about every local business in my city is dependent to a large degree either on government built roads, like the interstate system, or airports.

Something else that's huge for me in my new business as well as my previous software company is the internet. That was invented and developed by the military, and public universities were responsible for bringing it to the people. It was government that made internet happen. I think it is not only important that businesses pay taxes, but fair.

I've listened to both sides on the stimulus versus tax breaks, and I'll admit to not being an expert. But I know enough about the company that I worked for that reducing their taxes would do very little for increasing their activity. What they would need is more people buying the software, not more money for developing software.

That's why the arguments of Krugman et al make more sense to me. Cutting businesses taxes isn't going to create more customers for those companies.

My own opinion is that we can only be saved by significant innovation. I believe in our universities, the best in the world. I believe in the innovative powers of Americans. And I think the best idea, proposed by Obama, is a Manhattan project on alternative energy. Cheap energy not dependent on oil would produce the greatest economic increase the world has ever seen.

reads1| 2.9.09 @ 9:01PM

Jharp the 'entrepreneur' probably never has held an honest job, probably cheats on his taxes, (if he pays any,) has a miserable marriage, (if anyone would have him,) thinks cleaning his own garage is an accomplishment, really believes he is part of the 'intelligentia' and is nothing but an Obama worshipping Democrat who excels at sliming others. Back at You!

pete| 2.9.09 @ 9:11PM

jharp, I wouldn't mind your condescension if you weren't such an ignorant ass. People have explained repeatedly why you are wrong and you continue with your diatribe against Bush and conservatives.

When you find yourself in a hole the first thing you need to do is to stop digging. Someone needs to take Obama's shovel away from him.

Jeremiah| 2.9.09 @ 10:01PM

Why is it that for eight years the Republicans showed so little interest in "fiscal discipline"?

Here's an interesting fact for you:

40% of the nation's total debt (accumulated from 1776 to the present) -- that's FORTY, nearly half -- was accrued during the administrations of Reagan and the two Bushes.

Forty.

But Republicans are the party of fiscal accountability?

Since when?

Republicans TALK about discipline, but they don't practice it when it counts -- i.e., when they're in charge.

I think it's time for the Democrats to purchase some votes for a change.

What's good for the goose.

Jim| 2.9.09 @ 11:05PM

jharp,
I believe you to be an economic illterate. You offer no intelligent response, Bush is gone, Limbaugh and Hannity are not government officals, they are irrelivent to the discussion.
You enough you will feast you the only thing obama offers America, the bitter fruit from his anus, eat well .

Marc Jeric| 2.10.09 @ 1:31AM

So with $900 billion of pork and welfare (including %5.1 billion for Abu Hussein's brown shirts of ACORN) we will have 3 million new OR PRESERVED jobs - how smart! If we end up with 3 million fewer jobs the smart one can say that without this abomination of pork and welfare we would have 6 million less jobs, etc. That's Harvard affirmative action for you! In any case, $900 billion divided by 3 million makes it $300,000 per job - how about that!

GreginOkinawa| 2.10.09 @ 8:15AM

"how much do you think it would cost if we fought the terrorists on american soil."

"A lot less than $1,000,000,000,000. That's $1 trillion. "

It would have cost A LOT more due to lost productivity

"And less than 4,500 American's would be dead. "

Likely A LOT more, including civilians

"And less than 30,000 American's would have been maimed and wounded. "

Likely A LOT more, including civilians

"And the terrorists weren't in Iraq."

Have you been to Iraq? I have...twice...both gulf wars. They've always been there...who do you think signed the checks for Palestinian Suicide bombers?

" Any other stupid questions?"

Have you ever been to war? Have you ever seen first hand a socialist paradise? Have you ever smelled actual poverty? My conclusion is that libs like you are spoiled brats and have never seen first hand what terrorists, (like those in Iraq) did. The war was MORE than necessary. But idiots like you who like to point out that Bush and reagan account for 40% of the total national debt forget that in modern times it is only REPUBLICANS who care enough about this great nation to defend it, and yes, that costs money.

wylde99| 2.10.09 @ 8:25AM

What a misnomer, SPEND YOUR WAY OUT OF DEBT! How does that work?

donald| 2.10.09 @ 10:23AM

I thought that Nancy pelosi and co. were intending to slow down the world economies and specifically the U.S.'s to "curb" global warming or freezing or whatever happens to be on the menu this week. I look at our politicians and I realize that they have all the good parking spots- how we entrust them with our wallets boggles my mind.

jr565| 2.16.09 @ 7:56AM

jharp wrote:
"And some advice for the wingnuts here. If you want more of a say so quit electing unhinged lunatics. And try making them more accountable instead of doing nothing but cheerleading them. It destroyed your party. It destroyed our economy. And you all get to sit on the sidelines and watch."

Funny, that's exactly the thing I would say about you. You're a cheerleader and don't hold your democrats accountable for anything. Plus you're awfully smug.

jr565| 2.16.09 @ 8:02AM

Plus, jharp we're currently at 7% unemployment (roughly) which means that 93% of people are still working and thus can get tax cuts. You seem to suggest that the majority of people are in fact out of work and thus there are no taxes to cut. Au contraire.

The other tax cut you neglect to mention are tax cuts for corporations. You know the guys that might hire those 7% and who need to be economically viable in order to spur the economic growth we're looking for.

Sperry James| 2.19.09 @ 7:15PM

Excellent post. The biggest issue is the fact that Obama's plan will make judges into mortgage bankers who will change terms at free will. Kevin Price, Host of the Price of Business Show wrote at www.BizPlusBlog.com that this will lead to the end of middle class home ownership in the years to come. I don't know why others are not writing about this.

Midas| 2.25.09 @ 9:29PM

1.75 factor for Keynesian government spending? Hey, if that's true, why stop with a couple trillion dollars; we should be doing trillion dollar spending bills every day! WOOHOO! /sarcasm off
Stop and think about that return factor a moment, and you'll realize it's the stupidest thing you've read recently.

John Mullen| 4.22.09 @ 9:51PM

"Shutting Detroit Down"

Its happening

Blacque Jacques Shellacque| 5.1.09 @ 12:58PM

There are hundreds of articles from many reputable sources that show the destructive role of Fannie Mae in this crisis and how the Democrats prevented any reform that Bush had requested years earlier. You don't want to know about it because it doesn't fit into your leftist worldview.

Somehow, that scene in Beverly Hills Cop where Axel Foley puts his hands over his ears and loudly says, "LA LA LA LA LA I CAN'T HEAR YOU" comes to mind...

Allan| 5.10.09 @ 2:01PM

"Bush was never a conservative."

Exactly right.

But conservatives supported him, lock, stock, and barrel.

Obama is not a liberal. And the liberals are letting him have it.

We are in the situation we are today because conservatives were Bush's cheerleaders. Had they teamed up with liberals to oppose Bush's actions (albeit for different ideological reasons), things might be different today. But they did not and they are not.

Dean_L| 6.11.09 @ 7:42PM

Aside from all of the Keynsian economic
foolishness exhibited by the Obama administration, I still contend he's not the great orator everyone claims he is.

Given that our focus is typically economic, the fact that every blog post seems to start with the obligatory "the guy sure can speak" is part of the problem. A big part of the problem.

If our message about smarter economics doesn't get out because we concede the messaging ground to Obama, then it doesn't matter how correct we are. By the time the voting public realizes their mistake the country will resemble the Weimar Republic.

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