Stimulus 3.0? – by Jacob Laksin


539w

Almost a year into his first term and ten months after a Democratic Congress passed his administration’s economic rescue package, a budget-busting $787 billion “stimulus,” President Obama has come up with a curious explanation for the sorry state of the economy. Apparently, it’s all the Republicans’ fault.

That was the takeaway from the president’s economic address yesterday at the Brookings Institution, in which Obama sought to account for the country’s swelling deficit and persistent double-digit unemployment by blaming them on the party that is out of power. Pausing to lament what he called the “bitterness of partisanship,” the president provided a textbook example of the wedge politics he had in mind by assailing the GOP for creating the economic crisis. Obama complained that “[w]e were forced to take those steps [to jump-start the economy] largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that had led to the crisis, decided to hand it over to others to solve.” No bitter partisanship there.

It’s not clear, however, that the administration has “solved” the problem that Republicans supposedly created. The administration’s stimulus package has done little to lower the jobless rate in the country, which now stands at 10 percent – this despite the rosy predictions of Obama’s top economic advisors that unemployment would not exceed 8 percent if a stimulus were passed. In November, hyped by the administration as a more hopeful month on unemployment, some 11,000 jobs were lost. Against this bleak background, the administration’s repeated claim that the stimulus has “created and saved” over one million jobs – itself a highly dubious metric, as Edward Lazear, the former chairman of the President’s Council of Economic Advisers, has documented – is bound to come as cold comfort.

Then there is the deficit. The president has long maintained that he inherited massive deficits from the Bush administration. The charge is not entirely without merit. Whether it was the Medicare prescription drug benefit, federal education spending or the early financial industry bailouts, the Bush administration certainly contributed to the $1.3 trillion deficit that greeted Obama in office. Clouding the exculpatory narrative is that the Obama administration has since increased the massive spending of the Bush years. It’s no coincidence that the federal budget deficit has soared to record-high $1.42 trillion for 2009 – the largest deficit in American history, relative to the size of the economy, since World War II. Even that does not factor in the cost of the administration’s health care overhaul, whose estimated ten-year price tag could top $1 trillion.  

But if the administration realizes that it has a spending problem, it has an odd way of curbing its excesses. In response to criticism of the growing federal deficit, the administration has simply promised to spend more, with the president yesterday highlighting his plan to “spend our way out of this recession” with a new round of stimulus spending. Yet the new stimulus – a term the president tellingly avoided using this week – is unlikely to be more successful than previous incarnations. Whatever the merits of the administration’s plans to boost spending on everything from infrastructure projects like bridges and highways, to social spending on seniors and veterans, and public sector jobs, it’s hard to see how they will energize the private sector that, in his own telling, the president deems crucial to reviving the economy.

The more pressing question is how the administration will pay for a new round of stimulus spending that could cost $170 billion or more. For instance, the administration’s proposal to use leftover funds from the much-maligned bank bailouts – the $700 billion Troubled Asset Relief Program (TARP) – has already incited ire on Capitol Hill. Republicans spent yesterday pointing out that the funds from the TARP were originally intended to go toward reducing the national debt. Channeling the funds to pay for a scarcely disguised new stimulus program, they charge, would be illegal. At a minimum, appropriating taxpayer funds aimed for a narrow economic purpose to subsidize the administration’s spending priorities is bound to prove controversial with the public.

That’s something the administration can ill afford. Obama’s newest stimulus plan comes at a time when public confidence in his stewardship has fallen to an all-time low. According to the latest Gallup poll, Obama’s approval rating has fallen to 47 percent, the lowest for any president at this point in his first term. Revisiting the same strategy that has failed to revive the economy to date will hardly allay those concerns. “Our work is far from done,” the president announced yesterday. A growing number of Americans fear exactly that.

  • Robert Bernier

    Wow! Read this one. It is really good. And this gentleman says it just like it is.

    This venerable and much honored WW II vet is well known in Hawaii
    for his seventy-plus years of service to patriotic organizations and causes all over the country. A humble man without a political bone in his body, he has never spoken out before about a government official, until now. He dictated this letter to a friend, signed it and mailed it to the president. Consult : http://xrl.us/bgeewc

  • keithrage

    Great photo of the puppet at work, I would like to see the actual script on his prompter.(look serious, deepen voice) “All our problems are caused by republicans”

  • CowboyUp

    Why bother calling dp political payoffs, shoring up government jobs, and paying people not to work an economic 'stimulus,' when it isn't. It's like bleeding a sick person and calling it medicine. People are starting to notice hussein's a scratched record that has no clue. Everything is someone else's fault, and he acts like the job was forced on him or something.

  • thinker1

    1.This is United States of America and its WH, not an economic debate/guessing team. Maybe it's time to listen to real experts?
    2. Our GDP is bastardized now. Some stocks up?…………. MEANINGLESS!!!! Americans do not get pay, only Chinese, Mexicans, etc.
    3. Harry Reid, grow up, stop using infantile arguments! We are not idiots – YOU ARE!

  • BS77

    We are over ten trillion in debt, we owe China a trillion, some sixteen million Americans are out of work, millions of homes are foreclosed, banks are failing, we have a directionless, money burning bunch of liberals guessing what to do…people who have never run a corporation or a large business…..some of whom have never worked a REAL job in their lives….throwing a billion here, a billion there without a clue, continuing to enable countless third world illegal and legal immigrants to enter the US….This is a DISASTER, but the lame stream media doesn't issue a whisper of warning.

  • USMCSniper

    The only way government can induce sustainable economic expansion is to reduce the taxes and regulations that inhibit productive activity. That will increase the incentives for productive activity, and in effect are the opposite of government spending.

    What is necessary is a change in the returns to work and investment — for example, a reduction in the tax rate faced by workers and investors. If the government gives you a $500 or $5000 tax credit or rebate, there is no incentive to change your behavior. But if the government reduces your (for example) income tax rate from 10% to 5% or 33% to 28%, you are keeping more of what you earn – which means it’s more worth your trouble to earn it.

    Economist Alex Tabarrok has the clever idea of reducing everybody’s tax rate substantially – for all income above whatever they earned last year. This would have a strong stimulus impact – by encouraging people to work more hours, tax second jobs, or (re-)enter the labor force. This would increase production and induce economic expansion without any use of taxpayer funds, and without replacing one type of production with another.

    That’s the sort of creative ideas we need right now, rather than a repeat of the stimulus spending approach that has failed every time its been tried.

  • bls12

    Apparently left-over money burns a hole in his pocket.

  • JINGOIST

    The headline here is Obama Hints At Spending Unused TARP Money To Boost Jobs. It seems that there are HUNDREDS OF BILLIONS left over for Obie to spend on his political friends. Say, for instance that Hillary Rotten Clinton owed 6 million dollars to a pollster…Let's have the taxpayer pick that up.

    http://www.domain-b.com/economy/worldeconomy/20

    Like all things Obama, don't listen to the lies, use common sense and experience and you're far more likely to arrive at the truth of the matter. First off, when the Obama Administration took over the TARP program they started strong-arming banks/mortgage lenders and converted preferred stocks to common stocks (voting stocks) in a blatant bid to control those banks. IOW they changed the rules after the LOANS were made. Some institutions were “forced” to take bailout funds by the Feds. (links are available).

    To a large extent the same crooked tactics were used by the Administration where the auto companies were concerned. Eat your heart out Hugo Chavez! You only WISH you had this much chutzpah!

    So what was the endgame for Obama? What is he after? To start with, you have to know who he is. Barack Obama is a fascist. He's using taxpayer funds to leverage control of corporate entities such as GM, Chrysler, the banks that took bailout LOANS, etc. without much regard for contract law or propriety. He's seizing control of capitalist entities while leaving them largely intact.

    So he has this “slush fund” of 700 billion dollars, and he has a two prong approach:

    1. Make as many loans as possible, as quickly as possible and EXERT control ASAP. Use “stress tests” on the banks against their will if necessary. DO NOT allow the borrowers to pay that money back quickly, use any excuse necessary. What's the purpose of all of this? The purpose is to make it as painful as possible for future potential T.A.R.P. borrowers, thereby leaving you in control of a HUGE unspent pile of money (TARP funds).

    2. Use the unspent TARP funds to buy the election of Democrats in 2010 and 2012. Call it job creation if you want or Dem seats “created and or saved.” The devil's in the details here.

    The whole thing's rather clever I'd say. Too bad that I'm not talking about Venezuela.

  • TellinYaNowBozos

    I think I know what the BS in BS77 stands for. I mean c'mon on already. Hasn't anyone noticed that the scale of debt has increased steadily for 20 years, during the same decades that we settled on a confirmed strategy of deregulation, 'free trade' and sending jobs overseas? And the millions of homes that were foreclosed upon largely predated Obama – it was entirely predictable given the destruction of the middle class fostered by the prophets of excessive deregulation. The mortgage industry pushed through laws that allowed mortgage brokers to distance themselves from any responsibility to the mortgage itself. The result? Mortgages handed out to those who couldn't pay. The Bush administration loved it – the bloated housing 'boom' in fact camoflaged the fact that the economy was in a shambles. And there's more to come. In respect to the 'lame stream media', we have to go back to the economists who are mostly linked to mainstream capitalist thinktanks, and who therefore have a stake in pretending the house of cards is still standing. Get ready for the real crash, losers.

  • bushlikesdick12

    BS77 has no corner of the market here when it comes to BS

  • bushlikesdick12

    Laksin would come up with the opposite scenerio if he could.

    Well I guess he could if we use Carter as an example. I quess my his logic Reagan would be responsible for the economic crises that started under Carter's watch.

    Reagan's approval rating wasn't much different than Obama's at this time of his adminstration either.

    So if we measure the effectiveness of a President by the condition of the country he left it for the next president then I would give Carter a 2 out of 10 and Bush Jr. a (-12) out of 10.

    I'm sorry but it is going to take a very long time to fix this mess Bush left us — much longer than Obama's term limit of 8 years.

    Maybe we will see some daylight in Ms. Clinton's 2nd term.

  • USMCSniper

    You really are too stupid to even suspect you are stupid. Huhhh??? You say….

    “Maybe we will see some daylight in Ms. Clinton's 2nd term” Good Grief, you are really a silly ridiculous fellow!

  • Melinda

    don't forget: lift chin as tho you're self-confident