economic stimulus

Hopefully the satire is clear and not too poorly done...

    Joe American gimps into the emergency room.  (We'll pretend that the hundreds of people that normally crowd the place are not there)  The nurse approaches him.  "Yes Sir, what seems to be the problem?"

    "I hurt my leg, I think it's broken."

    "Well, we'll get you fixed right up Sir. Come with me."

    So Joe American is whipped back to the ward with the solicitous nurse.  but imagine his surprise when he is told to sit down and bare his arm.  "I just need to draw some blood sir," he is told.

  "But what about my leg?"

    "We'll take care of you sir don't worry."

    The nurse marches off with several vials of Joe's blood and he sits and waits his leg a throbbing mass of agony.  Soon he hears a cheerful voice calling out his name.  He sticks his head out the door.   A smiling young man tells him, "It's time for your X-rays sir."

    "Finally," Joe thinks to himself.  But to his surprise there is no wheelchair.  "Ummm, my leg is hurting quite badly.  Can I get a wheelchair?"

    "It's just a few doors down sir and we'll get you fixed up," the young man replys.

    Joe grits his teeth and forces his way down to the X-ray room.  "Just sit there and we'll get those teeth checked out," he is told.

    "My teeth?  But it's my leg that's hurt!" Joe complains.

    The technician looks at him blankly.  "I am just going by the orders on your chart sir."

   "But don't you want to X-ray my leg?"

    The man looks at the paperwork in his hand.  "No sir, I've got you down for dental X-rays and a chest X-ray.  Why don't we just get those taken care of and then we'll see about the other thing."

    Joe grumbles but submits first to a full set of Dental X-rays and then hobbles over and barely able to stand allows for a chest X-ray.  He then is directed back to his original room.  Limping along and clutching to the side of the wall to keep from falling he barely makes back to his room before another nurse appears.  "Sir we're going to need a urine sample"

   Joe moans.  "But what does that have to do with my leg?"

    The nurse blinks and looks at him blankly.  Joe points down to his pants leg that is beginning to seep blood.  "I'm sure the doctor will take care of all your problems sir.  In the meantime...

    Joe is handed a cup and looking at the expectant face of the nurse he sighs and creeps over to the bathroom to provide the requested sample.

    Finally he makes his way back to the hospital bed and collapses into it.  Hours seem to pass before finally the curtain of the room and pulled back and a tall self assured young doctor waltzes in.  Through his haze of pain Joe feels a glimmer of hope that perhaps finally he will receive the care he needs.

    The doctor sits down and frowns across the bed at Joe.   "It's a good thing you came in when you did sir."

    "Yes I know, my leg..."

    The doctor interrupts "Your cholesterol alone is sky high and you have two cavities, not to mention that your BMI is....well, a good deal over the recommended limit."

    Joe falls back to the bed realizing that the original reason he came to the hospital in the first place has been totally ignored and that all the good doctor and staff are concerned about are minor issues that could have been dealt with at a later date but once they had him in their clutches they were unwilling to let a good crisis go to waste....

House Majority Leader Steny Hoyer (D-MD) confirmed this afternoon that Democrats will break their transparency pledge by bringing the stimulus bill to a vote tomorrow morning, giving lawmakers and the public significantly less time than the 48 hours promised.

The House is scheduled to meet at 9:00 a.m. tomorrow and is expected to proceed directly to consideration of the American Recovery and Reinvestment conference report. The conference report text will be filed this evening, giving members enough time to review the conference report before voting on it tomorrow afternoon.

Hoyer's statement is disappointing if not surprising. For a party that made open government a rallying cry in 2006 and again in 2008, Democrats have effectively abandoned transparency for political expediency -- and resorted to cajoling K Street lobbyists.

Even supposed transparency advocate Sen. Claire McCaskill (D-MO) said today: "Don't know when we're going to vote. Will the no votes delay vote just because they can? Speed is important. They know that."

Assuming Hoyer's plan is carried out, he would give House members about 13 hours to read the 780-page bill. A congressional staffer did the math. That means lawmakers would be required to read one page per minute without sleeping or taking bathroom breaks.

Why the rush? Democrats know the longer the economic stimulus bill lingers, the more likely the public is to turn against it. Within the past week, Americans for Prosperity has seen a significant spike in people signing its anti-stimulus petition; the number stands at 435,000.

Equally disappointing, there's no indication that President Barack Obama will fulfill his promise for a five-day waiting period. Despite pressure from groups like the Sunlight Foundation, the White House could violate Obama's campaign pledge for the third time in less than a month.

Obama promised to "end the practice of writing legislation behind closed doors" in hopes of restoring trust in government. Despite overwhelming public approval and significant political capital, the president has made clear he's not yet ready to change the ways of Washington. This creates a tremendous opportunity for the minority.

We now live in a climate gripped with fear.  It's the worst economic times since the Great Depression, we are told.  Government must act swiftly, boldly, and decisively if we are going to survive the coming maelstrom.  We have Depression countdown clocks and the like.

But, is the fearmongering justified?  Here are a few facts to illuminate the discussion.

Let's look at unemployment.  The most recent statistics from December 2008 reveal that the national unemployment rate is 7.2%.  That's bad, but is it the worst it's been since the Great Depression?  Hardly.  It is worse than the 2001 recession, but we are still below the peak of 7.8% set in June 1992 for the most recent recession since then.  We are still far below the peak of 10.8% experienced during the 1980-82 recession.  In fact the unemployment rate was at or above 7.2% all the way from December 1974 to March 1977.  They were bad times, sure, but definitely not a Second Great Depression.  Did you know that the unemployment rate was above 7.2% for most of 1958?  You normally don't think of the 1950's as a time of great economic peril.  So, to put in perspective: The unemployment rate is high, but not even as high as it was in the 1980-82 recession, and definitely not approaching Great Depression levels of 15-25%.

Let's look at GDP.  The data for 4th quarter of 2008 isn't out yet but one group has forecasted that it will fall at an annual rate of 2.9%.  But, that was way back in November.  A more recent forecast is that it will fall at an annual rate of 6.0%.  Six percent!  That's huge, right?  Well, yes and no.  The last time GDP fell by this magnitude was in 2nd quarter 1980, and then in 1st quarter 1982, when GDP fell by 7.8% and 6.4%, respectively.  But, suppose the forecast is wrong - suppose GDP falls by more?  Well, from 1930-32 GDP fell by 8.6%, 6.4%, and 13.0%, respectively.  But this was because we were in a deflationary spiral (see below), and things could only get as bad as the Great Depression if GDP were to fall by similarly large amounts for three consecutive years.  If this were to happen, the Democrats' economic stimulus wouldn't do a damn thing about it anyway.  To put it in perspective: Right now the US GDP is about $14.5T.  If it were to fall by the same amounts as it did from 1930-32, by time we were done, the GDP would be at $10.8T, or a loss of $3.7 trillion dollars.  So based on $800B of spending, you'd need a Keynesian multiplier of about 4.5 in order to generate economic activity of that magnitude.  So quibbling over multipliers of 1.2's and 1.3's would thus be ridiculous.

Finally, inflation.  Are we in, or on the verge of, a deflationary spiral?  Deflation is caused when there is a simultaneous contraction of the money supply and expansion of the supply of goods.  Because there's less money around, the price of goods falls, and the deflationary spiral starts when the price is lowered below a company's profitability margin.  The result?  Disaster, as companies cannot afford to stay in business, leading to bank failures as the companies cannot repay their loans... and the spiral begins.  But in order to have a deflationary spiral, there's gotta be a contraction in the money supply.  One perusal of this graph should convince you that there isn't.  The money supply has increased beyond all historical precedent.  What we have to fear most is devaluation of the currency via inflation, rather than a deflationary spiral.

So, to sum up:  Things aren't as bad as the fearmongers would have us believe.  Our most recent historical precedent for when things were this bad was the 1980-82 recession.  And, did we need massive economic stimulus to get out of that one?  No, I think this man had other ideas.

The "new math" or "fuzzy math" wasn't taught in parochial school in Brooklyn in the 1960's, so if the numbers in the Obama deficit spending scheme are owrking for me I apologize for my limited educational skills compared to the Ivy League wizards drawing this one up.  

But I did the math, and assumed this amoprphous proposal works exactly as planned.

Obama advisers say plan would create 3.5m new jobs- AP

Facing growing criticism of his economic recovery plan, President-elect Barack Obama made public Saturday a detailed analysis by his economic advisers that estimates the $775 billion plan of tax cuts and new spending would create 3.5 million jobs over the next two years

$775,000,000,000 divided into 3,500,000= $221,428 per job "saved" or "created"

I've seen lots of local economic development proposals that got turned down with a better cost per job projection for being wasteful pork barrel programs.

Mind you I'm making two very big assumptions here in Obama's favor:

a) the plan works perfectly

b) the plan's cost comes in @ $775B. 

First, Senator Charles Schumer, Super Genius, has made clear Congress is going to add a massive amount of pork and fillers to the original Obama plan. But not to worry, it will come in under a trillion dollars.  

And the overall trillion dollar deficit scheme is going to be "paperless" Hard to tell if it works if it isn;t defined.

What's worse is what if the deficit spending scheme fails? And one economist points out that we've been trying to do "stimulus" for over a year in loose fiscal and monetary policy without result, suggesting a trillion dollar Obama program is akin to the Battle of the Somme   where Allied generals concluded that using more ammunition would achieve victory applying the same unsuccessful tactics.

What if we get a trillion dollars deeper in debt (adding a new $50B+/- interest cost in perpeuati )but the Obama scheme fails to revive the economy? (such as the Somme cost the UK most of it's trained soldiers to gain a few km) Will we be treated to the weak justification "well, things would've been worse"?  while they demand yet another trip to the stimulus bar?

Note: the annual interest cost on the added debt will run about $11,000 per new job created. If the new jobs don't net an annual increment of about $56,000 in GNP/job the new net tax revenue per job will be insufficent  to cover the added debt load to pay for the . (assumption is 5% interest rate average going forward and a 22% tax/GNP ratio--at the $775B cost/3.5M job gain).

Based on running these numbers, there's a high probablity the existing workers and taxpayers will have to go out of pocket ad infiteum to pay for these "new jobs"; which of course, will mean fewer "old jobs".

This is why the Republican Party has no business endorsing Obamanomics.  It may well decide to let the Democrats pass it on their own, but Warner Tood Huston explains eloquently how a loyal opposition gives the incumbent party a "chance" without being co-opted in the process.

Getting back to the original point--if Republicans proposed an economic scheme based on deficit spending that cost $221,400 per job created , think it would fly through unscatched?

President-elect Barack Obama has talked the talk about government transparency. But will he walk the walk? House Republican Whip Eric Cantor (R-Va.) stole the spotlight on the issue yesterday when congressional leaders sat down with Obama to discuss his economic stimulus package.

According to the New York Times, Cantor secured one of Obama's first specific policy commitments when the president-elect agreed to put "the entire contents of the legislation online in a user-friendly way to see how the money is being spent."

This was a brilliant suggestion from Cantor and a savvy political move. Conservatives must hold Obama and his administration accountable for his transparency promises. While I'm skeptical of Obama's sincerity (judging from his health care forums), the only way to keep him honest is to play offense.

Details of how Cantor's idea is accomplished will need to be figured out, but it's based on the concept that a full online ledger of the stimulus spending should be publicly available in a user-friendly format. The information should be updated in real-time, meaning that as the stimulus spending changes, the information online should reflect it immediately. Taxpayers should be able to sort by congressional district to find out how the money is being spent.

My only gripe with the idea is that it assumes a spending-focused stimulus is inevitable. Regardless, the onus will be on Obama and congressional Democrats to live up to their promise for complete transparency.

Now this is goining to have the sound of "man bites dog" on this blog, but Congress ought to set to in the lame duck session this week and insist that the Energy Department immediately spend $1.2 billion.

It's the best bargain for public money I've seen in a long while.

The Strategic Petroleum Reserve is short 26 million barrels from its 727 million barrel capacity.

http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve

It had been filling at the rate of 70,000 barrels/day when noted energy experts like Senator Chuck Schumer insisted this be stopped so as to keep the feds from adding to oil demand, thus boosting oil prices. This was when the price of crude was going to infinity and beyond.

At the time, eminently reasonable But of course, they then passed legislation forbidding the Bush administration from buying any more oil.

In order to take advantage of the oil bubble's collapse (prices are down around $40/bbl) the legislation needs to be repealed. NOW.

The window to take advantage of this historical crash in oil prices may be short. OPEC meets on December 17 and almost cretaintly will shut in lots of production to try and drive the price back up.

Acting now in the lame duck session to repeal the SPR purchase ban is good for taxpayers, good for consumers and  improves our energy independence. And as soon as the ban is lifted the Energy Department ought ot buy up as much oil as it can immediately.

If they don't act; I do not want the likes of Reid, Pelosi and Schumer bleating next year about energy independence--topping off SPR is a quick cost -effective way to improve the situation now, not some green pipe dream decades away from market.

While we are at it; maybe DOE ought to lock in oil futures for December 2009 delivery.  We might like to emulate Southwest Airlines and set a fixed price for future fuel needs for the Pentagon and the Low Income Energy Assistance Program.  I'd love to see us get heating oil to the northeastern non-profits cheaper than the tinhorn dictator Hugo Chavez and his lefty Kennedy friends.     

It's an idea that makes perfect sense. So, don;t expect anyone in Congress to do this. 

One of the main reasons bandied about for the GOP's decline is its lack of ideas. According to this re-telling, conservative think tanks once kept the idea pipeline freshly stocked, and it was this intellectual revival that underpinned GOP victories in 1980 and 1994.

The fact that this argument gets made internally shows that conservatives care more about ideas even when they (supposedly) don't have any than Democrats do when they are ascendant and (supposedly) chock full of them.

Witness my daily e-mail from the Center for American Progress: The New New Deal.

We are now engaged in a full-on debate over the return of nearly eight decades old economic policy, with George Will and Tyler Cowen weighing in on one side of the new New Deal debate and Paul Krugman, Brad DeLong, and OpenLeft arguing on the other.

But no one is pointing out that having a debate over the New Deal in 2008, much less recreating it, is patently absurd. The New Deal began 76 years ago. The New Deal is about as relevant today as the economic policies of John Quincy Adams were at the turn of the 20th century or Reconstruction was in the post-World War II period. Republicans should be mocking the fact that "change" apparently means 76-year-old economic dogma that first burst onto the scene a few years after the Talkies became all the rage. 

The age of liberalism's ideas should be at issue here. The agenda of the incoming Obama administration is looking remarkably similar to an unfinished to-do list from the time Democrats last had complete control of the government 16 years ago: an economic stimulus (albeit one 30 times as profligate), national health care, and gays in the military.

Don't they have any new ideas?

Democrats have made an electoral killing off the idea that Republican ideas are old. One of their major memes in the last election was that John McCain was too old and couldn't use a Blackberry. So it is ironic that their new, young, and fresh! President is directly modeling his agenda off that tried during a decade-long prolonged depression older than the man he defeated.