Stimulus Package Displays Congressional Shortcomings

[Pangloss]

Watching the developing political situation surrounding the economic stimulus package seems to be providing a unique insight into the difficulties that pervade the current US Congress. Bipartisan agreement that the package is needed, combined with the always-present need amongst politicians to be seen as "doing something", produced an agreement in the House in near-record time. But now the bill has reached the Senate, and the brakes have been applied.

 

At a superficial glance this may seem odd, because even in the Senate there seems to be bipartisan support. Both the Democraitc majority leader and the Republican minority leader spoke in favor of the bill being passed as it exists from the House. But from the Senate's perspective there are two factors holding things up:

 

1) It isn't good enough to actually accomplish what it purports to accomplish (stimulating the economy).

 

2) It is desperately crying out for some serious earmarking.

 

The first reason is one of those reasons that actually sounds pretty good at first blush. If the current wave of opining economists is correct, the senate is right in saying that the package doesn't have sufficient impact, and that it would have more impact if it carried two specific areas of additional benefit: Extending unemployment benefits, and an increase in food stamps. These factors alone, to the extend discussed in the previously-debated version of the Senate bill, could have almost as much economic impact as the rest of the stimulus package put together.

 

But that impact -- the improved impact being suggested by the senate -- still amounts a ridiculously small drop in a very large bucket: $150-200 billion in a fourteen trillion dollar economy. All we can reasonably expect from this bill is that some of the money will be spent in strategically useful enough places to make a little bit of difference. And it's all deficit spending -- it's not like we budgeted for this money. It's being slipped in the back door right off Air China 777s. (Oh well, at least Boeing's getting paid.)

 

The real disappointment is the second point. Earmarking a supplemental spending bill in the middle of a war and a period of massive deficit spending is just lower than low. Are we going to let them get away with that?

 

It's almost a GOOD thing that the senate had to halt action on this in order to wait for three of its own to finish their Super Tuesday campaigns. That makes it a good time to email your senator and tell them what you think!

 

http://www.senate.gov/general/contact_information/senators_cfm.cfm

 

What I think is just that it's an interesting example of politics at work. When they have universal agreement on an issue, and spend anyway, in fact seeing spending as a solution, it really shows you what Washington is all about.

[Realitycheck]

As far as the rebates are concerned, a 1% GDP stimulus package sounds trivial. Targeting it more towards the poor will ensure that it will be spent quickly on consumables, rather than being stashed away in a savings account. However, I really don't see how it affects us any more than trivially.

 

I am really interested in seeing where their policy leads us of promoting continuous rate cuts in order to jumpstart the economy. They have been doing that for quite a while. Logically, there is an overabundance of dollars in existence as a result of this constant prodding, though a dollar cannot be necessarily lent unless it is owned, unless you are a credit card company. Many economists think that this is what has caused the dollar's gradual demise.

 

All in all, it looks like a big mess that is only getting bigger, as we try to manipulate forces that are possibly beyond the scope of our abilities.

 

We should be more concerned with being fiscally conservative and watching our own backs, rather than trying to dominate the world under the table and funding the entire thing on a credit card. I remind you of the post that points out how much can be bought with the total costs of the Iraq war, and that is just the Iraq war. So much is squandered in attempts to manipulate our world to our advantage. If we would only focus inward, so many problems would be solved.

[doG]

As far as the rebates are concerned, a 1% GDP stimulus package sounds trivial. Targeting it more towards the poor will ensure that it will be spent quickly on consumables, rather than being stashed away in a savings account. However, I really don't see how it affects us any more than trivially.

 

One small nitpick here. As far as rebates are concerned, they're only rebates for those getting back some of the money they paid in. Returning money to people that paid little or no taxes is effectively granting gifts from the public treasury, not rebates.

[ParanoiA]

One small nitpick here. As far as rebates are concerned, they're only rebates for those getting back some of the money they paid in. Returning money to people that paid little or no taxes is effectively granting gifts from the public treasury, not rebates.

 

Allow me to nitpick as well, since I had that same attitude until I was reminded that many folks who didn't pay income tax, DID pay social security and medicare taxes.

 

I have no desire to validate the convoluted tax structure by allowing myself to believe that those taxes don't count. Granted, they may not have paid income taxes, but they still deserve some of their money back too.

 

Another thing, why are the rebates not being given to those who actually pay the bulk of the income tax revenues? I believe the threshold was like $175,000 - so anybody making over that would be given nothing? Absolutely ridiculous and quite the insult to those tax payers. This class envy thing these jokers use to manipulate us is really getting old.

[iNow]

Another thing, why are the rebates not being given to those who actually pay the bulk of the income tax revenues? I believe the threshold was like $175,000 - so anybody making over that would be given nothing? Absolutely ridiculous and quite the insult to those tax payers. This class envy thing these jokers use to manipulate us is really getting old.

 

The logic behind it is pretty simple. A stimulus package is meant to encourage spending. Those making more than (let's ballpark) $50K annually can generally spend when they want or need to. Those making less... those who live paycheck to paycheck... need a little "bump" in their income to go buy things like braces for the kids, or Nintendo Wii, or an iPod, or a television, or a new hot water heater or whatever.

 

So... in order for the "stimulus" package to have an effect, it should be targetted primarily to those who need economic/financial stimulating most desperately. Put another way... those who's wallets are tightest and whose financial bungholes are puckered right tightly need some help and some incentive to loosen them up.

 

Once you get over $175K... it's hard to argue that the money the government provides will be redispersed into the US market of goods and services... so, it's directed at low income/low tax paying folks who WOULD redisperse the funds into US goods and services... but then it is subsequently labelled as a welfare action since the state is in essence redistributing the treasurury to the country's poor.

 

 

I'm all for having some extra cash to pay my bills, but I think this package (which will almost certainly pass) is both short sighted and misguided. It's like putting a band-aid on one's chest to treat a punctured lung... and the band-aid is infected ta boot.

[doG]

Allow me to nitpick as well, since I had that same attitude until I was reminded that many folks who didn't pay income tax, DID pay social security and medicare taxes.

 

I have no desire to validate the convoluted tax structure by allowing myself to believe that those taxes don't count. Granted, they may not have paid income taxes, but they still deserve some of their money back too.

 

 

I went back over my post and couldn't find where I had excluded those that paid social security and medicare taxes. There are people that will get a so called rebate that paid little or no tax in any category and I still say the money they receive is a gift, not a rebate.

[Pangloss]

I'm all for having some extra cash to pay my bills, but I think this package (which will almost certainly pass) is both short sighted and misguided. It's like putting a band-aid on one's chest to treat a punctured lung... and the band-aid is infected ta boot.

 

Not that I disagree with you, but just to add something here (that I don't know if you'll agree or disagree with), I'm not convinced that there's anything actually wrong with the economy. Or more to the point, the complaints revolve around symtoms, not diseases. I've yet to be convinced that the symptoms actually indicate disease, as opposed to just cyclical patterns execerbated by popular bad behaviors (indicating some need for increased regulation, but not a desperate cry for, say, a leap to socialism, for example).

 

To me the situation is analogous to the US Forestry Service's decades-long policy of extinguishing all forest fires as soon as possible. Note that the lesson learned from that subject is NOT that we shouldn't put out forest fires, but that we let SOME of them burn. It's only the tree-huggers who interpret this lesson to mean that people are the problem. The sane interpret the lesson to mean that we act more responsibly.

[iNow]

Wrong is a subjective measure. The economy is the economy. The only time "right" or "wrong" enter into the equation is when we make it relative to ourselves.

 

We are not prosperous is perhaps a more objective measure. Look at where we are, and what our system looks like... what it's future looks like... the struggles being faced by an ever increasing number of our citizenry... and you'll see that even those who work hard... who have an inherent industriousness... who are not welfare whores and who are not mooching off of the state's tit... they are struggling too....

 

That's a sign of an economy gone wrong... and it's also a place where "wrong" is not limited to the subjectivity of the individual. The way things are today, you can't accurately pidgeon hole the unemployed. This is the first time in years that the number of jobs has not increased...

 

 

http://www.guardian.co.uk/feedarticle?id=7275899

U.S. employers cut payrolls for the first time in 4-1/2 years in January, the Labor Department said on Friday in a report that showed the slowing economy was at growing risk of sliding into recession.

A separate report showing a modest revival in manufacturing took some sting out of the jobs loss but financial markets were betting the Federal Reserve will have to keep cutting interest rates to try to keep growth on track.

"The economy is very weak. It's on the edge of recession but the data are mixed enough so that you can't say a recession has begun," said Stuart Hoffman, chief economist for PNC Financial Services in Pittsburgh. "It's hanging by a thread but it hasn't been cut yet."

President George W. Bush acknowledged to a Kansas City, Missouri, audience there were "troubling signs, serious signs that the economy is weakening" and said Congress should speed up work on fiscal measures to get tax rebates to consumers.

Some 17,000 jobs were cut last month, sharply contrary to Wall Street analysts' forecasts that 80,000 would be created. December's new-job total was revised up to 82,000 from 18,000, but October and November gains were revised lower.

At midmorning, the Institute for Supply Management said its index of national factory activity rose to 50.7 in January from 48.4 in December, a sign of expansion. Consumer sentiment also rose, according to a Reuters/University of Michigan Survey, though not as much as had been forecast.

Financial markets were whipsawed by the contrasting reports, but stock prices closed higher to cap Wall Street's best week in almost five years as Microsoft Corp's $44.6 billion bid for Yahoo Inc stirred investor optimism.

TEETERING ON THE EDGE

 

Treat the problem, not the symptom.

[Realitycheck]

Not that I disagree with you, but just to add something here (that I don't know if you'll agree or disagree with), I'm not convinced that there's anything actually wrong with the economy. Or more to the point, the complaints revolve around symtoms, not diseases. I've yet to be convinced that the symptoms actually indicate disease, as opposed to just cyclical patterns execerbated by popular bad behaviors (indicating some need for increased regulation, but not a desperate cry for, say, a leap to socialism, for example).

 

 

I would be inclined to say that the democrats are TAKING OVER. The government goes and pulls something like this right before baby boomer retirement? I think the democrats are cemented in for a good long while. Socialism is pretty far out of reach, but I think that change is definitely in the air.

[iNow]

Politics and economics are not the same thing. People making enough money to live a healthy and happy life has nothing to do with which side of the political spectrum on which they land.

 

 

If you truly wish to make this a "partisan" issue, then perhaps you should recall that it's the Republicans who have reliquished our country's dominance.

[Realitycheck]

I did not say anything about partisanship. That's just the way I see it. Democrats handle economics very differently than Republicans, nothing more.

 

This article kind of colored my thinking, since it somewhat echoed what I had been saying. I don't care much for crucifying Bush out of it. Bush did not rule the country by himself, but these are Republican policies that have gotten us where we are. The Republicans seem to be the ones that are always on the warpath these days. It costs us not only money, but international respect and so forth. When it comes to markets, of any kind, everything counts. It all goes into an equation. If everything is not right, value is diminished. Nobody likes the bully, no matter how righteous he may be.

 

In one of these noted studies, they talk about how recessions tend to accompany crises. We could have avoided one hell of a crises if we never had gone into Iraq. That's is what pervades everyone's thinking. How much crisis do we need to make out of this?

 

http://www.harpers.org/archive/2008/01/hbc-90002247

 

How Bush’s Fiscal Mismanagement Produced a Recession

[ParanoiA]

So, since we're all interested in solving the "problem" rather than just treating "symptoms", then what exactly do you all think the problem is?

 

Where does the business cycle come from? Why do these bubbles, like the housing bubble, happen? No, I mean deeper than "those damn republicans"...it happens on the Dems watch as well.

 

Hint...watch a couple of Paul videos if you need homework help.

[Sisyphus]

So, since we're all interested in solving the "problem" rather than just treating "symptoms", then what exactly do you all think the problem is?

 

Where does the business cycle come from? Why do these bubbles, like the housing bubble, happen? No, I mean deeper than "those damn republicans"...it happens on the Dems watch as well.

 

Hint...watch a couple of Paul videos if you need homework help.

 

This time around, it was overly widespread granting of overly risky credit. Just like in 1929, though obviously not on the same scale. Why, does Dr. Paul have a different explanation?

[ParanoiA]

This time around, it was overly widespread granting of overly risky credit. Just like in 1929, though obviously not on the same scale. Why, does Dr. Paul have a different explanation?

 

Well, he says the cause of the business cycle is linked to our monetary policy - paper money. And, of course, he blames the federal reserve. They have impressive control of our economy and government - yet they aren't elected by us. He believes in a monetary system that relies on hard assets, like gold. The implication being that we wouldn't be experiencing these "bubbles" - that aren't isolated to the housing bubble.

 

I like to bring this up, because I don't really know any economists and I've yet to see Paul debate with anyone as knowledgable as he on the subject. He gets into nuts and bolts that the other candidates don't understand and can't really comment on or have a conversation about. Mcain's diversion to his "circle" of smart buddies was a classic response to Ron Paul's very specific monetary question during one of the debates.

 

I don't understand economics well enough to judge what he's saying, though. I mean, like most, I could probably fake it and pretend that I understand how money REALLY works, but that does nothing for me.

 

(I do know that Reagan, the conservative's hero, also expressed concern over leaving the gold standard with the quote "No country that left the gold standard ever remained great" - funny how they laugh at Paul over this...)

[bascule]

Why anyone thinks additional government spending is a solution to this problem is beyond me.

 

If the government is going to pump money into something, it should be a program to provide sustainable mortgage payments to those who were suckered into unsustainable subprime mortgages.

 

Instead... give everyone money! Yay! That'll fix everything.

[Realitycheck]

The thing with Paul is that he is something of an extremist. Some of his positions are really likeable, but many of them are simply not feasible. Abolish the IRS, abolish the Federal Reserve, abolish 99% of the government. Sounds good, especially if you are a Republican, but these sound like pipe dreams coming out of kid on fruit loops. It's very hard to even take him seriously. He sounds like a crazy. He's got it all mapped out in his mind. Destroy 99% of the government and everything is going to work out just fine, really, no ... really! Trust me!

[bob000555]

Actually the whole idea of stimulating the economy by giving money to the poor so it wont be saved is ludicrous. The root of the whole economic slow down is a lack of liquidity due to banks not being willing to make loans, Thus it would stand to reason that the money should be given to those who save to raise deposits at the banks. Secondly the government should make incentives to banks and investors to lend; not just mortgages but also financing for takeovers business expansion ect.

[ParanoiA]

The thing with Paul is that he is something of an extremist. Some of his positions are really likeable, but many of them are simply not feasible. Abolish the IRS, abolish the Federal Reserve, abolish 99% of the government. Sounds good, especially if you are a Republican, but these sound like pipe dreams coming out of kid on fruit loops. It's very hard to even take him seriously. He sounds like a crazy. He's got it all mapped out in his mind. Destroy 99% of the government and everything is going to work out just fine, really, no ... really! Trust me!

 

So the original constitution was extreme? I guess I don't get that. I think a million pages of tax code that requires people to go to COLLEGE just to interpret it is extreme.

 

I always like to point out that while these are positions of his, he has never, ever hinted at the idea all of it could be done - or even should be done - overnight. These are just established ends that define the ideology - not his plan of action.

 

His position also doesn't support social security - should be abolished. Yet, he very clearly laid out his "action plan" during the debates, which involves taking care of everyone that has paid into this plan - as promised - but giving "the younger people" a way out. His "action plan" is quite different from his "position" isn't it?

 

And that's they way all of his views seem to shake out when you get to the plan of action. He knows it's insane and impossible to change the country on this kind of scale too quickly. However, he does a very poor job of explaining that. And that's too bad, because many would "get" him if he would clarify the difference between ideological positions and realistic political goals.

[Pangloss]

I agree with all of the above, but I am concerned that if we elect Obama we are in for a lot more "stimulus packages". Unfortunately I see no other way to send a "knock it off" message to Washginton OTHER than electing Obama.

[iNow]

You've been listening to the Fox commentators again, haven't you?

 

 

I agree completely that we need to send that "knock it off" message though.

[Realitycheck]

My gut instinct tells me that rate cuts have little effect on the purchasing habits of consumers. How many times have you went out and bought something because of a lower advertised interest rate? It seems that the rebate would be more effective at accomplishing the same objective, but I really think that the free market governs and there is not a whole lot we can do about it other than act as prudently as possible.

[Pangloss]

You've been listening to the Fox commentators again, haven't you?

 

I know you're joking -- FNC is even more repugnant to me than CNN.

 

I peek in on BOR to see what he's blowing a gasket on maybe once a month, and I do enjoy Fox News Watch occasionally, which is their weekly media analysis show (which is surprisingly good). But when the Tivo runs over and accidentally snags a regular "anchor" or "commentator", I feel like I have to take a shower. <shudder>

 

My gut instinct tells me that rate cuts have little effect on the purchasing habits of consumers. How many times have you went out and bought something because of a lower advertised interest rate?

 

I assume you mean regular spending, like at a store, as opposed to buying a house, where it makes a huge difference. And you're right, except for one thing -- credit card debt. A cut in the interest rate means a lowering of debt for many (most?) consumers. The theory is that reducing that debt will prompt more spending. (How's that for an ugly truth about our society? BTW, X-Box 360, Wii and PS3 sales were all WAY WAY UP this past Xmas.)

 

But I think your point is valid because reduced debt doesn't translate exactly to increased spending. I was surprised to see the rate cut held up as an example of the "war on recession" this past week, outside of the context of housing. The New York Times probably reprinted a press release from the White House and all thinking and reason went out the window.

[iNow]

I know you're joking...

But, of course <pass the Grey Poupon>.

 

You did, however, imply that Obama would need to intitiate multiple stimulus packages (packagii? ), and I think that this is not really an accurate portrait to paint.

 

I see Obama's primary strength being the generation and advancement of big ideas, and getting people from all sides of the proverbial aisle to come together and make those ideas come to fruition... to execute on and implement those ideas. If those aforementioned ideas have the effect of repairing the self-imposed damages we have been experiencing in our economy, which I think many will, then I fail to see how a characterization of him pushing multiple "stiumuls packages" (I still laugh at the fact that this is what they are calling the current action...) if elected can be an accurate one.

 

 

My gut instinct tells me that rate cuts have little effect on the purchasing habits of consumers.

You are correct when it comes to smaller purchases, but with larger purchases (automobiles, homes, vacations, etc.) interest rates have a larger impact. However, to the root of your point, interest rates do more for the transactions in the banking industry than at the consumer level, and really tend to be motivated by a desire to curb inflation.

 

 

 

 

 

 

 

To supplement what I said earlier this morning (after now having gone through my Sunday morning ritual of political immersion), I do strongly believe that it will be a mistake if the Republicans this year attack Democrats as irresponsible "Tax and Spend" politicians considering that Republicans are responsible for an over 5 trillion dollar national debt.

 

A silly analogy would be to compare that to a child molestor attempting to tell someone that masturbation is an abomination.

[Pangloss]

I see Obama's primary strength being the generation and advancement of big ideas, and getting people from all sides of the proverbial aisle to come together and make those ideas come to fruition... to execute on and implement those ideas. If those aforementioned ideas have the effect of repairing the self-imposed damages we have been experiencing in our economy, which I think many will, then I fail to see how a characterization of him pushing multiple "stiumuls packages" (I still laugh at the fact that this is what they are calling the current action...) if elected can be an accurate one.

 

Well let me put it another way. Who is more likely to reduce government spending, Barack Obama or Mitt Romney?

 

My heart says to vote Obama (with increasing intensity) and my historical emotions tell me to vote McCain, but my brain suggests that Romney may be what this country actually needs the most, fiscally speaking.

 

But I'm keeping an open mind here, and I could be talked into it with a few smart choices in an Obama cabinet. That might be a good area for Obama to reach across the aisle and select for Treasury a fiscally responsible, moderate conservative with cross-class appeal, like Charlie Crist or Arnold Schwarzenegger.

 

I do strongly believe that it will be a mistake if the Republicans this year attack Democrats as irresponsible "Tax and Spend" politicians considering that Republicans are responsible for an over 5 trillion dollar national debt.

 

Why do you feel that Republicans are solely resposible for the entire national debt? Why wouldn't Democrats share that blame, both because of much greater length of time in control of Congress, and because they still got their share of votes (and earmarks!) when they weren't in the majority?

[iNow]

Who said "solely?"

 

Also, Romney makes me sick, and I'd vomit if he were elected. Seriously... I will. And if I hear him say the fu(king line "The house that Reagan built" one more time, I'm going to scream. He changes his position every other day and is trying to buy a seat at the White House. He has no noticable convictions and changes his approach with each passing breeze in some desperate attempt to get elected... not by the brilliance and steadfastness of his policy suggestions... but by subconscious suggestions... saying the name Reagan at least 4 times in each speech he gives.

 

I don't care how many times he says the word Reagan. That doesn't mean he'll adequately enforce the ideals for which the name "Reagan" stands. He is trying to buy a seat in the White House, he is trying to appeal to those paying the least attention, and I feel strongly that he will not be what our country... nor what our people... need if (god forbid) he gets elected.