Obama's Economy "Fix"

[Guest]

I started with a wish that Obama would succeed. I have heard his proposed "cures" for the economic problems facing us and have switched to trying to prevent him from succeeding in the plans he has outlined. He is proposing to throw out the system that has produced the strongest, most productive country that history has ever seen and replace it with a discredited system that has failed every time it has been tried. We can not spend ourselves into prosperity. Do not allow about 600 people in Washington hijack our lives and dictate how we live and how our money will be spent.

This country (and all others) has lived through many recessions and they generally last for 12 to 24 months. Only the depression lasted longer and it is now generally agreed that the government "cures" prolonged the problems rather than help end them. Obama is grabbing this reccession and intends to use it as an excuse to restructure our entire socity.

I have no choice but to oppose his plan with every fiber in my body for the sake of my children and grandchildren. Please join me before it is too late. Call and write your representatives in Congress and tell them to stop this madness.

[Guest]

People don't spend, workers get laid off; more people cannot afford to buy stuff; more and more workers get laid off. I think you get the picture.

Wasn't war spending responsible for getting this country out of the depression?

[Guest]

That's the problem in getting out of a recession is that it becomes self feeding. Government spending creates jobs, but the money is really fake in that either debt is created to pay for the expenditures or taxes are increased. If taxes are increased there's less spending occuring and companies either raise prices or layoff workers in order to absorb the increase in costs

Obama actually understands the taxation issue, which is why despite his campaign on raising taxes some and lowering it for others is on hold. He understands that raising the tax rate on those famlies above 250k reduces the spending in the economy. The ironic thing is that McCain saw this, said this and was lambasted. I have yet to hear one Obama supporter criticize him. I was actually a McCain supporter and am pleased to see Obama grasps some concepts that seemed unrealistic. The big concern I have now though is whether he sees this as his FDR moment.

[Guest]

I think the first poster needs to add a bit more detail to his/her criticism and concerns. Actually both Presidential candidates near the end of the campaign, when the scale of the economic issues were becoming more clear, proposed major spending stimulus packages as something they would pusue and the idea has broad appeal from members of both parties and a majority of economists, not the mention the broad support of other nations impacted by the U.S. economies troubles. So you concernt that is is a disaster may or may not be true but it certainly isn't so self evident that you can ask people to join your crusade to stop it without making a more specific and factual case.

Even 60-70 years later the jury is still out among historians and economists on how effective the New Deal was in pulling the U.S. out of the Depression. It is generally agreed that the economy did not truly rebound under we marshalled for and won the war, no doubt. But it is also widely held that the massive stimulus spending turned the tide, stopping the free fall of economic indicators and restoring public / consumer confidence and optimism. The war was the catalyst that finally jump-started massive growth but it would be simplistic and wrong to try and suggest the New Deal was not productive, let alone suggest it was destructive.

Also, the New Deal projects, like what is being proposed now, were benefitial to the U.S. in terms of sheer end results as projects above and beyond their purpose in job creation. The TVA and the many other power projects have a profoundly positive impact. Similarly, what is being proposed now are positive and in some cases essential projects in terms of repairing our national transportation infrastructure and/or supporting new transportation projects, etc.

If well executed (which of course is the big IF), personally I would rather see the $350 billion (the rest are tax cuts) proposed for these spending projects over the trillion the Bush adminsitration has handed the banks and insurance industry with absolutely no public benefit or results. The proported purposes were to ease mortgage foreclosures for homeowners and to give banks money to directly funnel into the credit markets to get credit flowing again. As soon as he got the money though Paulson baited-and-switched, giving none of it to mortgage relief and handing it to the banks with no meaningful strings attached by radically overpaying for preferred equity and doing nothing to force them to fund actual credit. Instead they have horded it, our tax dollars and an amount over 3-times as large as the actual spending package being proposed...

[Guest]

Very well. Let’s look at the specifics. All of these quotes are from Obama’s speech yesterday. If you would like the entire text of his speech it is available here. I urge you to read it.

http://www.investors.com/editorial/editorialcontent.asp?secid=1502&status=article&id=316308294466177

“only government can break the cycle …” If it were true that government can stop a recession then it must be true that government can prevent a recession. If so, how do you explain the string of recessions that repeatedly occur throughout the world? Carter, Reagan, Bush, Clinton and Bush wanted one? Obama is proposing more of the same policies that extend back through the War on Poverty to the New Deal – only much more so. His estimate is that his plan will “save or create 3 million jobs over the next few years” at a cost of 1.2 trillion dollars. Do the math. That is $400,000 per job. I can’t imagine that he is proposing to pay the workers that amount. I can only assume that government overhead will eat the rest.

“it’s not just another public works program”----“we’ll invest in priorities like energy and education, health care and a new infrastructure”—“will save the public sector jobs of teachers, police officers, firefighters—“ Apply some common sense to this. It is just another (failed) public works program dressed up in techno speak. We are to send dollars to Washington to have them decide how best to spend them and hope they will sent us a little money back to pay our township workers? To famously quote Joe Biden “you can put lipstick on that pig but it is still a pig.”

“Instead of politicians doling out money behind a veil of secrecy, decisions about where we invest will be made transparently and informed by independent experts wherever possible.” We know better than you how to spend your money. Just shut up and behave and maybe we’ll send something your way. This plan is designed to move decision making about how you spend your money and how you live your life from you to a very small group of people in Washington. Exactly what are the qualifications of people like Obama, Biden, Reid, Pelosi, Dodd, Franks, Lautenberg, Menendez et al (or anyone else) that would inspire you to let them decide for you how to live your life?

“I know the scale of this plan is unprecedented, but so is the severity of our situation.” This is perhaps the biggest lie in his whole speech. This economy is nowhere near as bad as when Carter left office. Obama has stated his intentions to use this recession to restructure our country. Don’t let it happen.

[Guest]

[Guest]

Thank you for adding specifics because it helped me understand your POV. Though I disagree with most of your assumptions and conclusions.

“only government can break the cycle …” If it were true that government can stop a recession then it must be true that government can prevent a recession.

First, it is illogical to summarily conclude that for a statement to be true the opposite must be true. Where did you get that notion from? Second, you are interpreting his statement to broadly mean “only a government can end a recession” which is not what it says. I agree with you that most recessions, though their arrivals and departures are always disowned/owned by politicians, usually are part of natural cycles that are at best hastened or prolonged but not caused by Presidents and Congresses. Obama is not saying a government is required to end any recession. He is saying that in this particular case the level of spending necessary to stimulate the economy is so vast that the government is the only entity with the ability and will to do it. And keep in mind it is a speech. It shouldn’t be confused with policy or a comprehensive explanation which he could devote hundreds of pages too. I doubt he even means it in absolute terms. Sure, if a vast cross section of private companies and financial institutions got together and agreed to buck the trend of hording and saving right now they could accomplish the same. Similarly, if no one did anything eventually the cycle would naturally shift, though possibly with far more pain first and much, much later and slower.

Second, what he’s proposing is not conclusively larger in scale than the New Deal as you suggest. You may be looking at absolute dollars and not factoring in inflation, but the collective cost of the New Deal programs announced in FDR’s first term are quite large in relative dollars. Not to mention some of them, like social security and the FDIC, have had a lasting cost impact that dwarfs anything currently proposed.

Your math on the cost per employee is radically flawed too. For one, you are double dipping, because roughly half of the package Obama is proposing are tax cuts (i.e. government revenue reduction and less collection from taxpayers) yet you are counting it as an expense to tax payers. Second, the you are quoting the total deficit estimated, not just the stimulus package, inclusive of all the typical expenses that the government was incurring prior to this new package, including the military and all our legacy government operations. They actual stimulus spending, so far (I have no doubt it won’t be the end) is $350M. Also, Obama didn’t state that the sole purpose or benefit was job creation so it would be illogical to divide the total by the # of jobs and assign that as the cost per job. That’s like looking at the spending in the military and dividing it by the # of employed solders, which doesn’t take into account spending on hardware, etc. nor the “benefits” of military spending beyond employment.

“it’s not just another public works program”----“we’ll invest in priorities like energy and education, health care and a new infrastructure”—“will save the public sector jobs of teachers, police officers, firefighters—“ Apply some common sense to this. It is just another (failed) public works program dressed up in techno speak. We are to send dollars to Washington to have them decide how best to spend them and hope they will sent us a little money back to pay our township workers?

Your general conclusion that “it’s just another failed public works program” again has no actual defense of your position. I assume you realize that is a generalization and opinion without facts and seems to reflect your general bias that all public works projects are by definition failures. Second, your premise is factually incorrect on a couple points: 1) You state “we are to send dollars to Washington…” but the largest share of the package is tax cuts so in point of fact we are sending less dollars to Washington (at least in the short term, but if you want to get into a larger argument about deficit financing and national debt we can, though the Republicans historically have been the largest users / champions of this form of government overall). 2) Then you state “… to have them decide how best to spend them and hope they will send us a little money back.” Have you read the plan? Because if you had I am confused by your assertion since the opposite is largely true. More than any previous federal spending program in history, this one is proposed to be structured to spend the money locally. Historically these plans are largely carved up through “earmarks” where Senators and Congressmen negotiate specific money for specific programs into the bill. This plan proposes to completely do away with that and instead directly apportion the money to various local, State and federal programs to be further distributed on a project by project basis. He’s even created a Cabinet-level position for the first time ever specifically charged with fighting against earmarking (chief performance officer) and has proposed the creation of a public website where taxpayers can go online a personally review exactly where federal spending goes. That level of transparency is unprecedented. Will he succeed? Unclear. Many in Congress, in both parties, will probably fight loss of earmarks to their dying breath. And all the distribution to States, etc. does is move the corruption and boondoggle down the food chain. Do we really trust our Governors (or even Mayors – look at what our local leaders have spent or would like to spend money on) to handle their portions equitably any more than the feds? To me that is the biggest danger, not the notion that public works are by definition bad as you seem to suggest.

“Instead of politicians doling out money behind a veil of secrecy, decisions about where we invest will be made transparently and informed by independent experts wherever possible.” We know better than you how to spend your money. Just shut up and behave and maybe we’ll send something your way. This plan is designed to move decision making about how you spend your money and how you live your life from you to a very small group of people in Washington.

You seem to be saying the opposite of the facts here. First, absolutely no money is moving from local to federal in this program. Second, if anything decision making is moving from historically federal (right now and historically local and statement governments and programs get funding for the projects in question from the Feds through Congressional appropriations and applications to programs like the Federal Transportation Authority, etc.) to more local. And in the current/historical model decisions have been made by federal members of Congress under the heavy influence of lobbyists (the lobbyists actually write most of the specific language of the bills). So there is no current basis in reality for your inference that “we” currently decide how to spend our money – “we” don’t. Lobbyist in Washington do. So how is a system that proposes to bypass federal lobbyists and send the money directly to States and other agencies and for the first time ever to give the public direct visibility to it (therefore allowing scrutiny to act as an audit process that could catch abuse and as a result change spending allocations) somehow shifting decision making away from us to “them”? It’s a baffling claim. You could argue whether it will work, whether it is a idealistic and doomed to fail because “they” (i.e. the people currently deciding how to spend our money) won’t let it succeed, but to suggest that the very idea is transferring decision making further away from “us” is like claiming the Sun revolves around the Earth.

“I know the scale of this plan is unprecedented, but so is the severity of our situation.” This is perhaps the biggest lie in his whole speech. This economy is nowhere near as bad as when Carter left office. Obama has stated his intentions to use this recession to restructure our country. Don’t let it happen.

First, your assertion is debatable. There are hundreds of economic indicators so I have no doubt you could cite dozens that were worse in 1980 than now. But I could cite at least dozens back at you were the indicators are far worse now than in Carter’s term. And if we were to collect all the leading economists (or politicians or whatever group you want) in a room and take a vote, I am confident a majority would agree that overall the current economy and the future economic indicators are collectively far worse than the late 70’s. You seem to be suggesting that the idea that we’re in a bad economy is being cooped or exaggerated by Obama (and perhaps the Democrats in general) but this just doesn’t jive with the facts. People from both parties were acknowledging this as the worst economic conditions since the 30’s before the election. Bush, a Republican, has already spent far more (if you exclude Obama’s proposed tax cuts from his “spending” total) to stimulate the economy that Obama proposes, so if this is really just the Obama administrations ruse to justify public spending what was the current President’s excuse? And why was McCain proposing similar plans for spending before the election? And why, if this is all an excuse for spending by Obama, would he propose a plan that specifically forced him to table many of his earlier plans, including a tax increase for weathly Americans and for business? If this is all an excuse for his agenda, why undermine his own agenda? It makes no logical sense as an argument.

A majority of Americans were expecting a large stimulus package from the new President, regardless of who was elected, and were conceptually favorable to it, just as FDR’s New Deal was enormously popular with the public in its day regardless of how effective it truly was or not. There is plenty to rationally debate. But the idea that this is some Obama or Democrat-specific program or that this was the plan regardless of the economy or that its goal is to transfer more spending control to the feds is all at odds with the facts. I’m certainly not convinced of the likelihood for success of the program but these just aren’t the basis to be questioning it on.

[Guest]

Stopping is not the opposite of preventing. The policy of increased government spending as the way to stop a recession would seem to be adequately tested (and disproved) by the history of ever increasing government spending. In the former Soviet Union government spending was essentially 100% of GDP but that didn’t prevent the economic collapse of the country. With the policies espoused by Obama direct Federal government spending would reach over 27% of GDP with an unknown additional effect of existing and future government mandates. With state and local government costs the total amount of the economy directly controlled by government would be in the order of 50% of the GDP. You want us to believe more of this is the solution. This spending is the cause of our problems, not the cure for them. This country is the most productive in the world is in spite of, not because of government involvement.

Again you wield smoke and mirrors. The reality is that Obama “tax cuts” are cuts only when measured against taxes after the 2010 expiration of the Bush tax cuts. Also, transfer payments to those who are currently paying no tax is not a tax cut, it is welfare. Am I to understand “directly apportion the money to various local, state and federal programs” is different than “we are to send dollars to Washington to have them decide how best to spend them and hope they will send us a little money back to pay our township workers”? The amount of money we as a state send to Washington vs. the amount returned shows just how much of a suckers game that is.

You seem to believe that this is not going to be micro managed by a small group of politicians. We are talking central industrial policy in capital letters. Look at Japan if you want to see how well that works. Already we have Congress forcing us to conform to their idea of what kind of light bulbs to use, what kind of cars to drive, how much water to use when we flush a toilet and on and on and on. The spectacle of congressmen grilling the auto company CEOs about using company planes is a lesson on how frivolously this new power would be used. Oh by the way, we are paying for a private Air Force plane for Nancy Pelosi’s travel to and from California.

I am amazed that you can view the conditions today as worse than the late 70s and early 80s. Don’t you remember 20% interest rates, 13% inflation rates or 9.7% unemployment rates? I understand that some on both sides of the aisle are hyping the conditions in hopes that we will not object to them taking power to do whatever they want in exchange for promises of good times. As far as I am concerned they are opportunists and should be voted out of office at the earliest possible moment. I repeat my earlier statement I will oppose this plan with every fiber in my body for the sake of my children and grandchildren. I could not live with myself if I did not try to stop this. Again I ask you to stand up and tell your representatives in Washington to stop this assault on our country and our freedoms.