Strengthening Constitutional Self-Government

No Left Turns

Reviewing the Various Views of the President’s Stimulus Victory

It was achieved behind closed doors in response to Obama’s gloomy words exaggerating the prospect of doom. The right word to describe the messy package is WASTEFUL. But we shouldn’t use that word, because confidence in its stimulating effects is the key to stimulating our ANIMAL SPIRITS. If the stimulus works, it’s as a placebo to get investors investing.

Discussions - 22 Comments

Isn't it the animal spirits of our legislators that made this piece of legislation such a mess?

But Obama said the wastefulness of it was good and we should all be happy about the prospect of joyously wasteful government spending. That is the point, I thought. Words we are not supposed to think about are debt, inflation or consequences. Pyrrhic victory, indeed, as this has nearly everyone I know sick and frightened.

Kate--I agree. This whole thing has my husband and me scared. Rather than spend money, this just makes us want to save as much as we can for fear of what is come. I don't know much about economics, but nothing good can come out of this massive amount of spending.

I am no economic expert but am deeply sceptical of the placebo view. I doubt many investors will take their money out of idleness and into the private economy based on their reaction to the fact of the bill and its spending provisions. But the debate over the bill was striking in several ways.

1. Not for the first time, Obama revealed a simple and dogmatic liberal streak under all his political sophistication. His statement that government spending is by definition stimulus revealed a faith based economics view. Now even an old Reaganite like me can concede that some forms of government spending (like some but not all transportation projects) can in some cases spur economic growth but Obama went farther than that. Meagan McCardle likes to use the example of the government paying one person to dig a hole and another person to fill the hole in as an example of a spending program that will do little to stimulate economic growth. It is not so much that I doubt Obama would disagree with that statement as much as I doubt that his mindset carries him in the direction of thinking about it at all. He is smart in so many ways but there were times in DREAMS FROM MY FATHER where I was struck how simple and powerful was his faith in government led economic revival. He seemed to have this sense that the government would get together with the business community and the government would use its power and expertise to partner (as very senior partner) with the business community to... well it wasn't all that clear but it was gonna be great. I hoped that it was just the attitude of a young community activist. Since then he has learned the post Cold War globaloney about globalization and competition and stuff but this vague faith in government led growth sometimes peers through.

2. The packages wastefulness is largely a result of Obama's doomsaying and it would be very, very charitable to call it an unintented result. Obama could have publicly intervened to slow down the process and produce a bill more "timely and targeted" as Lawrence Summers would want. In fact, Obama publicly eggeg Congress on. It is fair to draw the conclusion that Obama himself was more inclined to the views of Nancy Pelosi than the views of his economic experts. That is a bad sign.

3. Or it could be that Obama's economic advisors told him that no stimulus package is very likely to work in any case and he simply used the emergency to ramp up government spending because he really does think that all these programs are worthwhile regardless of whether the contribute to economic growth.

4 Clinton failed to get a 47 billion dollar stimulus plan through Congress. Obama managed to get a plan over 15 times larger. Our economic politics has moved that far to the Left

5. On an unrelated note, it was really smart of the GOP to pick Jindal to give the response to Obama's speech to the joint session of Congress. I say this not just as a Jindal fan, but as one who recognizes the charisma limits the current GOP Washngton leadership. The responses to these kinds of presidential speeches usually don't matter much. If they did, the pitiful Pelosi and Reid rejoinders to Bush's major speeches would have sunk the Democrats. But the GOP is so marginalized from power and has so much trouble finding an audience for its views outside the conservative media ghetto that it can't afford to waste what chances it gets.

As a small business owner with an interest in finance, IMO this spendulus bill is almost besides the point.

The markets (business and invester class) are much more interested in the latest version of the TARP and related efforts. The confidence crises (due to what is called "counter party risk" from the exotic derivatives on bank/insurance companies balance sheets) is the cause and solution of this current recession.

This spendulus bill is simply more of the same from Washington (from both parties). Sure, it is a spike, but still part of an over spending trend that will come home to roost not in the short but in the long term.

I find it a bit odd that some posters find this scary. This is par for the course. It will simply move up the time frame of a 1970's like inflationary cycle - something that is baked into the works due to the double whammy of trade deficit's (consumers living beyond their means) and unfunded government ponzi schemes (i.e. Medicare and Medicaid - government living beyond it's means). That is the best case scenario (stagflation), the worse being a real debasing of the dollar and depression-end-of-life-as-we-know-it sort of economic collapse. Such an event is still a bit ways off however (20 years at least).

To those of you who believe that the GOP (revitalized or not) or "conservatives" have philosophy or will to correct any of this, well your just plain wrong. Just look at the deficits under Reagan, Bush 1 & 2, the Prescription Drug Giveaway, Bernie/Freddie Macs, etc. More important than all that, look at way Greenspan and other GOP men have ran the Treasury/Fed.

It's too bad, but we have zero leadership on this - the vague sense from Jindal (whom I really like) just does not count, espeacally sense the GOP would undercut any real solution proposed...

I'll never forget Obama's horrifying warning about how, if the stimulus bill wouldn't be passed, one of his terrorist pals would get us with a nuclear bomb in a briefcase. And then he jacked the terrorist threat level up to bright orange. My family and I retreated to the basement, where we huddled in fear.

Pete, I do like "faith-based economics". I can't bring myself to pray to Obama's higher authority or be happy about being forced to sacrifice to to such an earthly, but vague, supreme being. This puts the idea of Obama as messiah in a whole new light.

As to how government should spend and what government should spend on, I was surprised to find myself mostly in agreement with a - maybe all of two minute-long, so who knows - commentary by Robert Reich, speaking on NPR in the evening business program the other night. This is a response to Pete's #3, wherein Obama's economic advisers may actually be saying this whole thing is pointless.

Christopher, I do not say the economic situation is unusual. Although having lived through the 70s inflationary cycle I am surely not looking forward to this one. It is the stupid response of our leadership, yes, both of the last administration and (Ye Gods!) this one. If, next year, we find newly designed WIN (Whip Inflation Now) buttons, I would not be at all surprised. What is most scary is not the economy, but the ludicrous response of our elected representatives and their cohorts to the situation. Also, scary is Pete's #4, though being old enough to remember Johnson's and even Nixon's economic policies, I would say this is just a logical progression from those.

I am glad to hear you have a basement, Craig. My 89 year-old mother-in-law keeps her house well-locked up in fear of such threats, as well. We can't persuade her that her thinking is silly and muddled, either.

Lots of good comments. My post was ironic, of course. The most troubling of Pete's insights: Obama's own opinions are closer to Pelosi's that Summers'.

I just watched the Sunday morning political shows with amazement and disgust. I saw Andrew Sullivan praising Obama as a fiscal conservative. Good Lord.

But this "fiscal conservative" talking point is probably going to be picked up by the Obama White House and their media allies. Now that the domestic spending has passed (well some of it), the deficit is going to be used as an excuse to cut the military budget and raise taxes in order to bring the budget to within one trillion dollars of balance. It will be the responsible thing to do and anyone who disagrees does not care about our country's long term future. If I were the GOP, I would be raising money for commercials that highlight the silliest parts of the spending bill and links them to the defense cuts and tax increases that are coming, when they do come.

Tax cuts is all we need.

Tax cuts and deregulation.

That's all we need: Tax cuts and deregulation.

And a war. Tax cuts and deregulation and a war. That's all we need.

And no more unions. Tax cuts and deregulation and a war and no more unions. That's all we need.

And drilling. That's all we need.

Tax cuts and deregulation and a war and no more unions and drilling.

That's all we need.

If I were the GOP, I would be raising money for commercials that highlight the silliest parts of the spending bill....

It won't work because the jig is up for the GOP - we know they are not "serious" (as Noonan incorrectly asserted the other day). If they were in power, their stimulus bill would have been only slightly smaller (say, 600 Billion or so) with even more tax cuts that would have driven the coming 'Great Inflation' to fruition even sooner than this Democrat version.

No, this resistance by the GOP is simply election politics...wait, that was your point...;)

Christopher, entitlement reform must come, but the public isn't there yet and holding off on offering an alternative economic conservative politics until the public is focused on entitlements is suicide in both the short and long term. I'm sceptical of any short term stimulus - whether tax cuts or spending - but one that is based on expanded unemployment benefits and a payroll tax holiday fulfills Larry Summers' three t's (timely, targeted, temporary) much better than the current plan while not expanding the baseline budget or long term government dependency. Not a bad deal compared to what we are getting.

There are of course long term structural issues to be dealth with (many revolving around healthcare), but an undue obsession with Medicare's insolvency to the exclusion of the issues of the day guarantees that no one will listen until it is too late.

Fung, you're better than that....... The guy you voted for, and his minions, are pushing "solutions" that will only intensify and prolong the problem. Our markets want for capital. A way to address that problem, without taking on vast amounts of additional debt, would be to enact genuine capital gains and corporate tax cuts. The United States is vying with markets that don't suffer from union troubles, the tort bar and the endless regulations churned out yearly in the CFR. Now Republicans aren't suggesting that the United States should thoroughly emulate those societies, but we are saying that businesses in this country need some help.

Why pretend that the "stimulas bill" is in any way stimulative? Was this really the time to take on an additional trill in debt, ----------- I mean was this really the time to indulge partisan juices.

Billions for friends, tens of billions for political allies, but nothing but empty rhetoric for the economy, ------------------------ that's not a recipe for success. No wonder they're intending to follow up this idiocy with the reimposition of the "fairness doctrine."

A "fairness doctrine" that's unfair.

A "stimulative package" which isn't stimulative.

Euphemism isn't going to cut it very long. Even if it's being pushed by a false messiah. And that's why we're seeing the anxious editorials in The Washington Post.

It's not just Republicans decrying what's going on, it's knowledgeable Democrats, who know their party is being set up for a backlash, as we saw in '94 and before that in 1980 and in 1968.

He's wasting political capital, and he's deluded himself that the campaign mode will suffice. He's in for an education.

Not sure what your point is Pete in the last post, except that you believe a political victory (based on of course a populist "issues of the day" sort of treatment) by the GOP will somehow (despite all evidence to the contrary) bring something called "an alternative economic conservative politics".

Why you continue to assert that the GOP is the vehicle for this is beyond me. The despairing "we must work inside the two party system" is a recipe for more of the same.

Besides, it will the the Democrats who actually "reform" entitlements (by which you mean means testing) because only they will have the clout to do so during the coming great inflation (the perception that they are out for the little guy). Before we get there, it will be the Republicans that get us deeper into health care entitlement expansion because that is what Big Business wants. So the Dem's will prove to be more "conservative" if that is the word.

As far as:

much better than the current plan while not expanding the baseline budget or long term government dependency.

Well ya, but what does such a plan have to do with the real GOP, the GOP that actually governs - the one that just expanded "long term government baseline" like nothing since the sixties?? Nothing of course.

You are right that this spending bill has no chance of getting private capital back in a significant way - but then no Keynesian plan ever did. Debt spending and the artificial price roller coaster is the source of the problem, not the solution. Again, the solution to the current downturn is fixing the structural problem in the banking system, thus restoring confidence, and letting the correction in housing play out...

Fung, you have never really listened to the lyrics of that song. All you have down are some catchy bits from the chorus.

Christopher, my point is that there is room for a lower spending, lower taxes, more free market oriented politics. The real GOP helped kill stagflation. Well, it wasn't totally the GOP(though Reagan's contributions should not be slighted). It was more like conservative economists and popularizers came up with a set of policies (floating exchange rates, some deregulation, lower marginal tax rates, a stable currency) and arguments that influenced the general public and some leaders in both parties - but since more conservatives were already in the GOP, the Republicans became more associated with those policies. Movement to a better politics is possible and has happened.

We disagree on the chances of a succesful third party politics. If you can't convince enough people to vote for you in the primaries to dominate those primaries, you don't have much chance of winning in the general election. That doesn't mean that the GOP is the ONLY vehicle for conservative politics. There might be times when a conservative would do best to run as a Democrat or (like in the case of New York's ballot system) a third party candidate. Most importantly, conservative need to do better at influencing politics from outside the formal structures of the parties. This country is missing a mass memberhip conservative organization that can throw its weight around on particual issues or in support of candidates regardless of party. But at the end of the day the brute fact of the two party system will still be there and one of the two parties will still be more receptive to conservative ideas than the other one.

You might have a point on the Democrats being the ones to means test entitlements, but a politics that is dominated by the liberal wing of the Democrats (and their conservative wing is really a feather right now), will produce a much more tax burdened, overregulated, and sclerotic economy between now and then (think 1970s Britain) and there is no guarantee that they will even address entitlements in a responsible way. They could just choose to ride out the smash.

Kate,

I don't know what song you refer to. My reference was the 1970's Steve Martin movie "The Jerk."

Now, this morning the radio talk people told me that grown men should no longer refer to "Caddyshack," "The Big Lebowski," or Superbad." So, I pass the maturity test, since they never mentioned "The Jerk," which I picked not only for comic content, but also because of the overall character development and plot. And because I have never seen "Superbad."

But, more to the point: Why weren't all you fiscal conservatives crying waste when your president committed billions to TARP? When he repeatedly asked for 87 billion here, and 80 billion there to carry on his illegal war in Iraq? When we committed billions to shoring up Iraq's economy with money that we had borrowed from the Chinese? Why don't you cry about waste when you watch your retirement accounts turn to dust while Exxon/Mobile posts record profits year after year?

It was you and your guy who got us here, and handed this crisis to the current administration. It strikes me as bad form to magnify his defeats, fabricate his mistakes, and exploit his limited choices after you cheered on the free market disaster that Obama must now clean up.

Why weren't all you fiscal conservatives crying waste when your president committed billions to TARP? That is the question isn't it? I will submit because it was a fear over loosing their stock market gains and now that months have passed without the vaunted bounce back I think people are starting to write off what they lost/never really had. As for the other wasteful spending, IDK, wish I did understand how to double think that well to say that it was a good move. I think I remember Limbaugh saying it was stealing an issue from democrats(the drug bill) and then everyone said it was so. Well, I'm sure they were very distressed to see their ideas become reality, anyone want to steal my issue from me: make the poster named as Brutus a wealthy man? It will teach me a lesson.

Fung, I am not a fan of that kind of movie and did not know I was reading a quote. What you had written had the tum-te-tum quality and repetitivenes of a song lyric to me. Also, I was guilty of being facetious.

I thought we conservatives were upset over TARP. I was, anyhow. President Bush's popularity ratings did not reflect conservative support; they were as low as they were because conservatives were exasperated with him. Yes, spending was one of those issues of exasperation.

Honestly, I want oil companies to be profitable. Lots of people hold those stocks in their mutual funds and retirement accounts. Is there a privately owned oil company with a single owneer who reaps the profit? I don't think so. We need profitable oil companies.

I do not want to reargue the Iraq War, mostly because we have argued it before and the terms you use to define it are silly.

Fung, Martin's "all I need" bit was not a song, but a monologue. For those who know the movie, the image of the loser/embittered G.O.P as being like the washed-up Jerk mutterring on about tax-cuts is pretty damn funny...of course I don't agree with your politics, but kudos Fung on the reference: you have the taste to refer to the very best of all bad movies.

"He hates CANS!"

Oh, as for the serious stuff, Pete's on a roll and I like his point #4. Multiplication, people. The best thing conservatives can do right now, is forget the words, words, words, and pull out a MULTIPLICATION TABLE. Of, course most of those don't have "15x" on them. In the Obaman era, an elementary-school multiplication table just won't cut it!

Kate,

You must be overjoyed at the profits among the oil companies! Are you also happy to have contributed to those profits by paying over $4.00 p/gallon for gasoline, and watching your home heating and cooling costs skyrocket? Are you similarly thrilled by tax breaks for those oil companies paid for by yourself, and by your neighbors whose incomes dwindle even as their medical bills, insurance premiums, property taxes, copays, go through the roof?

Are you happy about current foreclosure rates and jobless rates, while CEOs of banks thumb their noses at the growing ranks of the desperate?

Focus all you want on what you call my "silly" term for Bush's war. I was focussed on the wastefulness and costliness of the last eight years, and on the increasing gulf between the rich and the growing numbers of poor whenever an unregulated free market finds a champion in the White House.

Beyond that, I was focussed on the complete lack of accountability and responsibility of a group that revels in the difficulties of Obama's administration after leading the cheering section for the excesses, the short-sightedness, the greed, and the arrogance of the Bush administration.

Carl,

Thank you!

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