by Frank James
Former Reagan Administration economist Martin Feldstein has given congressional Republicans opposed to the $819 billion economic stimulus plan just passed by the House some effective ammunition today in an op-ed piece in the Washington Post.
Although his reputation is that of a deficit hawk, Feldstein supports the idea of a large stimulus. So his criticism of the Obama Administration-House Democrats package isn't the reflexive opposition to spending one might hear from some conservatives. Rather, he doesn't believe large parts of the package will do the job.
An excerpt:
Start with the tax side. The plan is to give a tax cut of $500 a year for two years to each employed person. That's not a good way to increase consumer spending. Experience shows that the money from such temporary, lump-sum tax cuts is largely saved or used to pay down debt. Only about 15 percent of last year's tax rebates led to additional spending.
... Instead, the tax changes should focus on providing incentives to households and businesses to increase current spending. Why not a temporary refundable tax credit to households that purchase cars or other major consumer durables, analogous to the investment tax credit for businesses? Or a temporary tax credit for home improvements? In that way, the same total tax reduction could produce much more spending and employment.
Postponing the scheduled increase in the tax on dividends and capital gains would raise share prices, leading to increased consumer spending and, by lowering the cost of capital, more business investment.
He also criticizes big parts of the spending in the legislation. For instance, he questions whether the billions of dollars the legislation would send to states would lead to increased spending. And he thinks at least one provision could have the unintended consequence of increasing unemployment.
Another excerpt:
The largest proposed outlays amount to just writing unrestricted checks to state governments. Nearly $100 billion would result from increasing the "Medicaid matching rate," a technique for reducing states' Medicaid costs to free up state money for spending on anything governors and state legislators want. An additional $80 billion would be given out for "state fiscal relief." Will these vast sums actually lead to additional spending, or will they merely finance state transfer payments or relieve state governments of the need for temporary tax hikes or bond issues?
The plan to finance health insurance premiums for the unemployed would actually increase unemployment by giving employers an incentive to lay off workers rather than pay health premiums during a time of weak demand. And this supposedly two-year program would create a precedent that could be hard to reverse...
Feinstein furthermore asserts that defense spending would be the quickest way to pump money into the economy:
... If rapid spending on things that need to be done is a criterion of choice, the plan should include higher defense outlays, including replacing and repairing supplies and equipment, needed after five years of fighting. The military can increase its level of procurement very rapidly. Yet the proposed spending plan includes less than $5 billion for defense, only about one-half of 1 percent of the total package.
Infrastructure spending on domestic military bases can also proceed more rapidly than infrastructure spending in the civilian economy. And military procurement overwhelmingly involves American-made products. Since much of this military spending will have to be done eventually, it makes sense to do it now, when there is substantial excess capacity in the manufacturing sector. In addition, a temporary increase in military recruiting and training would reduce unemployment directly, create a more skilled civilian workforce and expand the military reserves.
Expect to hear Feldstein and this op-ed piece to be cited frequently by Republican lawmakers in coming days.
By the way, an irony worth mentioning is that we're witnessing something of a dispute between an economics professor and his brilliant student. Feldstein was Ph.D dissertation adviser to Lawrence Summers, chairman of Obama's National Economic Council, obviously one of the key economic strategists behind Obama's package.
Comments
Former Reagan Administration economist Martin Feldstein has given congressional Republicans opposed to the $819 billion economic stimulus plan
Oh please....you hold the mastermind of the trickle-down myth up as an expert? Now he claims tax cuts aren't good? Why? Because they don't go to the taskmasters first? This is like holding Hitler up as a peace expert.
Posted by: bill r. | January 29, 2009 4:14 PM
Posted by: bill r. | January 29, 2009 4:14 PM
He is not alone-folks from the Clinton camp are not completely under the influence of the Obaama hypno ray just yet...
from NRO Online today
(Kudlow)-
"...Clinton economic adviser Alice Rivlin made the same point yesterday in testimony for the House Budget Committee. Her message: Divide up the package and slow down the process..."
Its not just Reagan supply siders who have voiced opposition to this bill- and the clearly partisan inclusion of huge non- stimulus spending in an emergency stimulus bill should embarass anyone who voted for it-
Posted by: heartburn | January 29, 2009 5:25 PM
Its not just Reagan supply siders who have voiced opposition to this bill- and the clearly partisan inclusion of huge non- stimulus spending in an emergency stimulus bill should embarass anyone who voted for it-
Posted by: heartburn | January 29, 2009 5:25 PM
PrePuke,
An "economist" who prays at the feet of already failed Trickledown Reaganomics supports the Limbaugh House Republicans? I'm shocked...not
The problem is not that President Obama was unwilling to compromise, it's that the Limbaugh Republicans no longer understand the meaning of compromise. For the last eight years, both in the majority and out, Limbaugh Republicans have understood the word compromise in only one way: capitulation. You're either with them -- on every point -- or you're again' 'em, no middle ground possible. They've taken the George W. Bush policy for international relations and made it the centerpiece of their domestic tactics.
Little wonder then that while President Obama went to Limbaugh Republicans in the House offering to discuss genuine compromise in which there is give and take along with acceptance of getting less than 100% of what you want, Limabaugh Republicans weren't interested. Instead they offered The Bush Tax Cut, Part II as the only acceptable alternative -- a tax cut package that featured benefits disproportionately aimed at the wealthy and whose focus was on continuing the policies that landed us in this mess. After everything that's happened, reward the rich and let the rest eat trickled-down upon cake continues to be the Limbaugh Republican philosophy. That didn't work last time, or the time before that, or the time before that. It never works.
It's very simple, this bipartisan business: Democrats propose it. Limbaugh Republicans say they welcome it. Democrats reach out. Limabaugh Republicans renege and then they go to the media to simultaneously play the victim and the victor. I gotta admit---even though their ideas do nothing but kill people and destroy stuff, it's amazing to watch...in a snake-dies-while-trying-to-swallow-hippo kind of way.
You would think after suffering to straight devastating electoral losses the Limbaugh Republicans would want to try to expand their base (the south), not shrink it.
Posted by: antacid | January 29, 2009 6:28 PM
heartburn,
Alice Rivlin doesn't oppose the stimulas for the same reasons that Reagan enabler Martin Feldsien does and I think you know that.
"It's everybody's wish list, everybody's favorite program. And I think that's a big mistake," said Alice Rivlin, a Brookings Institute economist and former budget director for President Bill Clinton who has been advising Democrats. "I agree with the Obama team that we need a big increase in public investment, but it should be done very, very wisely," rather than through a rushed process that risks being "seen as scattering money to the wind."
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/18/AR2008121804204.html?hpid=topnews
Try again, heartburn...and next time try harder at not exposing yourself as the "concern troll" that you are:
http://www.urbandictionary.com/define.php?term=concern+troll
Posted by: Frank | January 29, 2009 7:13 PM
While I think it's good that Obama is going out of his way to remove personal invective in DC, that's really not the issue here. The issue here is that the GOP wants 4 more years of economic policies like the last 8, and we don't.
Limbaugh and his House Republica pals are the ones that are very afraid and they should be. Conservatism should be dead as doornails now but there are still enough mean and/or stooopid people to try to breath life back into the ghastly undead ghost of Reagan conservatism. For them to come back to life Obama has to fail and the American people have to suffer.
Posted by: CS Nowik | January 29, 2009 8:10 PM
Heartburn....By all means lets give the republicans a chance. Tax cuts is their idea........maybe we should try something new like that.
Posted by: bill r. | January 29, 2009 8:33 PM
There is not one single thing the government can do efficiently. Not one. There is no profit motive. No responsibility. No accountability. They are very proficient at borrowing and spending. For any of you who think that these drunken sailors are going to be stewards of your money and stimulate anything, other than waste, you are to be pitied. The free market created the most powerful economic engine on earth. Greed, corruption, and social engineering by a liberal, free-spending, irresponsible government are destroying it. Both parties are equally culpable in this free-for-all. Incentives need to be enacted to encourage investment, which will create jobs. Government has never cured any problem by throwing our money at it. They just create a bigger problem.
Posted by: ObamabotsACTIVATE | January 29, 2009 8:54 PM
The problem is that Republicans can only think two weeks ahead, of themselves. All I hear from pugs while reading these and other blogs is "it's not GW's fault stop blaming Republicans. One guy actually decared "It's Obamas fault we are in this mess because"...now get this..."he is the new president" So I guess they can't think two in the past either.
All of the suggestions by pugs read like this...give to corporations, and programs that are in our states and we'll be happy. Rep of N.Carolina just got a the Barry Bill reissued in order to save the jobs of textile workers making government uniforms. Textile workers with high school educations, that actually cost 150,000 per worker per year. So just because Obama's plan isn't giving money to the good ole white christian boys of the south, it's a waste of money. Pugs keep talking about tax cuts. "how about a tax cut for spending money?" Yeah what money..I thought these people were unemployed, nearly homeless and pugs are suggesting they go out and buy a car so that they can receive a $1000 tax credit..that is absolutely insane thinking. Why not just give us all ten thousand dollars that would spur some spending!!! Oh I forgot that skips filtering it through the white southern racists good ole boys. Yeah on second thought that won't work.
Posted by: mvansome | January 29, 2009 9:55 PM
The stimulus package is 80% pork and a payoff to every Democratic special interest group there is. If the Democrats believe a stimulus package is needed...fine, let them put one on the table. The current package, however, belongs in the trash with the rest of the garbage. Trying to sneak this bloated appropriation bill through using the fear and anxiety created by the current economic situation speaks volumes about Congressional Democrats...and those volumes are good.
Posted by: ScottieRules | January 29, 2009 10:48 PM
Nancy and her cohorts in the House are about to get run over by the bus. The American folks are waking up and demanding real change; out with the Pork! The ole Chicago shuffle is in trouble as it well should be. Poor Obama, still clinging to the Il. Democratic mentality, will find the Senate more corrosive to his massive wealth redistribution and Democrat entrenchment act. You lefties get your emails? Honest Americans are mobilizing to demand real change!
Posted by: Bubba Porter | January 29, 2009 11:26 PM
What's telling is that you get someone like GOPer Rep. Gingrey who makes a very realistic point about how it's easier for outsiders like Limbaugh and Hannity to be critical of Obama than someone in Congress who has to actually work with the Dems... and Gingrey has to GET ON HIS KNEE'S, APOLOGIZE TO LIMBAUGH AND KISS HIS RING for making that statement?!?!
HAHAHA!!!
As long as the Greedy Oil Party are taking their marching orders from unaccountable doofuses like Rush, it doesn't matter who their leaders are because they won't matter. And the fact that they're basically high fiving each other over the fact that they locksteped voted with their out of touch with reality base in the south, tells me that they're going to be out of power for a looooooong time.
I think the GOPer's must realize that they have lost all sway with anyone in the political middle and have no other course than to pander to the far-righties who represent what little base they have left.
The Whigs...oops, I mean the GOP, has sunk so low that nowdays when the average American citizen thinks of the GOP, they think of this nut:
.
http://media.photobucket.com/image/rush%20limbaugh/KINGSPADE13/WEED/funny/limbaugh_oxycontin.jpg
Posted by: Purple Haze | January 30, 2009 2:35 AM
Try again, heartburn...and next time try harder at not exposing yourself as the "concern troll" that you are:
http://www.urbandictionary.com/define.php?term=concern+troll
Posted by: Frank | January 29, 2009 7:13 PM
But she does not support the bill as is- which makes your initial post, where you attempted to descredit Feldstein because of his supply side history, incorrect and meaningless.
The fact is that their are more and more reasonable credible critics of the DEM spending bill masked as a stimulus bill. Rivlinis a very good example of someone who isn't in lockstep with Obama -
Reasonable people can argue that there needs to be a stimulus or not- there is no reasonable argument for massive emergency spending that will not have an immediate impact on the improving the economy..
BTW- what is a "concern troll"? I am not sure if I should be insulted or not..!
Posted by: heartburn | January 30, 2009 10:07 AM
Heartburn....By all means lets give the republicans a chance. Tax cuts is their idea........maybe we should try something new like that.
Posted by: bill r. | January 29, 2009 8:33 PM
try decreasing the corp rate to zero for a couple of years and see what that does to economy..
Posted by: heartburn | January 30, 2009 10:11 AM
Swamp Scoreboard:
----------------
bill r - 30
Frank - 25
heartburn - 0
.
Posted by: Sportscenter | January 30, 2009 2:22 PM
try decreasing the corp rate to zero for a couple of years and see what that does to economy..
Posted by: heartburn | January 30, 2009 10:11 AM
Bigger bonuses?????
Posted by: bill r. | January 30, 2009 2:45 PM
try decreasing the corp rate to zero for a couple of years and see what that does to economy..
Posted by: heartburn | January 30, 2009 10:11 AM
Bigger bonuses?????
Posted by: bill r. | January 30, 2009 2:45 PM
Right- because all of the thousands of small business owners-who employ most of this countries workforce- are waiting for a tax break in order to give themselves bonuses...
What you will see is improved confidence in the economy when you get large socialistic government programs out of the way of people that hire, expand businesses, and who make investment capital available- you know all of those things that used to be important before the "feel good- get me re-elected" political spending of today
Posted by: heartburn | January 30, 2009 4:50 PM