President Barack Obama met with Republican congressional leaders at the Capitol last week, before the House GOP voted unanimously against his economic stimulus. The plan promises to get bigger in the Senate. (Photo by Mannie Garcia/Bloomberg News)
by Janet Hook
with Noam N. Levey, Jim Puzzanghera,
Richard Simon and Jim Tankersley.
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With Congress moving toward passage of an $800-billion-plus economic stimulus plan, big government is back. Unabashed. With a vengeance.
The stimulus is bigger than the Pentagon's entire budget. It's more than the United States has spent on the war in Iraq. And its hundreds of provisions reach into almost every aspect of American life -- including workers' paychecks, local schools, digital television and modernizing medical records.
Perhaps not since the Great Depression has Congress set out to expand and redefine so dramatically the government's role in the economy, all in one bewilderingly complex blueprint.
"The three-decade-long period where the default assumption was that government is the problem, not the solution, has clearly ended," said Bill Galston, a senior fellow at the Brookings Institution and a former aide to President Clinton.
If the enormous stimulus plan succeeds, it's likely to mean a larger, more activist government for years to come. If the plan is judged a failure -- whether because the economic crisis persists or the public becomes disenchanted -- the idea of government as an active player in national life could be discredited anew.
Even as Senate Democrats and Republicans begin sparring over the bill, it remains a challenge just to understand what's in the plan. The version passed by the House last week ran 647 pages; the Senate version, which may come to a vote this week, will probably be longer.
See a a review of the basic elements of the economic stimulus, based primarily on the House bill, in Tribune newspapers and here in the Swamp:
Jobs
In this area, the Obama administration and congressional Democrats are following a popular theory: The best offense is a good defense. Spending and tax cuts are designed to discourage job elimination as well as encourage job growth.
Aid to states, for example, could allow them to avoid cutting services and laying off workers to meet budget-balancing rules. Money spent on highway and other infrastructure projects could open jobs for construction workers and others idled by the housing crash.
Obama's advisors calculated that the stimulus plan would create 3.7 million jobs. Simon Johnson, a former chief economist for the International Monetary Fund, said the projection might be overly optimistic, given the dysfunctional nature of today's economy.
"That's not a criticism of the stimulus," said Johnson, who supports it. "It just means you shouldn't expect miracles."
The Congressional Budget Office estimates 1.2 million to 3.6 million jobs would be created or saved, although the White House has not specified how many jobs it thinks would fall into either category.
If you're one of the millions of Americans already out of work, a job created sounds better than a job saved. But experts say saving jobs aids the overall economy, thereby increasing the likelihood that unemployed people can find work.
The administration's calculations were based in large part on projections of how heavy the job losses would be if a large stimulus package were not enacted: The Jan. 9 report said the unemployment rate would be about 7% at the end of 2010 with a stimulus, and 8.8% without one.
Tax cuts
A big goal of the stimulus package is to get consumers spending again. So the bill tries to give most of the tax cuts to people who are likely to spend whatever they have -- low- and middle-income workers.
This year and next, the stimulus provides a $500 credit for individuals ($1,000 for couples) against their income and payroll taxes. The credit begins shrinking for individuals who make more than $75,000 a year (or, for couples, more than $150,000). Individuals making more than $100,000 a year ($200,0000 for couples) would get nothing.
The bill also increases by $7,500 the tax credit for first-time home buyers, if they make less than $75,000 a year. It provides a new tax credit for up to $2,500 in college tuition and related expenses for people earning less than $80,000 a year.
And it would temporarily increase the earned income tax credit for the working poor and widen eligibility.
But Edward Leamer, director of the UCLA Anderson Business Forecast, doubts that many consumers will spend the money, given their anxiety over the economy's future. He noted that most of the approximately $96 billion in tax rebate checks sent out as part of last year's economic stimulus -- 119 million people got an average of about $800 -- was saved or used to pay bills.
"Now the situation is actually worse. Consumers are not in a spending mood," Leamer said.
Supporters hope the fact that tax cuts will show up as small increases in paychecks, rather than lump sums, will encourage people to spend the money.
Obama hasn't yet urged Americans to spend, as President Bush essentially did after the Sept. 11 terrorist attacks. And Johnson, the former IMF economist, said he shouldn't.
"I don't think you should put moral pressure on any individual who may have a high level of debt to go out and spend more," Johnson said. "They should do what's appropriate for them . . . and it's the government's responsibility to deal with the macro-economy."
Infrastructure
A centerpiece of the House bill is tens of billions of dollars for ready-to-go infrastructure projects, from new roads to school repairs. Half of the highway construction must be obligated within 90 days and the other half within 180 days.
"For years, state departments of transportation and transit agencies around the country have said, 'Give us the money. . . . We can get things going.' Well, here is their opportunity," said Rep. James L. Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee.
In addition to the $30 billion for highway and bridge construction and maintenance, the bill provides $20 billion for school projects, from repairs to such measures as installing solar roofs. Among other provisions: $3 billion for airport improvements; $2.5 billion for new commuter or other light rail systems; $2 billion to modernize existing transit systems; and $1.1 billion to improve intercity passenger rail service.
The measure also provides $4.5 billion to the Army Corps of Engineers for "environmental restoration, flood protection, hydropower, and navigation infrastructure critical to the economy"; $3.1 billion for infrastructure projects on federal lands; and $1.5 billion to construct low-income housing using green technologies.
To get an idea of the scale of some of these plans: The House bill includes $6 billion to help states fund clean water projects -- almost 10 times what the program got last year.
Even so, the bill has drawn criticism that it doesn't spend enough on infrastructure.
"Unfortunately, rather than focusing on job-creating measures like infrastructure and tax cuts -- like I think should be in there -- the Democrats have put forth legislation with billions in unwarranted and unrelated spending," says Rep. J. Gresham Barrett (R-S.C.).
Healthcare
The stimulus package offers the most direct benefits to Americans who have lost their jobs and their health insurance in the downturn, and to those already receiving public assistance.
Roughly 3.5 million Americans who lose their jobs will be able to receive unemployment benefits for 59 weeks, instead of being cut off after 26 weeks. And 20 million people would see a $25-a-week increase in their aid checks; the average weekly benefit is now $200.
The government also will provide $7.5 billion more to help states assist unemployed workers who otherwise might not have qualified for aid because they earned too little or only worked part time before losing their jobs. Democrats estimate that could help up to 650,000 workers.
The bill would provide an extra month's check -- about $450 -- for some 7.5 million poor and elderly disabled people who rely on Supplemental Security Income. Couples would get $630 more.
An estimated 8.5 million Americans would get help keeping their health insurance after losing their jobs.
The so-called COBRA law currently allows people to retain employer-based health insurance for 18 months if they pay the premiums. But that often costs more than $1,000 a month -- so much that relatively few people do it.
The stimulus would commit the federal government to paying 65% of the cost of these premiums.
House lawmakers also want to give states the option of enrolling recently laid-off workers in Medicaid, the state-federal health insurance program usually reserved for the poor.
At the same time, millions of people who already rely on Medicaid could be spared cuts in services thanks to $87 billion in emergency aid that the House would provide to state governments. Many states already are scaling back benefits to balance budgets strained by the economic downturn.
That aid could also help doctors, hospitals and nursing homes because states have cut reimbursements for taking care of Medicaid patients in recent years.
The healthcare industry could get further assistance from some $20 billion to promote greater use of modern information technology, although that money would flow into the economy more slowly.
As part of the Obama administration's plans to begin overhauling the nation's healthcare system, the stimulus plan includes $1.1 billion to study ways to increase the quality of medical care Americans get.
Energy
Nearly $100 billion in spending and tax breaks seeks to encourage the use of "greener" energy -- and less consumption overall.
Almost a third of the money is tagged for efficiency measures, including about $10 billion to weatherize and retrofit houses to cut electricity bills for low-income Americans, almost $8 billion to reduce energy consumption in federal and military buildings, and some $7 billion in efficiency grants for state governments to dole out.
There's $1 billion in low-income energy assistance and hundreds of millions apiece to buy electric and hybrid cars for government fleets and to encourage the purchase of high-efficiency home appliances.
Longer-term, the plan includes $11 billion for the so-called smart grid -- technology that helps consumers reduce their electric bills and the demands on their local power supply by encouraging them to use less energy during peak hours. Another $8 billion will help fund construction of thousands of miles of new electric lines, which could make renewable energy -- from wind or solar farms, for example -- available to more of the country.
Advocates say the energy spending will help the economy in three ways. It will create jobs, particularly in the construction sector. It will lower energy costs for many consumers. And it will serve, in the advocates' words, as a "down payment" on Obama's grander plans to push the nation toward renewable energy and away from oil imports and other planet-warming fossil fuels.
Arts
It's only a few lines in the huge package, but the $50 million for the National Endowment for the Arts has provoked an outsized controversy.
"This is stimulus?" Rep. Mike Pence (R-Ind.), chairman of the House Republican Conference, sniffed. He and other Republicans say the spending is itself a form of art -- the Democratic art of throwing money at problems willy-nilly.
In defense of such spending, Rep. David R. Obey (D-Wis.), chairman of the House Appropriations Committee, said: "People ask, 'Well, what does funding for the arts have to do with jobs?' People in the arts field are losing their jobs just like anybody else."
In the Los Angeles area, the Santa Clarita Symphony canceled its 2009 season, posting on its website the declaration "Victim of Failing Economy" and citing "declining ticket sales and a drastic decline in individual and corporate donor contributions."
The stimulus money would be distributed to projects and activities that "preserve jobs in the nonprofit arts sector threatened by declines in philanthropic and other support."
During the Great Depression, "the government supported writers and theaters and artists and there was a renaissance of art in America that helped our country through those dark times," said John Cavanagh, director of the Institute for Policy Studies, which has launched an online petition campaign to include the arts in the stimulus program.
Some Depression artwork still adorns the American landscape, and "three-quarters of a century later, we have the same crying need for artists," he said.
Whatever the need, including the arts in the stimulus bill has given opponents a target too tempting to resist.
"I'm sure the arts have been hit hard by the downturn of the economy," said Steve Ellis of Taxpayers for Common Sense. "But it is hard to make the argument that it is stimulative. The raw politics is that the arts spending provides a bull's-eye for critics to ridicule and criticize the entire package."
Comments
While it serves us well to tweak this bill, it should not be a political football for the partisans. For example.....I hear over and over about the money spent on the TV conversion. Bill O and Vannity cry about why would we waste money on this. Yet I don't hear one thing about the absolute fact that the government stands to make over 12 billion on this by the auctioning off of unused spectrum to businesses. If you want to debate this bill, at least be honest about it. The media seems to just be playing the conflict of the bill and not the truth.
Posted by: bill r. | February 1, 2009 9:36 AM
Arts spending is stimulative!
John Cavanagh obviously has never sat on a theater board or other arts organization or he would know that the arts sector is very labor intensive and produces many, many jobs. Indirectly, jobs are created in other sectors, such as restaurants.
Just open a program booklet of a local play, opera or concert and see how many people were involved in producing.
What we don't need is more missiles, guns, tanks and bombs.
Posted by: Michael Tracy | February 1, 2009 9:54 AM
Mr. Farzad, "senior writer" for Business Week, who looks to be about 29 years old, contributor to Business Week "Bailout is a Bust" issue, is lecturing us about how even more tax dollars have to be dispersed and disbursed to those who screwed up in the first place.
ENOUGH!
This is just more of Paulson and Bush panic peddling.
Aided of course by the helpful Sen. McConnell.
Like setting a small fire in the lobby of the bank, so helpful in creating more diversion so they can keep stealing.
Why not just save us a lot of trouble and just enact the 2 page version of the giveaway Paulson and Kash & Karry sent up in the first place?
On the other hand, perhaps a bill that has some claw back provisions, that extends the criminal statutes of limitation another 5 years, that creates at least a teensy einsey little bit of independent oversight by overseers who are not legally blind?
Posted by: ornery | February 1, 2009 10:08 AM
Big Gov't is back????
Where have you been the last 8 years?
Posted by: Damien | February 1, 2009 10:10 AM
The biggest spending bill in US History.
Passed after only one day of debate.
And to this day, no member of Congress who voted for the bill has actually read it. No one can say for certain that it will create even ONE job.
This is the reality of "Change."
Posted by: "Change You Can Belive In" | February 1, 2009 10:26 AM
The bill is the biggest scam in my 46 year life. If the entire amount were spent to provide tax breaks to small business and individuals who create a majority of the jobs, our econmy would be strong again within 2 years.
Posted by: Robert | February 1, 2009 10:53 AM
If the entire amount were spent to provide tax breaks to small business and individuals who create a majority of the jobs, our econmy would be strong again within 2 years.
Posted by: Robert | February 1, 2009 10:53 AM
Does greed only exist with CEOs? We have seen them pay themselves ridiculous amounts in bonuses, why would this be different with others? It is just another trickle down myth.
Posted by: bill r. | February 1, 2009 11:16 AM
There could be no better investment in America than to invest in America becoming energy independent! We need to utilize everything in out power to reduce our dependence on foreign oil including using our own natural resources. Create cheap clean energy, new badly needed green jobs, and reduce our dependence on foreign oil. OPEC will continue to cut production until they achieve their desired 80-100. per barrel. The high cost of fuel this past year seriously damaged our economy and society. Oil is finite. We are using oil globally at the rate of 2X faster than new oil is being discovered. We need to take some of these billions in bail out bucks and bail ourselves out of our dependence on foreign oil.If all gasoline cars, trucks, and SUV's instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. Jeff Wilson has a really good new book out called The Manhattan Project of 2009 Energy Independence Now. He explores our uses of oil besides gasoline, our depletion, out reserves and stores as well as viable options to replace oil.Oil is finite, it will run out in the not too distant future. WE need to take some of these billions in bail out bucks and bail America out of it's dependence on foreign oil. The historic high price of gas this past year did serious damage to our economy and society. WE should never allow others to have that much power over our economy again. I wish every member of congress would read this book too.
Posted by: Jimmy | February 1, 2009 11:18 AM
Please read related article titled "Welcome to the U.S.S.A" posted at http://www.cliffyworld.com
Posted by: cliffyworld | February 1, 2009 11:57 AM
I read Bill Galstons comment, a former aid to President Clinton, that the three decade assumption that Government is the problem and not the solution has clearly ended. Where does he live?? . . in my world of middle class America not one person I talk to has any confidence in the Government. After reading the new stimulus package and what and where the money is going I have even less .. President Obama said shame on the CEO's . . I say, shame on the Congress and the Senate . . There lack of real ideas, and adding instead their pork ideas, is not only a shame, but so very very scary to myself and I dare say most Americans. Thank You for posting the article on the Stimulus Package . . Ray Pitts, Nashville, Tn. 37216
Posted by: Ray Pitts | February 1, 2009 11:58 AM
This is nothing but a spending bill and while folks say that the GOP Congress of 2001-06 spent a lot, this dwarfs that by a long shot. The GOP should learn not to try to out "democrat" the democrats. It can't be done. When it comes to wasteful spending, this bill shows the dems to the number one pork provider.
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Bill R tries to lump Wall Street CEOs in with small business owners. It is not even close. Robert has it right
Posted by: Terry | February 1, 2009 12:35 PM
You GOP naysayers may want to read this (don't wait for Rush's permission to do so):
http://www.nytimes.com/2009/02/01/opinion/01rich.html?_r=1
Posted by: Kenny Bunkport ✌ | February 1, 2009 12:42 PM
Having spent the better part of 10-days in September and October opposing the original bailout bill, I find myself exhausted by making the original case yet again: it is not for lack of money to loan that our economy is failing, it is because we have allowed our economy to become dependent on borrowed money that our country is in danger of failing.
Our leadership continues to seek a solution that will do nothing more than make the conventional statistical indicators look a little better for a little while, and do nothing to dismantle the malignant economic practices which have been tolerated and expanded year after year. Only free-market forces can clean out the greed and sense of entitlement which is suffocating our economy. In 2007, even before we realized our 'prosperity' was phony, we ran a $708-Billion trade deficit. Now, rather than attempt to fix that problem, we propose to pile on another $825-Billion in borrowing without any coherent strategy for earning what we consume, and nothing but the slightly expanded verbiage of good intentions as far as transparency and accountability for how this new cash advance is going to be spent.
A big part of the problem, I believe, is that no one in Washington DC wants to admit how bad this crisis is, how much damage we have allowed to accumulate, because too many of those who are now posing as our 'rescuers' presided over and created the disaster in the first place. President Obama has the least exposure of any of them, and he has 4 years in office, regardless of which Congressional leaders love him or hate him. That's why I voted for him (as a Republican), because I thought he had the brains and the guts to face this problem for what it really is, and let the perpetrators be exposed at a minimum, and dethroned in the next elections if the voters decide it. The $350-Billion which has all but disappeared in the last 4-months is an overwhelming indictment of the very people who are trotting out this new bill. They could have passed tax measures that limited compensation in any company that was the recipient of government bailout funds, but they never even raised the question. So now we find that $18-Billion of that money went into the pockets of the racketeers on Wall Street who created this (on top of the $32-Billion they absconded with last year). How bad does it have to get President Obama before you stand up to this cabal of financial moguls and Congressional power-brokers who are in the process of destroying this country?
-- A Republican who campaigned for and voted for you.
Posted by: ted in pdx | February 1, 2009 1:04 PM
Bill R tries to lump Wall Street CEOs in with small business owners. It is not even close. Robert has it right
Posted by: Terry | February 1, 2009 12:35 PM
I wasn't really lumping anybody together, just pointing out human nature and the myth of trickle down.
Posted by: bill r. | February 1, 2009 1:25 PM
Jimmy's comment on energy independence is spot on.
We have an opportunity to create the (renewable) energy industry which human civilization will eventually depend upon entirely as our oil is used up. We should not only seek energy independence, we should set the bar even higher and seek to be the leading exporter of carbon-neutral transportation fuel. Unless we end the hegemony of oil-rich nations over the global economy, it won't matter that much if we are technically independent of them, their clout in other markets will marginalize the United States anyway, as oil supplies become progressively more uncertain.
We could take that beachhead within 2 years if we focused our remaining resources on Hydrogen-via-Nuclear production systems. Within 5 years, as alternative fuels (primarily algae/photosynthesis based) come on line, we could be in a position to undercut oil globally, and at least dampen the risks of climate change. And by the way, the creation of that new industry would create millions of jobs based on the certainty that commercially viable amounts of Hydrogen would be available to fuel hydrogen-electric cars.
That is the kind of bold strategic thinking we need from our new President, the kind of thinking that produced the Eerie Canal and the Transcontinental Railroad. That is the kind of challenge that Americans are supposed to thrive upon...and I believe we would if our leadership would actually "think anew, and act anew" (to borrow a quote from President Obama's hero). (And mine too!)
Posted by: ted in pdx | February 1, 2009 1:47 PM
Some whitening strips can even strengthen your gums and make them more resistant to gingivitis and similar diseases. So if you want pearly white teeth but can not go to a dentist because of its limited budget, only Michigan to call an expert to whiten your teeth and let him advise you on your other options. He should be able to help much.
Posted by: Christine | February 1, 2009 1:49 PM
We should forget about courting Repubicans. They never cared about the America people, just American billionaires.
We should double the stimulus, we need BIG projects, on par with rebuilding the interstate highway system from scratch. Something huge like that. Maybe focused on urban rapid transit systems and intercity high speed rail. Make urban transit free to use to reduce carbon emisions and get people to walk more for their health... that kind of thing,.... And give them universal health care.
The Republicans can go Cheney themselves.
There is no point in negotiating with them. They lead us to the edge of ruin because they don't care if the country is ruined. Why negotiate with them on the salvation of the economy, when they don't want the economy to work and will undermine it every chance they get?
President Obama and Democrats in Congress have a responsibility to push through the strongest bill possible. Caving to unreasonable Republican demands at the last minute - in a hapless attempt to pick up votes that can't be picked up - is counterproductive and irresponsible. I really hope they have enough political courage to cut those who don't negotiate in good faith out of the discussions, and advance the strongest bill possible. We were told by Republicans in 2000 and 2004 that elections have consequences. It's time for Republicans to eat their words.
Posted by: Hey Joe | February 1, 2009 3:38 PM
It won't work and they know it, this is payback for all their special interests.
Its throwing good money after bad right down the rat hole.
Posted by: Paul | February 1, 2009 4:03 PM
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Posted by: Kenny Bunkport ✌ | February 1, 2009 12:42 PM
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That’s a very interesting article, Mr. Bunkport. The problem is that the article is written from the perspective of one who assumes, as true, the very premise that Republicans dispute. The writer believes this spending bill is actually going to do something good, which makes Republican opposition to it look like nothing more than political revanchism.
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Let’s make this clear: The basic premise is false. It is questionable, at best, whether the proposed bill is reasonably likely to accomplish what its sponsors promise.
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The health of our economy is gauged by its production. That’s why we rate it in terms of “GNP” or “GDP.” Governments do not produce; they consume. Investment in “infrastructure” projects (even if they provide some jobs) is also an investment in consumption rather than production. Propping up the demand side doesn’t promote production, it promotes consumption. Propping up the “demand side,” as opposed to the “supply side,” is precisely what Herbert Hoover did, and it is also why Hoover failed. It is also why FDR continued to fail for another 7 years or more while keeping up Hoover’s policies of propping up the demand side. In which case, there are serious reasons to doubt that a consumption bill, slathered with billions and billons of dollars in pork spending, will boost the economy.
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The crux of the problem from the Republican perspective is that the bill is simply not designed to do what it is has been promised to accomplish. If improving the economy is the point of the bill, then a substantial portion of it should be devoted to investment in production - which it doesn’t do. This is an aspect of the question the author of the article never considered. He didn’t consider it because he already assumed - as many do - that the bill will actually stimulate the economy.
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There’s one other problem. The financial crisis hasn’t played itself out yet. Trillions of dollars worth of mortgages are still at risk of going underwater and going into default. As long as that remains the case, banks are going to be tight fisted and companies and individuals who depend on credit to make the world go ‘round will be in trouble. I agree with the writer (above) who points out that loosening credit started the problem. That was one of the main causes of the Great Depression too. Trying to jump start an economy in the teeth of such instability with “demand side” spending is not likely to work; at least, not for very long. The government’s total failure to address any of these fundamental problems - in the “stimulus bill” or otherwise - is just one more reason why many believe the government is headed in the wrong direction.
Posted by: John W. | February 1, 2009 4:37 PM
Every democrat and Obama himself should basically be saying the same thing:
"The Problem is Job Loss. The republicans only answer is 'tax cuts'. If tax cuts were the solution to Job Losses, the Bush economy would be have generated millions of jobs and be humming right along."
Tell the Repugs to go f*ck themselves. The Repugs want this bill to fail. They don't give a damn if the economy (America) fails, it's all politics to them and they see this as a way for them to come back into power.
They all think the same way fatso Rush thinks, only they aren't stupid enough to say it out loud like he is.
Obama and the Dems have already given up WAY to much and in my opinion they should take back most of it and announce that they are doing it because the Repugs are bargaining in bad faith, which they are.
Posted by: dano | February 1, 2009 5:50 PM
John W,
As Rich states in the article:
"If the country wasn’t suffering, the Republicans’ behavior would be a laugh riot. The House minority leader, John Boehner, from the economic wasteland of Ohio, declared on “Meet the Press” last Sunday that the G.O.P. didn’t want to be “the party of ‘No’ ” but “the party of better ideas, better solutions.” And what are those ideas, exactly? He said he’ll get back to us “over the coming months.”
Coupled with "leadership" coming from Rush (who has very publicly stated he'd like to see Obama fail), the GOP is bereft of ideas and hopefully the electorate will keep that in mind in the next round of elections.
Posted by: Kenny Bunkport ✌ | February 1, 2009 7:51 PM
Can see the money wasted in Illinois now.
Posted by: Inky | February 1, 2009 8:46 PM
This is the true gut-level Republican family values in action. Clinton left us a $1.5 Trillion surplus. Bush blew it all quickly, with tax refunds and tax breaks and roll-backs benefiting the top 2% and mostly the top 1%, his real base. The Bush/Republican administration borrowed enough from every taxpayer's future the last eight years, and our childrens' futures, to fund a small mansion and yacht for everyone in America, and then the Republicans quickly hand the bales of billions to no-bid cronies, privatizing whatever they can--taking it away forever, and then they declare that you all are so much safer because of their expedient actions. Then, to deal with the national credit crisis their deficit spending helped create, along with the deregulated derivative ponzi scheme crushing family home values, the Republican party have the nerve to decry any aid amount directed to help out the deficit/credit deluged family taxpayers as yet another kick in their wallets. Since the 1970's business has demanded give back after give back from labor, demanded to be unfettered from taxes so it can create more jobs...but the jobs weren't created here, millions were exported with the means of production to China, Mexico, India, etc.
Here's an eye-opener question? Why isn't the enormous deficit ever factored and discussed as the US debt per shareholder? Taxing profits at shareholder and business levels is the really the only realistic way out at this point. Why isn't it ever framed as deficit per Wall Street banker and CEO? We never got a real choice on spending trillions for the wars or to veto the greed of Wall Street's derivative designers.
The personal income/wage-based tax system targeting the bulk of the load on the middle class is going against a rapidly shrinking pool, as millions of white collar and factory workers lose jobs, homes, pension savings, etc. As the pool of actual tax-payers is weakened and shrinks, dependents of the state increase, and the rich bankers have the gall to take aid meant to help us all and directly pocket $18 billion as bonuses. We've been gamed for the last time by the rich. The Bush/Republican tax roll backs for the rich insulated the rich from giving their share in helping secure the very society which made possible their vast accumulation of wealth. It's time to bring back 'The Death Tax' to full force--a fair way to treat a rich person whose been busy concentrating wealth, exporting US jobs and maximizing values of shares on the backs of workers and consumer safety. It's time to revise Capital Gains so that the society making possible short and long term gains gets a fair share. And it's time to shift the majority of the tax burden off the depleted middle class and onto the backs of those who still have money, who've managed to more than double their money in the last 8 years, or better.
It's time to tax Capital income and profits from production and services, and give Labor a long earned Jubilee break. Wages should not be treated as 'income'. Wages are the trade of sweat & creative labor for cash. It's not pure income like rent from a secure property, or profit from running an industry, or shareholder dividends. We should take a hard look at the European VAT system, along with this coordinated 'take back' from the rich.
Posted by: Blinky | February 1, 2009 11:01 PM
Nothing adjusts the markets better than an absolute failure across the board. Let the financial sector fail, the auto industry, housing market and even the porn industry. Add another 10-12% to our current unemployment rate and send us into the Great Depression II. Then create a nation of self-governed militias within their own states and refuse to acknowledge the federal government at all. Only then will we see the beauty of a truly unregulated free market.
Posted by: Free Market Marty | February 1, 2009 11:18 PM
John W,
Speaking of GDP, I would encourage you to look at the GDP during Roosevelt's tenure(s) and the last eight years. And also explain how this idea of an unregulated free market economy is supposed to work when you freely admit that loosening credit started this slide as it did with the Great Depression. Which one is it? A truly free market, unfettered by government restrictions or are the greatest collapses in our economic history the result of "loosening credit"?
Posted by: Stuart Chase | February 2, 2009 2:49 AM
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Posted by: Kenny Bunkport ✌ | February 1, 2009 7:51 PM
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Mr. Bunkport,
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You are talking past me with your talking points. You have not addressed what I said, and neither has Mr. Rich. As far as Republican leadership goes, don’t ask anything of Mr. Boehner (whose name I wish I could spell phonetically). He’s a sell-out in my book because he voted in favor of the Wall Street Bailout (which isn’t doing what it was supposed to do either.) Go talk to Mr. Kantor or either Senator from Alabama. They’ll tell it to you they way I did.
Posted by: John W. | February 2, 2009 3:08 AM
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Posted by: Blinky | February 1, 2009 11:01 PM
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Your post is very inspired, but woefully counterfactual.
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Clinton didn’t leave us with a $1.5 trillion surplus. Where you got that one from is a mystery to me. We were approximately $5.6 trillion in Debt when Clinton left office. Furthermore, the Debt increased every year of his two administrations. There was no surplus. It was all smoke and mirrors, and you bought it.
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In the second place, your “eye-opener question” isn’t as great as it sounds. Not all publicly traded companies have the same market capitalization and not all shares trade at the same value. Thus, if you taxed all shares at the same rate (or even at all), you would simply make some companies go out of business. That’s especially true of businesses like Fannie Mae and Freddy Mac (You know, the ones the Democrats thought were doing just fine?) which are currently trading at a fraction of a dollar per share. A taxation system like the one you propose would wreak havoc on the rest because it would discourage investment in the market. You would not simply be driving jobs abroad, but entire companies as well. That’s not a good idea.
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In the third place, the tax burden is not borne primarily by the middle class. The top 10% of taxpayers pay 68% of all income tax collected, whereas the bottom 50% of taxpayers pay only 3.3% of the tax burden. And you think it would be better to lay the entire burden on the top brackets? Those are the people who keep everyone else employed. If you think the unemployment rate is bad now, just try your “workers’ jubilee” and see what happens.
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Other problems with your proposals arise under the Fifth Amendment - i.e. that apparently hidden Amendment with provisions that seem hidden from progressives.
Posted by: John W. | February 2, 2009 3:47 AM
i think the whole debate regarding the stimulus mattered mainly from everyone's thought of what should be priority--obama thinks those in their bill are the priority, while the republicans think otherwise.
Posted by: Imee | February 2, 2009 5:02 AM
The New Deal spending-binge of the 1930s that Obama so proudly emulates was, in-fact, a colossal economic failure. FDR never achieved an unemployment level under 14%… and averaged 17% over his presidency.
FDR’s own Treasury Secretary Henry Morgenthau stated in 1939:
“We are spending more than we have ever spent before and it DOES NOT WORK… We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!”
This is all in stark contrast to the proven Reagan Recovery of the 1980s, which brought us back from almost 11% unemployment (50% worse than today), plus double-digit inflation and interest rates.He accomplished this with an adherence to Friedman's Chicago School philosophy- with spending cuts and tax cuts, in addition to deregulation and incentives for small businesses and entrepreneurs.
Ronald Reagan created over 20M jobs…growing the country’s real GDP by almost 30% in the process. Those kind of results makes one wonder why Obama’s trillion-dollar spending plan would impress ANY-body, with his pledged 4M new and “saved” jobs (whatever those are)… a paltry figure 16M jobs shy of The Gipper’s towering accomplishment.
A $500B tax cut would be far more effective, allowing American business to create the jobs they've repeatedly demonstrated the ability to produce, and actually create wealth… instead of just moving it from one pocket to the other.
This "recovery" plan of Obama is nothing but a specious, socialist Trojan-horse. To quote Rahm Emanuel: "no great crisis should be wasted"
http://reaganiterepublicanresistance.blogspot.com/2008/12/biden-runs-interferrence-for-big.html
Posted by: Reaganite Republican | February 2, 2009 7:43 AM
The Republican Party appears to;
1. Hope that the country fails
2. Fear Rush Limburger
3. Come dangerously close to hoping for a big terrorist attack on the USA.
Posted by: C.Morris✈ | February 2, 2009 8:30 AM
John W,
Nope. Rich is saying, in part, that unless the GOP brings ideas to the table (and hopefully not vetted by Limbaugh, who appears to be running the party), that it does seem to be revanchism, as you put it, especially in light of the vote along party lines.
Posted by: Kenny Bunkport ✌ | February 2, 2009 10:15 AM
John W,
And on another front you are misinformed. Following is the link to historical data of the Congressional Budget Office:
http://www.cbo.gov/doc.cfm?index=9957
It clearly shows @$250B in surplus inherited by Bush who squandered it (and much else) resulting in a @$450B deficit for 2008. That's a $700B swing downward (but his buddies got tax breaks...).
No wonder you revisionists want to get so creative.
Posted by: Kenny Bunkport ✌ | February 2, 2009 1:45 PM
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Posted by: Stuart Chase | February 2, 2009 2:49 AM
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I suggest that you have constructed a false dilemma by pitting the viability of a truly “unregulated free market economy” against the notion that the economy failed because of a loosening of credit. There is no such dilemma because: (1) we don’t have an unregulated free market or a free market of any kind; and (2) the loosening of credit was caused by a single quasi-governmental agency, to wit: the Federal Reserve Bank, in which case the credit problem is not a free-market created phenomenon.
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For the last 73 years or so it has been impossible to describe our economy as a free market system. A free market system is one unfettered by government regulation and undistorted by government intervention. The last 73 years has seen massive government regulation and intervention into everything from production quotas and incentives in agriculture, to manufacturing, to working conditions, to pay levels, to hundreds of billions of dollars in private R & D and corporate welfare. You can’t look at all of this and say we have a free market. That’s a joke. When the government is the final arbiter of which business is competitive and which isn’t, there is no free market. Furthermore, if we truly had a free market, then all business and bank failures would go by way of bankruptcy and liquidation. We know that doesn’t happen either.
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In the second place, the prime mover in the sphere of credit problems has been the Federal Reserve Bank. When it lowers its interest rates to that which is next to nothing (like it is right now), it makes money available to banks at very cheap rates. That means that banks don’t have an incentive to pay their own depositors as much for the use of their money in lending. That, in turn, discourages savings (because banks don’t do what they don’t have to do). Furthermore, prior to both the Great Depression and our current economic downturn, the FRB kept the money supply so cheap that banks were encouraged to lend beyond what was prudent by anyone’s business judgment. In fact, the banks succumbed to this moral hazard on both occasions. Prior to the Great Depression, banks were making ridiculous personal loans for investment, sometimes even taking bank stock (purchased with loan money) as collateral. More recently, they have executed loans secured by mortgages to many, many people who simply weren’t creditworthy when viewed objectively.
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The FRB came into existence by act of Congress. Its main board members are appointed by the President and approved by Congress. However, it has turned into a structural defect in our “mixed market” system because it doesn’t police itself and the federal government doesn’t exercise any oversight. Neither the President nor Congress has any veto power over the FRB’s decisions, some of which have had disastrous consequences. If we wanted a real free market economy, we would ditch the FRB, return to something like a fractional gold standard (that we only rid ourselves of in 1971), and allow the market to decide how much money we have and at what rates. Otherwise, if we still want to control the problems we have with the expansion of credit, we had better give either the President or Congress more oversight or veto powers.
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Oh, and BTW, I have looked at the economy under FDR. We started to come out of the depression when the government shifted focus to investment in production, rather than the demand side. It wasn’t trickle down economics by any stretch because the government engaged businesses directly to produce goods for the war effort. There was no simply “hoping” that entrepreneurs with money would invest in production. It was a case of the government providing the incentive to produce while treating the businesses as functioning within their own business model. That is what put people back to work on a massive scale, and which put us back onto the road to recovery. In contrast, the idea of investment in infrastructure and/or simply propping up the demand side, which is now in play, has never worked for very long. It certainly didn’t work for FDR.
Posted by: John W. | February 2, 2009 2:02 PM
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Posted by: Kenny Bunkport ✌ | February 2, 2009 10:15 AM
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Mr. Bunkport,
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Bully for Mr. Rich. The GOP has brought ideas to the issue. Senate Republicans have offered more with regard to what they would like to see in a stimulus bill. Furthermore, both you and Mr. Rich still can’t grasp the point that House Republicans opposed the bill for clear, non-revanchist, reasons; namely, that they don’t believe it will do the job as written. It is a plain, common-sense position to all but those who are enamored with the stimulus bill.
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And, no, Rush Limbaugh doesn’t run the Republican Party. If the Republican Party champions any ideas it isn’t because Rush Limbaugh thought them up or advocated them. There are better minds among conservatives than Rush, that’s for sure.
Posted by: John W. | February 2, 2009 2:15 PM
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Posted by: Kenny Bunkport ✌ | February 2, 2009 1:45 PM
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Excuse me, but that was a budget surplus for one year. It is, furthermore, terribly ridiculous to suggest that it represented a genuine “surplus” in any real sense given that we were, at the time, approximately $5.6 trillion in Debt. It’s sort of like someone saying, “I’m rich because I have $2,000 in the bank. Never mind that I owe $70,000 in credit card debt.” As for the statistics regarding the Debt and Clinton’s addition to it, I refer you to the U.S. treasury page at http://www.treasurydirect.gov/NP/BPDLogin?application=np If you enter January 20, 2001 (Clinton’s last day in office) you will see the government’s debt stood at $5,727,776,738,304.64 on that date. Against that figure, calling a $250 billion budget surplus a “surplus” in anything other than a single years’ accounting is ludicrous. We would owe more than that per year just for debt service.
Posted by: John W. | February 2, 2009 2:29 PM
John W,
Then, using your "smoke and mirrors," we can agree that Bush dug us into an even deeper hole than the data suggests.
As for Rush, tell that to GOP officeholders who grovel to him and those who offer him his contract.
Posted by: Kenny Bunkport ✌ | February 2, 2009 2:40 PM
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Posted by: Kenny Bunkport ✌ | February 2, 2009 2:40 PM
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1. I’m not using smoke and mirrors. Twisting serious debt figures into a bountiful plus takes smoke and mirrors, and maybe then some.
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2. You will never hear me defend Duh'bya. I thought he did a very poor job in many respects. He should have been more solicitous of the financial health of the government, in which case he should have curbed Congress’ appetite for spending to counterbalance his insistence on tax cuts. Having to pay for all that spending through debt service is more expensive than taxation.
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With regard to the economy, however, he didn’t have as much control over it as he did over government finances. A president doesn’t have dictatorial powers over the economy, or the power to dictate policy to the FRB or private industry. As I mentioned before, we don’t have a free market economy, but neither do we have a command economy. I do believe, however, that Duh’bya could have set a fire under the FRB, the FDIC and/or Congress about the trouble brewing in the housing and banking industries - assuming he wasn’t too busy reading My Pet Goat to care.
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3. I am unaware of any politicians who grovel before Rush Limbaugh. I would have no respect for any politician who did (not that I have a lot of respect for any of them anyway). I don’t know with whom he contracts for his work, but I’m sure they like him more because of his ability to generate advertising revenue than the content of his message. He does get people’s hackles up.
Posted by: John W. | February 3, 2009 4:00 AM