A Trillion Here, A Trillion There
Congress passes Obama's stimulus bill.
We await to be stimulated.
Here's a tongue-in-cheek heads-up on how this plan will work.
Three contractors are bidding to fix a broken fence at the White House. One is from Chicago, another is from Tennessee, and the third is from Minnesota.
All three go with a White House official to examine the fence. The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil. "Well," he says, "I figure the job will run about $900: $400 for materials, $400 for my crew and $100 profit for me."
The Tennessee contractor also does some measuring and figuring, then says, "I can do this job for $700: $300 for materials, $300 for my crew and $100 profit for me."
The Chicago contractor doesn't measure or figure, but leans over to the White House official and whispers, "$2,700." The official, incredulous, says, "You didn't even measure like the other guys! How did you come up with such a high figure?"
The Chicago contractor whispers back, "$1000 for me, $1000 for you, and we hire the guy from Tennessee to fix the fence." "Done!" replies the government official. And that, my friends, is how the new stimulus plan will work.
While there is some truth to that, a few things need to be noted. The best deterrent to boondoggles is public embarassment. "If a federal agency proposes a project that will waste that money I will not hesitate to call them out on it and put a stop to it," Obama told mayors yesterday. The Fifth Estate-- the media-- also have it call out the Democratic administration if they waste our money.
Getting power is not the same as keeping power, and good governance and the delivery of results will determine to no small degree whether or not there is a second Obama administration or whether Democratic congressional seats are held or lost in 2010. Also, I don't think it is rude to note that this crisis has its roots in the incompetence the Republic administration-- money that was spent like a drunken sailor not just on the war but also on expanded entitlement programs. This recession (depresison, if you're unemployed!) is not because of fate or the alignment of the stars but because of specific decisions that men and women took in past years. And msot of these men and women who mad such catastrophic decisions were Republicans.
I've to realize that much of this world-wide crisis has its roots in a discredited economic ideology that was most forcefully trumpted by President Bush and his acolytes in the last eight years. The ideology in a nutshell is that you could throw away the rule book and the players in the game of business would act responsibily, ethically, in their best interest, in the best interest of their shareholders, and in the interest of America. On all counts, this turned out to be false, and there is no need to recount the mountain of evidence to support this conclusion.
While it is an overstatement to just blame George Bush on the recession, unemployment, the deficit,the stock market, gas prices, and home prices, his economic theory ignited this crisis and fanned its flames. Perhaps thsi self-knowledge that he is a historic failure is such that it wouldn't surprise me if the man who sat in the chair once occupied by George Washington and Abraham Lincolon is still in a fetal position surrounded by whisky bottles.
The stimulus bill passed, and it will be a test of Republican integrity as to whether they will accept the stimulus money. Of course they will. When it comes to towering hypocrisy, I can always count on the Republcians to deliver. During the Senate debate, 36 of the Senate Republicans voted for an alternative that would have cut taxes over the next decade by $2.5 trillion, [and] reduced the top marginal race to 25 percent," said the Atlantic's Ron Brownstein on "Meet the Press." "For John McCain -- who voted for that alternative of a $2.5 trillion tax cut over the next decade -- to talk about generational theft, I mean, pot meet kettle."
Folks, wake up. The Republcians were the problem. The Democrats are now trying to find a solution.
There are good arguments that this bill will fail to deliver as advertised. But I don't see how it can make things any worse, with the world having lost in the last six months thirty trillion dollars in wealth.
I think this economic pump priming will have a measurable psychological effect, although the effect won't be immediate. It appears so far the market palce has turned a thumbs down on it, so much more work needs to be done.
Politically, the plan will either be the Republican's Waterloo or the Democrat's Waterloo. It's a gamble, but I think the Republicans have hurt themselves more by almost without exception voting for the status quo as behooves the party of Herbert Hoover and George W. Bush. The situation we are currently in is, after all, largely the result of the discredited free market dogma espoused by the Republicans and many of the institutions that have failed were run by Republicans. They are, however, right to raise concerns about whether or not some of the spending can be justified. But the more important questions is whether or not massive spending will work.
When I was a child, I had a shoe-box of million mark notes from the Weimer Republic with face values in the hundreds of thousands of dollars. German's printing presses printed so much money, the value of the money eroded causing the middle-class to vanish. This was fertile ground for the rise of fascism. Today's Zimbabwe is also facing similar pressures, as its money has become almost worthless. On the other hand, spending that began under FDR's New Deal and reached its climax during World War II created the foundations for the prosperity of the 1950s and 60s. And that might indeed happen. But the journey might be intolerable for most Americans. The economy of World War II was one of regimentation, scarcity, and the subordination of individuality to the presumed greater good of the state.
What we have today is a pool filled with toxic sludge. The mechanisms that animates our economic system have shut down. Banks resist extending credit-- the water in the professor's analogy. They don't want to extend credit because they themselves don't want to take the risk that the credit they extend -- the water-- will intermingle with the sludge and turn to sludge further harming or killing their institution and companies that depdnd on that institutions.
This is the same kind of rational decision that we as individuals and families are doing now by belt-tightening. We are deferring the purchase of high-end consumer products on the assumption that prices will continue to fall or that we will lose our jobs. But collectively our decision not to buy this stuff is triggering layoffs and factory closures, which in turn puts a downward pressure on prices and hiring decisions. Increased savings-- normerly a good thing-- is actually a bad thing for our economy. The result is unemployment for large numbers of people, including perhaps ourselves.
So what is the answer? No one really knows for sure, but perhaps the best pattern is what happened between 1929 and 1945, between the start of the Great Depression and the end of WWII. In the absence of individual and corporate spending, the government spent massively-- four trillion dollars in today's terms. (To put that into perspective, world wide equities in the last six months have lost more than $30 trillion dollars!) Of course, there was boondoggles, corruption, inflation, and so on. But the state was doing that which free enterprise was not doing-- circulating capital. It wasn't relevant that factories were building tanks or that anyone would actually use those tanks. From the standpoint of the economy, those tanks could have been dropped into the middle of the Atlantic. The productivity wasn't the building of tanks-- it was the circulation of capital to build those tanks.
There is productivity so long as their is monetary velocity. Spending combined with rationing that brought pent-up demand for consumer goods I think was responsible for the prosperity of the 1950s and 60s, as eventually free market institutions such as banks regained their footing and credability.
The problem for America is whether or not we as a country are willing to tolerate this kind of collectivized economic decision-making that presupposes the subordination of the individual to the state. We have ample cause to be skeptical about the stimulus, but I'm not sure there are many workable alternatives to get money flowing again through the veins of our national economy.
We await to be stimulated.
Here's a tongue-in-cheek heads-up on how this plan will work.
Three contractors are bidding to fix a broken fence at the White House. One is from Chicago, another is from Tennessee, and the third is from Minnesota.
All three go with a White House official to examine the fence. The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil. "Well," he says, "I figure the job will run about $900: $400 for materials, $400 for my crew and $100 profit for me."
The Tennessee contractor also does some measuring and figuring, then says, "I can do this job for $700: $300 for materials, $300 for my crew and $100 profit for me."
The Chicago contractor doesn't measure or figure, but leans over to the White House official and whispers, "$2,700." The official, incredulous, says, "You didn't even measure like the other guys! How did you come up with such a high figure?"
The Chicago contractor whispers back, "$1000 for me, $1000 for you, and we hire the guy from Tennessee to fix the fence." "Done!" replies the government official. And that, my friends, is how the new stimulus plan will work.
While there is some truth to that, a few things need to be noted. The best deterrent to boondoggles is public embarassment. "If a federal agency proposes a project that will waste that money I will not hesitate to call them out on it and put a stop to it," Obama told mayors yesterday. The Fifth Estate-- the media-- also have it call out the Democratic administration if they waste our money.
Getting power is not the same as keeping power, and good governance and the delivery of results will determine to no small degree whether or not there is a second Obama administration or whether Democratic congressional seats are held or lost in 2010. Also, I don't think it is rude to note that this crisis has its roots in the incompetence the Republic administration-- money that was spent like a drunken sailor not just on the war but also on expanded entitlement programs. This recession (depresison, if you're unemployed!) is not because of fate or the alignment of the stars but because of specific decisions that men and women took in past years. And msot of these men and women who mad such catastrophic decisions were Republicans.
I've to realize that much of this world-wide crisis has its roots in a discredited economic ideology that was most forcefully trumpted by President Bush and his acolytes in the last eight years. The ideology in a nutshell is that you could throw away the rule book and the players in the game of business would act responsibily, ethically, in their best interest, in the best interest of their shareholders, and in the interest of America. On all counts, this turned out to be false, and there is no need to recount the mountain of evidence to support this conclusion.
While it is an overstatement to just blame George Bush on the recession, unemployment, the deficit,the stock market, gas prices, and home prices, his economic theory ignited this crisis and fanned its flames. Perhaps thsi self-knowledge that he is a historic failure is such that it wouldn't surprise me if the man who sat in the chair once occupied by George Washington and Abraham Lincolon is still in a fetal position surrounded by whisky bottles.
The stimulus bill passed, and it will be a test of Republican integrity as to whether they will accept the stimulus money. Of course they will. When it comes to towering hypocrisy, I can always count on the Republcians to deliver. During the Senate debate, 36 of the Senate Republicans voted for an alternative that would have cut taxes over the next decade by $2.5 trillion, [and] reduced the top marginal race to 25 percent," said the Atlantic's Ron Brownstein on "Meet the Press." "For John McCain -- who voted for that alternative of a $2.5 trillion tax cut over the next decade -- to talk about generational theft, I mean, pot meet kettle."
Folks, wake up. The Republcians were the problem. The Democrats are now trying to find a solution.
There are good arguments that this bill will fail to deliver as advertised. But I don't see how it can make things any worse, with the world having lost in the last six months thirty trillion dollars in wealth.
I think this economic pump priming will have a measurable psychological effect, although the effect won't be immediate. It appears so far the market palce has turned a thumbs down on it, so much more work needs to be done.
Politically, the plan will either be the Republican's Waterloo or the Democrat's Waterloo. It's a gamble, but I think the Republicans have hurt themselves more by almost without exception voting for the status quo as behooves the party of Herbert Hoover and George W. Bush. The situation we are currently in is, after all, largely the result of the discredited free market dogma espoused by the Republicans and many of the institutions that have failed were run by Republicans. They are, however, right to raise concerns about whether or not some of the spending can be justified. But the more important questions is whether or not massive spending will work.
When I was a child, I had a shoe-box of million mark notes from the Weimer Republic with face values in the hundreds of thousands of dollars. German's printing presses printed so much money, the value of the money eroded causing the middle-class to vanish. This was fertile ground for the rise of fascism. Today's Zimbabwe is also facing similar pressures, as its money has become almost worthless. On the other hand, spending that began under FDR's New Deal and reached its climax during World War II created the foundations for the prosperity of the 1950s and 60s. And that might indeed happen. But the journey might be intolerable for most Americans. The economy of World War II was one of regimentation, scarcity, and the subordination of individuality to the presumed greater good of the state.
What we have today is a pool filled with toxic sludge. The mechanisms that animates our economic system have shut down. Banks resist extending credit-- the water in the professor's analogy. They don't want to extend credit because they themselves don't want to take the risk that the credit they extend -- the water-- will intermingle with the sludge and turn to sludge further harming or killing their institution and companies that depdnd on that institutions.
This is the same kind of rational decision that we as individuals and families are doing now by belt-tightening. We are deferring the purchase of high-end consumer products on the assumption that prices will continue to fall or that we will lose our jobs. But collectively our decision not to buy this stuff is triggering layoffs and factory closures, which in turn puts a downward pressure on prices and hiring decisions. Increased savings-- normerly a good thing-- is actually a bad thing for our economy. The result is unemployment for large numbers of people, including perhaps ourselves.
So what is the answer? No one really knows for sure, but perhaps the best pattern is what happened between 1929 and 1945, between the start of the Great Depression and the end of WWII. In the absence of individual and corporate spending, the government spent massively-- four trillion dollars in today's terms. (To put that into perspective, world wide equities in the last six months have lost more than $30 trillion dollars!) Of course, there was boondoggles, corruption, inflation, and so on. But the state was doing that which free enterprise was not doing-- circulating capital. It wasn't relevant that factories were building tanks or that anyone would actually use those tanks. From the standpoint of the economy, those tanks could have been dropped into the middle of the Atlantic. The productivity wasn't the building of tanks-- it was the circulation of capital to build those tanks.
There is productivity so long as their is monetary velocity. Spending combined with rationing that brought pent-up demand for consumer goods I think was responsible for the prosperity of the 1950s and 60s, as eventually free market institutions such as banks regained their footing and credability.
The problem for America is whether or not we as a country are willing to tolerate this kind of collectivized economic decision-making that presupposes the subordination of the individual to the state. We have ample cause to be skeptical about the stimulus, but I'm not sure there are many workable alternatives to get money flowing again through the veins of our national economy.
Labels: economics
posted by My Mall and News at
10:37 AM
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