Category Archives: Stimulus Package

President Obama’s Brain: Panic, Inexperience and Overly Complicated

Tuesday, July 21, 2009

I’ll be really brief. (My Corn Flakes are getting soggy.) I believe in the intelligence of my readers. Most of you will fill in the blanks. Others, well, won’t realize there are any blanks, so it won’t make any difference.

First example: President Obama’s program for healthcare reform is a mess. Grotesquely too complicated and way too costly, as far as we can tell, in ways we can’t fully calculate yet. Interferes with established markets with who knows what impact. Difficult to impossible to administer. Yada, yada, yada.

Alternative, much simpler solution: (1) Ask the medical profession to define the minimum coverage Americans should have. (2) Ask the medical profession and insurance underwriters to define the cost of that coverage – provided exclusively by the private sector. No profiteering, please. (3) Give the money for that coverage to people who can’t afford it. (“Honey, would you put my English muffin down again? …Thanks.” I make a kissing noise with my mouth without looking up so as not to interrupt my typing.)

Second example: The economy is in trouble due, in part, to the irresponsible behavior of many of our nation’s leading financial institutions. “Oh my God!!” our new President says to himself, giving out k-billions of dollars in bailout money to solve problems the economy would have resolved more effectively and far less expensively on its own. To paraphrase Admiral Farragut, “Damn the budget deficit, full speed ahead! Who wants bailout money?” (Personally, I get a kick out of imagining President Obama wearing one of those old horizontal Admiral’s hats.)

Flash forward just 6 months… Many of the same companies are showing huge multi-billion dollar profits and are returning to their pre-bailout ways. “Way to go, President Obama!”

Oh, and did I forget to mention that he’s only managed to spend $90 billion – some of it still in “the pipeline” which, for the government, is a lot like having a fur ball – of the $787 billion he insisted he needed on an emergency basis to save the economy?

Okay, my English muffin is getting cold, and the fake, high-in-Omega-3s butter my wife buys me won’t be melting in the nooks and crannies anytime soon. And that’s where I draw the line. You’re on your own. Good luck.

-wf


Site Meter

Advertisements

President Obama’s Hurricane Katrina

Friday, July 17, 2009

Running for President is one thing. President Obama is a superb campaigner with an exceptional campaign management team. Managing the government is something else altogether.

Rightly so, President Bush was lambasted for his slow and horribly inept response to the devastation caused by hurricane Katrina on New Orleans and in other communities throughout the region. What’s stunning is that President Obama – clearly President Bush’s intellectual superior – has proven himself no better, and perhaps worse at delivering government support in a crisis of much greater magnitude.

Despite his popularity and majority ownership of Congress, despite his stated need for a stimulus package on an emergency basis, here we are, 154 days since the stimulus package was passed by Congress on February 13, 2009, 5 months later and the Obama Administration has so far managed to spend only $90 billion of the total $787 billion approved – and much of that $90 billion has yet to hit the street, is still categorized as being “in the pipeline.”

The stimulus package was never necessary or appropriate. The way the money would have been spent wasn’t the most effective use of those funds to blunt a serious downturn and facilitate recovery. We didn’t have the money, and the economy is recovering on its own without it. That having been said, there’s just no excuse for President Obama’s not having spent the money Congress approved. He’s in charge. It’s his fault.

Please, save me from one more speech where a politician accepts responsibility for his or her failures. I don’t want an apology. It’s the last thing the American people and the economy need. What I want is for him to step up to his teleprompters, tell us they’ve missed the window of opportunity they had when the bill was first passed and cancel the stimulus package. “That’s it. It’s too late. We’re not going to spend the remaining $687 billion as originally planned. I’m sure we can find something else to do with it. Sorry, I blew it.” (That last sentence is optional.)

Better yet, let’s deliver the $697 billion directly to those consumers who have been hurt the most by the recession and who will put these dollars out there in the economy where they need to be, immediately.

Suggested reading… “Occam’s Economics: A simple, back-of-the envelope plan to regenerate consumer spending – immediately.” which I posted Thursday morning, July 8.

-wf


Site Meter

Deficit of the Day: $1.09 Trillion (Is this a great country, or what?)

Tuesday, July 14, 2009

Yes, our federal government deficit has exceeded $1 trillion, and yet we keep spending. Making matters worse, it’s a milestone in non-wartime government history that will be short-lived, soon to be eclipsed by the $1.84 trillion deficit the Administration is expecting by October.*

For those of you who may say, “Com’on, the economy is huge. It’s not such a big number when you think about it. The dollar isn’t worth what it used to be.” (No kidding.) “We’ll get things under control when the economy recovers. Blah, blah, blah,” you’re nuts if you think a $1.84 trillion budget deficit isn’t significant.

Unbelievably, the Administration has yet to spend $697 billion of the $787 billion the President said was needed on an “emergency” basis. (And people thought the Bush Administration was incompetent for its untimely handling of hurricane Katrina.) Meanwhile, the economy is going to, and may have already begun to recover on its own. What to do, what to do?

Personally, I’d reallocate the $697 billion to those households which have been most affected by the recession who will spend the money we give them immediately, without endless delays or wasteful “pork.”** Okay, you don’t like that idea. Fine. Then just don’t spend the $697 billion. Round numbers, that will cut the current budget deficit to a measly $400 billion, chump change by federal government standards.

As for the $1.84 trillion deficit forecast for October, well, as President Barack “Buzz” Lightyear would say, “To infinity and beyond!”

Somebody’s going to have to pay for all this, in the form of taxes and essential government services we’re not going to enjoy – and I think we all know who that’s going to be.

*AP article on Yahoo! News, “Budget deficit tops $1 trillion for first time”.

**Suggested reading… “Occam’s Economics: A simple, back-of-the envelope plan to regenerate consumer spending – immediately.” which I posted Thursday morning, July 8.

-wf


Site Meter

Con of the Day: “Obama urges patience on stimulus plan”

Sunday, July 12, 2009

And so the Associated Press headline read.* The President wants us to be patient. His stimulus plan will work. Just give it time.

Well, first, for it to work he’ll have to actually spend the money, which, for the most part, he hasn’t. As of July 8, only $90 billion of the $787 billion allocated has been spent – or is in “the pipeline” – which leaves a whopping $697 billion unspent.** The patience he’s asking for is with him and his administration for being such slackers, and has nothing to do with the effectiveness of the stimulus package if it had been implemented.

More to the point, what he’s doing is waiting for the economy to recover on its own, as it will, sooner rather than later, by which time he will have spent the stimulus money and take full credit for the recovery – as will the Democrats in Congress.

What a crock.

Suggested reading… “Occam’s Economics: A simple, back-of-the envelope plan to regenerate consumer spending – immediately.” which I posted Thursday morning, July 8.

-wf

*See the AP article on MSNC, “Obama urges patience on stimulus plan”

**The Washington Examiner, July 8, 2009, “First stimulus package spending at glacial pace; Obama wants another?”.


Site Meter

Occam’s Economics: A simple, back-of-the-envelope plan to regenerate consumer spending – immediately.

Thursday, July 9, 2009

Let’s talk about giving all $697 billion* of the first stimulus plan which has yet to be spent to the 14.7 million** people who are currently unemployed. Com’on. Think about it. I dare you to take this plan seriously.

For the sake of discussion, I’m going to make some gross, simplifying assumptions:

(1) Ignore the substantial unemployment benefits the unemployed are already receiving.

(2) Overlook the fact that, while the unemployment rate is currently 9.5%, 3.5% is typical of a healthy economy. No recovery plan, in other words, needs to push unemployment to 0%.

(3) Pretend the millions of Americans who are still working, but who are under-employed as a result of the recession and whose family incomes are seriously depressed… I’m going to pretend these families are okay. (They’re not.)

These and other issues not elaborated here are obviously important considerations which will need to taken into account, but not right now. I just want you to focus on the core concept.

$697 billion divided by 14.7 million people is an average of $47,415 per person, tax free. I don’t know the pre-recession average annual disposable income of these families, and that could be a problem if it’s higher than $47,415, but I suspect I’m okay. We could, in other words, completely regenerate the consumer spending lost by the recession for a full year in one fell swoop just by giving what’s left of the first stimulus package to the people who need it most.

Simply put, what I’m suggesting is that we’d be better off giving our stimulus dollars to the unemployed whose needs are such that they will not hesitate to spend every dollar we give them. Give the money to them gradually over the next year until the natural process of economic recovery takes over. (We’ll handle the transition between receiving subsidies and returning to employment through a negative income tax to make sure they have a substantial financial incentive to return to work.)

Forget about public works projects and various economic development programs, the nature, duration and location of which may not be the most effective, most timely means of getting people back to work. Let’s ask ourselves, “What can we do that will have the most dramatic and most immediate impact on the economy?”

The simple answer is, give the money to consumers whose incomes have been so depressed (or eliminated altogether) by the recession that their propensity to consume is 100%. For all intents and purposes, they’re going to take every dollar you give them and spend it, immediately. They’re not going save any of it. They’re not even going to use any of it to pay down their credit cards and other debt except to make mortgage and car payments. And they are certainly not going to take months, maybe years to build something with it. They’re going to spend it. All of it. Right now. (This paragraph was excerpted from “A second stimulus package?!” which I posted yesterday.)

What? This is too simple, too straightforward a concept to work? Let me get this straight… We’re in a national economic crisis so severe that the Administration is considering a second round of $300 to $400 billion – more money we don’t have – even while $697 billion of the first emergency stimulus package remains unspent. I think a little simplicity that focuses our attention on the problem we’re trying to solve may be exactly what we need.

Is the idea too pure, too kosher for Congress because it doesn’t have any “pork”? My apologies, but I thought that was one its advantages. Are there implementation issues? Of course, but they’re almost certainly less than the mess we are now realizing with the stimulus funds we’ve spent, and still haven’t spent, so far.

I know it’s not the way Washington usually does things, but sometimes, the simplest, most obvious solution is the one that makes the most sense.

-wf

*The Washington Examiner, July 8, 2009, “First stimulus package spending at glacial pace; Obama wants another?”.

**The Bureau of Labor Statistics, Unemployment Statistics.


Site Meter

A second stimulus package?!

Wednesday, July 8, 2009

Yes, it’s true. Without having spent the entire first stimulus package or having any evidence that what has been spent has had any real effect worth the trouble, the Obama Administration is considering a second package of perhaps as much as $300 to $400 billion.

Recovery from a serious downturn in the economy takes time. Downward phases of business cycles are part of a natural process through which the economy makes adjustments that were long overdue. It’s a process the government can tweak a bit, if they’re really good at it, and mess up if they’re not, but it’s not something it can control to the extent the Obama Administration has in mind. We need to let it happen, and do everything we can to protect the spending of consumers whose incomes have been adversely affected.

Unfortunately, impatience is the hallmark of the Obama Presidency. He couldn’t wait to run for President, and he can’t wait to check off his campaign’s list of objectives for an Obama government. Healthcare reform? Pass some legislation, regardless of whether or not it makes sense. Check. Recession? Throw a trillion or so at the problem. Who cares if we can afford it. Check! His superficial air of calm and control notwithstanding, he needs to spend more time thinking, and maybe less time making speeches, before wasting billions of dollars that can be deployed much more effectively, and spending us into oblivion in the process.

Let’s say I have a billion dollars to spend to help the economy recover. What’s the most effective use of those funds? What will have the most dramatic and most immediate impact on the economy? The simple answer is, give it to consumers whose incomes have been so depressed (or eliminated altogether) by the recession that they’re not even buying the essentials they need to support their families. These are the people, and there are unfortunately many millions of them, whose propensity to consume is 100%. They’re going to take every dollar you give them and spend it, immediately. They’re not going save any of it. They’re not even going to use any of it to pay down their credit cards and other debt except to make mortgage and car payments. And they are certainly not going to take months, maybe years to build something with it. They’re going to spend it. All of it. Right now.

In fact, before we consider a second round of spending money we don’t have on less effective stimulus programs, maybe Congress could redirect the balance of the first round that we haven’t spent to families who will put those dollars to work without further delay.

Suggested reading… “Occam’s Economics: A simple, back-of-the envelope plan to regenerate consumer spending – immedately.” which I posted Thursday morning, July 8.

-wf


Site Meter