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Stimulus package full of pork? (pg. 7)
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| Capitalizt |
| quote: | Originally posted by Clovis
I don't understand how that chart correlates with states getting targeted assistance from the stimulus package. |
It means tons of new money is being created by the fed and pumped into the banks. They have plenty of "liquidity" now due to cheap dollars from the fed. There are lots of dollars sloshing around that could get us out of this slump, but people are still refusing to spend and banks are refusing to lend due to fear. They are afraid of what government might due next..what interventions might be coming.. The rules are constantly changing and government is influencing supply and demand with it's crazy bailouts and stimulus plans. Nobody can make any rational decisions based on economic reality because they don't know what reality is. If government would just stand aside and allow the market to correct, things would quickly work themselves out. Prices would bottom and an equilibrium would be reached..then banks would start lending again. They have no reason to make any commitments now because the government is intervening and changing the rules of the game every week. As long as we have an activist government, people will remain be frozen with fear and uncertainty.
The feds just need to stop devaluing the currency and stop propping up failed enterprises. The best thing they could do for everyone is maintain the purchasing power of the dollar and allow nature to take it's course. |
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| Clovis |
I don't think that is exactly what is happening, but, thanks.
AFAIK California hasn't been getting money because we haven't been able to pass a budget until 2 days ago. Banks would not lend to the state until we had a budget that showed how we were going to deal with the shortfall.
The money in the stimulus bill would help keep certain programs afloat during the budget crisis, key programs that have been cut or cut back so that the state government could balance and pass a budget. |
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| Shakka |
| The idea that banks are refusing to lend is a half-truth. This country is so over-leveraged as is that there is not a lot of demand for credit. Yes, liquidity is sloshing around, but who has the capacity to borrow in these times? |
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| Lebezniatnikov |
Robert Reich:
| quote: | The stock market reached a six-year low today. Why? Some blame loose talk (including that of former Fed Chair Alan Greenspan) about nationalizing the nation's banks. Others blame Obama's new plan for helping homeowners who may not be able to pay their mortgages. But the real culprit is the accelerating decline in aggregate demand -- consumers, businesses, and exports. Companies are losing money because their customers are disappearing. That's precisely why the stimulus is so important -- indeed, why many of us fear it's too small.
One of the oddest of right-wing claims is that FDR's New Deal didn't pull America out of the Great Depression, so Barack Obama's "New New Deal" won't, either. While it's true that the New Deal didn't end the Great Depression, three points need to be impressed on the hard-pressed conservative mind:
1. The New Deal relieved a great deal of suffering by establishing social safety nets -- Unemployment Insurance, Aid for Dependent Children, and Social Security for retirees. Most have remained, a worthy legacy. But because the structure of the economy has changed (a much higher percentage of the working population is now employed part-time in several jobs or as independent contractors, for example), there are gaping holes in the safety net which a New New Deal should fill in order that the Mini Depression we're experiencing not cause excessive harm.
2. FDR's public works spending did help the economy somewhat. By 1936, U.S. the economy was showing some life. Unemployment was declining and consumers were beginning to buy. But FDR cut back on public-works spending, and the economy sank back into its former torpor. A warning to Obama: Don't worry about so-called "fiscal responsibility" when aggregate demand still falls far short of the economy's total capacity.
3. The Second World War pulled the nation out of the Great Depression because it required that government spend on such a huge scale as to restart the nation's factories, put Americans back to work, and push the nation toward its productive capacty. By the end of the war, most Americans were better off than they were before its start. Yes, the national debt ballooned to 120 percent of GDP. But the debt-GDP ratio subsequently declined -- not just because post-war spending dropped but because the economy continued to grow as war production converted to the production of consumer goods. Lesson: The danger isn't too much stimulus, it's too little stimulus. |
http://tpmcafe.talkingpointsmemo.co...e-new-new-d.php |
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| Shakka |
Much as I dislike Krugman, I thought his editorial yesterday was pretty interesting.
| quote: |
February 20, 2009
Op-Ed Columnist
Who’ll Stop the Pain?
By PAUL KRUGMAN
Earlier this week, the Federal Reserve released the minutes of the most recent meeting of its open market committee — the group that sets interest rates. Most press reports focused either on the Fed’s downgrade of the near-term outlook or on its adoption of a long-run 2 percent inflation target.
But my eye was caught by the following chilling passage (yes, things are so bad that the summarized musings of central bankers can keep you up at night): “All participants anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks; a few indicated that more than five to six years would be needed for the economy to converge to a longer-run path characterized by sustainable rates of output growth and unemployment and by an appropriate rate of inflation.”
So people at the Fed are troubled by the same question I’ve been obsessing on lately: What’s supposed to end this slump? No doubt this, too, shall pass — but how, and when?
To appreciate the problem, you need to know that this isn’t your father’s recession. It’s your grandfather’s, or maybe even (as I’ll explain) your great-great-grandfather’s.
Your father’s recession was something like the severe downturn of 1981-1982. That recession was, in effect, a deliberate creation of the Federal Reserve, which raised interest rates to as much as 17 percent in an effort to control runaway inflation. Once the Fed decided that we had suffered enough, it relented, and the economy quickly bounced back.
Your grandfather’s recession, on the other hand, was something like the Great Depression, which happened in spite of the Fed’s efforts, not because of them. When a stock market bubble and a credit boom collapsed, bringing down much of the banking system with them, the Fed tried to revive the economy with low interest rates — but even rates barely above zero weren’t low enough to end a prolonged era of high unemployment.
Now we’re in the midst of a crisis that bears an eerie, troubling resemblance to the onset of the Depression; interest rates are already near zero, and still the economy plunges. How and when will it all end?
To be sure, the Obama administration is taking action to help the economy, but it’s trying to mitigate the slump, not end it. The stimulus bill, on the administration’s own estimates, will limit the rise in unemployment but fall far short of restoring full employment. The housing plan announced this week looks good in the sense that it will help many homeowners, but it won’t spur a new housing boom.
What, then, will actually end the slump?
Well, the Great Depression did eventually come to an end, but that was thanks to an enormous war, something we’d rather not emulate. The slump that followed Japan’s “bubble economy” also eventually ended, but only after a lost decade. And when Japan finally did start to experience some solid growth, it was thanks to an export boom, which was in turn made possible by vigorous growth in the rest of the world — not an experience anyone can repeat when the whole world is in a slump.
So will our slump go on forever? No. In fact, the seeds of eventual recovery are already being planted.
Consider housing starts, which have fallen to their lowest level in 50 years. That’s bad news for the near term. It means that spending on construction will fall even more. But it also means that the supply of houses is lagging behind population growth, which will eventually prompt a housing revival.
Or consider the plunge in auto sales. Again, that’s bad news for the near term. But at current sales rates, as the finance blog Calculated Risk points out, it would take about 27 years to replace the existing stock of vehicles. Most cars will be junked long before that, either because they’ve worn out or because they’ve become obsolete, so we’re building up a pent-up demand for cars.
The same story can be told for durable goods and assets throughout the economy: given time, the current slump will end itself, the way slumps did in the 19th century. As I said, this may be your great-great-grandfather’s recession. But recovery may be a long time coming.
The closest 19th-century parallel I can find to the current slump is the recession that followed the Panic of 1873. That recession did eventually end without any government intervention, but it lasted more than five years, and another prolonged recession followed just three years later.
You can see, then, why some Fed officials are so pessimistic.
Let’s be clear: the Obama administration’s policy initiatives will help in this difficult period — especially if the administration bites the bullet and takes over weak banks. But still I wonder: Who’ll stop the pain? |
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| pmoisse |
I think that part of the problem with any solution is that in this day & age of information sharing and tv soundbites, nobody is giving any of these "fixes" time to work before reacting in a negative way based on the latest news.
There isn't a short term fix, but everyone seems hungry to FIX IT NOW DAMMIT!!!! and get back to the way things were when the houses of cards were still standing.
The more I read about all this (and I'm certainly no economist) the more I fear we are digging a deeper hole for humanity. Why not just implode the whole system now and focus on starting something fresh while there is still some momentum left in the global economy?
I know the "market" has never been one for caution and patience, but I think it's hurting itself more than helping with the pannicked speculation and reactions to what-ifs based on the latest panel of experts on tv. |
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| The17sss |
Take note, Lebez and other other believers in the "stimulus"
The Market Is Shorting Obama's 'Stimulus'
By George Bittlingmayer & Thomas W. Hazlett
| quote: | President Barack Obama's "stimulus" plan invokes the 1930s fiscal strategy put forward by British economist John Maynard Keynes, who saw capitalism as pretty much spent. Having exhausted their store of innovative ideas, investors curled up. Workers lost jobs, spent less, and sent still other workers walking. Budget deficits – government spending without taxes to "pay as you go" - would pull unemployed workers off the street and arrest the downward spiral. Investors’ “animal spirits” would be calmed, new capital risked, and economic vitality restored.
So the Obama theory – government spending is stimulus. If so, financial markets should feel the love. The U.S. budget is awash in red ink, and $800 billion more of it should easily move the needle on our economic prospects. Indeed it has – in the wrong direction. Financial markets don't want more government debt or a scramble for "shovel-ready" spending projects. They want the skeletons in the banking sector's closet exposed and expunged.
The Bush Economy went up in smoke in September-October 2008. The financial meltdown hit Wall Street, devastating bank equities and laying waste to America's 401-Ks. The Republican ticket, McCain-Palin, was a 50-50 bet on Sept. 15; by Oct. 15 it was a 5-1 long-shot. Voters saw the carnage: the Dow Jones Index lost 17% of its value from Sept. 2 through Nov. 3. In a flash, Americans lost years of toil, and Republicans the election. Decisively.
The election marked a turning point. Investors looked forward to the economic policies crafted by Democrats in Congress and the White House. More pointedly, they wanted decisive, well-crafted action on the banking crisis. Hence the Dow soared 6.5% Nov. 21 on news that Timothy Geithner, the highly-respected head of the New York Federal Reserve Bank, was Obama’s pick for Treasury Secretary.
Yet, from Nov. 4, 2008 through Feb. 12, 2009, the DJI overall fell 18% -- a larger drop than during the Sept-Oct plunge. In January, when the Obama plan, promising far greater deficits than the two much smaller "emergency stimulus" plans signed by Pres. George W. Bush in 2008, was unveiled, the market tanked – the worst January performance in 113 years. |
... which Lebez and MisterOpus belive have nothing to do with Obama's policies.... just a coincidence or probably Bush's fault right? lol
continued....
| quote: | More pointedly, key political victories for the Team Obama spending plan have not been viewed as buying opportunities on Wall Street. A string of negative market reactions began with the December 18 announcement of a stimulus bill of $700 billion (Dow down 2.5%), continued with the January 7 announcement that the actual plan would be "on the high side" (-2.7%) and continued with last week's 61-36 Senate vote supporting the Administration's fiscal plan. The White House victory and the new bank bail-out plan announced the following day by Treasury Secretary Geithner were met with a 5% wipe-out in the DJI, and a decline in Treasury bond yields, indicating a "flight to quality."
There are many problems with Keynes' "stagnationist thesis," as Joseph Schumpeter called it, not the least of which is that it didn't test so well when applied by New Dealers. U.S. unemployment was perniciously high throughout the 1930s, peaking at 25% in 1933 but still over 17% in 1939.
Many claim that World War II brought us out of the Great Depression, but the lesson to be learned is still being debated. Federal budget deficits soared (reaching 26.5 % of GDP in 1942 as calculated by Harvard economist Robert Barro), providing Keynesians an argument for spending as stimulus. But WWII also brought a profound shift in the New Deal's regulatory policies. Attorney General Thurman Arnold's vigorous campaign to break-up "the bottlenecks of business" in major industries like steel, chemicals and electrical equipment was shuttered, and America's largest corporations enjoyed a respite from threats of dismemberment (Arnold was kicked upstairs to a judgeship). As Thomas K. McCraw writes in his superlative Schumpeter biography, "Under the life-and-death pressure of war mobilization… the Roosevelt Administration, which had been hostile toward alleged monopolies, now decided that big business must lead in the job that had to be done."
The only thing guaranteed by the spending stimulus is more national debt. One stroke of the presidential pen has now increased it by $800 billion. Democrats recently screamed about W-era profligacy. On July 28, 2008, Sen. Kent Conrad (D-ND), Chair of the Senate Budget Committee declared, "If they gave out Olympic medals for fiscal irresponsibility, President Bush would take the gold, silver and bronze. With his eight years in office, he will have had the five highest deficits ever recorded. And the highest of those deficits is now projected to come in 2009, as he leaves office."
Kent Conrad was right. The projected 2009 deficit then stood at $482 billion. In January it was forecast by the Congressional Budget Office at $1.2 trillion.Pres. Obama's new plan now ups that to $1.7 trillion. If W got the gold, the new Administration has landed the Platinum in just its qualifying heat.
If historic U.S. budget deficits are any indication, the economy is already "stimulated." The predicted 2009 federal deficit stood at 8.3% of GDP before Obama's package sent it to about 12%. This is a stunning level of debt, double the previous post WWII high when Reagan's 1983 budget deficit amounted to 6% of GDP. That time around, the 10.8% unemployment rate, the worst since the Great Depression, was soon reversed. |
... important to note for all you Reganomics bashers who love to cry, "Regan's tax cuts lead to a huge deficit! Wahhh!" Note the difference in % of GDP then compared to now.
continued....
| quote: | Keynesians claim that the Reagan boom was an outcome of just this deficit strategy; for sake of argument, let us assume the Keynesian position. Reagan's budget deficit, half the size of Obama's as a fraction of GDP, was able to pull the economy out of an unemployment trough deeper than the 7.6% hole we're in today.
How do economists know that, while a deficit amounting to 6% of GDP budget was sufficient to spur the economy back to health in 1983, it will take more than twice that federal borrowing to do the same now? They don't. Economic models are all over the place in their projections. Indeed, Prof. Barro's cutting edge analysis of fiscal policy finds no historical stimulus from peacetime deficits. Of course, we've never seen so massive a deficit – one that would bar the U.S. from membership in the European Union, on grounds that our government finances are a mess -- and so we lack empirical evidence to inform the precise experiment we're running today.
We do, however, know the accounting trends: our government faces massive new spending increases as Baby Boomers retire and their Social Security and Medicare bills come due. Market investors are wary of new spending, guaranteeing either future tax increases or inflation, as a run-up to the demographically guaranteed spending spiral. The quest for "shovel-ready" projects makes one think, Where's Senator Ted Stevens when we need him? In any event, this fiscal bridge to nowhere is not spurring markets.
Government deficits are nonetheless being sold as doctor's orders, an elixir that – while it looks ugly and tastes bitter – will propel us back to economic health. Yet the best forecast currently on the table is the one made by investors risking their own money. They are shorting the "stimulus."
George Bittlingmayer is the Wagnon Professor of Finance at the University of Kansas. Thomas Hazlett is Professor of Law & Economics at George Mason University. |
couldn't have said it better myself ;)
http://www.realclearmarkets.com/articles/2009/02/the_market_is_shorting_obamas.html |
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| djjoshuaallen |
great thread.
But the bottom must be hit for the markets to correct themselves. And they will correct themselves. Big government spending will only delay the fall to the bottom, providing jobs solely dependant on government funds. And while it may cushion the hit, making it a bit less painful, we will sacrafice years of economic recover for it.
Although unpopular around these boards, I do feel that tax cuts are a better solution. Spending is the way out of this mess, and it should be done by the consumer not government. This will eliminate wasteful spending and corrupt government pork. Everybody says we cant cry about a few million here or there, but rest assured that those millions will turn into billions.
I do recognize immediate needs for states such as my own (CA) for crucial programs to keep government functioning, but not 787 Billion dollars worth. And this is just the beggining, when this one doesnt work Obama will move into phase two, three, and four of economic stimulus. 8 years later we may see a recovery and will have to thank our children for picking up the bill (2,3,4 trillion by then with interest) for our cushioned economic collapse. |
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| MisterOpus1 |
| quote: | Originally posted by The17sss
Take note, Lebez and other other believers in the "stimulus"
The Market Is Shorting Obama's 'Stimulus'
By George Bittlingmayer & Thomas W. Hazlett
... which Lebez and MisterOpus belive have nothing to do with Obama's policies.... just a coincidence or probably Bush's fault right? lol |
Umm, gosh, I must have been completely asleep for the past 8 years to not consider what got us into this mess in the first place. I do find it wee bit odd, however, that you present an op-ed from a Conservative website as your supporting evidence to the contention that the DOW tanking in the past month has been attributed largely to Obama and/or his stimulus plan. Goodness, why am I not surprised.
I'll get back to that thought in a moment.
Hmm, going back to verify the dates the author was referring to is interesting. Let's look a little closer:
| quote: | | A string of negative market reactions began with the December 18 announcement of a stimulus bill of $700 billion (Dow down 2.5%), |
Umm, yeah, there really wasn't much in the market tanking that had to do with Obama that day:
http://money.cnn.com/2008/12/18/mar...wyork/index.htm
Moving on:
| quote: | | continued with the January 7 announcement that the actual plan would be “on the high side” (-2.7%) |
Again, nothing attributing to Obama:
http://money.cnn.com/2009/01/07/mar...wyork/index.htm
And finally:
| quote: | | and continued with last week’s 61-36 Senate vote supporting the Administration’s fiscal plan. The White House victory and the new bank bail-out plan announced the following day by Treasury Secretary Geithner were met with a 5% wipe-out in the DJI, and a decline in Treasury bond yields, indicating a “flight to quality.” |
Finally we get something involving Obama and the stimulus plan:
http://money.cnn.com/2009/02/09/mar...wyork/index.htm
It's also worth noting some of the other bad news that day along with the stimulus plan.
But hey, 1 out of 3 days isn't TOO misleading, is it? Jesus.
| quote: | | ... important to note for all you Reganomics bashers who love to cry, "Regan's tax cuts lead to a huge deficit! Wahhh!" Note the difference in % of GDP then compared to now. |
How is anything that was cited in that last paragraph equate to your statement in any way? A few things come to mind:
1. You really making the claim that Reagan's tax cuts didn't lead to a huge deficit? Care to explain then why he decided to follow his tax cuts with the biggest tax increase in history, followed by more and more tax increases?
2. Care to also explain why my Senator from Kansas, Bob Dole, a Republican, mind you, had to tell Reagan enough with the tax cuts?
3. Care to explain how all those wonderful things that trickle-down voodoo economics seemingly sank us further down into the abyss, to which we had to climb our asses out of in 1987, 1989, and again in the early 90's, to which yet another Republican had to raise taxes (against his word, mind you)?
I'm trying hard to hold my tongue on that last thought.......
BTW, Bittlingmayer is fairly well known around here (my hometown of Lawrence, Kansas - home of KU). He's pretty well-respected, however it's a little disappointing to see him mislead a little in the article above. I'd also like to pick his brain as to what he would consider a better option would be for a stimulus bill.
I'm also waiting to hear your ideas on that as well.
I'd also like to ask or rather see if you could clarify whether or not you truly believe the DOW tanking was attributed entirely to Obama being in the office for the past month, and not attributed to anything that has led up to the recent downturn in the markets over the past few years.
And I'm also wondering if you're going to maybe come up with some evidence that is not an op-ed from one of your favorite Right-leaning websites? |
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| djjoshuaallen |
in case some of you were still under the assumption that one man got us into this mess (bush)
http://vimeo.com/3261363
Additionally, can sombody please tell me how this "stimulus bill" fixes the problems with our financial system outlined in this video? All I see is a 787 billion dollar cushion to ease the pain of an inevitable fall caused by an unstable system. The quicker we get to the bottom, the sooner our economic recovery begins.
The most benificial actions that should be taken must be directed at fixing our consumer confidence, and its apparent that neither Obama nor his "stimulus bill" are going to accomplish that. |
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| Lebezniatnikov |
| quote: | Originally posted by MisterOpus1
I'm trying hard to hold my tongue on that last thought.......
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:stongue: |
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| Lebezniatnikov |
| quote: | Originally posted by djjoshuaallen
in case some of you were still under the assumption that one man got us into this mess (bush)
http://vimeo.com/3261363
Additionally, can sombody please tell me how this "stimulus bill" fixes the problems with our financial system outlined in this video? All I see is a 787 billion dollar cushion to ease the pain of an inevitable fall caused by an unstable system. The quicker we get to the bottom, the sooner our economic recovery begins.
The most benificial actions that should be taken must be directed at fixing our consumer confidence, and its apparent that neither Obama nor his "stimulus bill" are going to accomplish that. |
The stimulus isn't designed to fix structural problems - it's merely designed to spur output and increase demand in order to keep GDP growth close to projection through hiking up consumption (which hopefully keeps profits up, and therefore employment from free-falling). |
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