Baker: Stimulus worked, but it was too small

Two-fisted liberal pride!  Don't ever back down!  The GOP watered down the stimulus with 1/3 tax cuts and cut the overall amount from more than $1 trillion that was required to about $700 billion.  

Sums up Dean Baker: "In other words, we were trying offset a loss of $1.4 trillion in annual demand with a stimulus package of $300 billion a year. Surprise! This was not enough."

Even so, the stimulus helped avoid a second Great Depression.  

My progressive comrades: don't ever apologize, don't ever make excuses. THE STIMULUS WORKED.  The fact that it couldn't do more is entirely the fault of Republicans.

Now read below to get the numbers.

Why the stimulus just couldn't do it

By Dean Baker

February 20, 2014 | CNN

When President Obama proposed his stimulus in January 2009, the economy was in a freefall, losing more than 700,000 jobs a month. The immediate cause of the plunge was the freezing up of the financial system after the collapse of Lehman Brothers, but the deeper cause was the loss of demand after the collapse of the housing bubble.

The bubble had been driving the economy both directly and indirectly. The unprecedented run-up in house prices led to a record rate of construction, with about 2 million homes built at the peak in 2005.

In addition, the $8 trillion in housing equity created by the bubble led to an enormous consumption boom. People saw little reason to save for retirement when their home was doing it for them. The banks also made it very easy to borrow against bubble-generated equity, which many people did. As a result, the personal saving rate fell to 3% in the years 2002-07.

The bubble also indirectly enriched state and local governments with higher tax revenue. And there was a mini-bubble in nonresidential real estate, but that came to an end in 2008 as well.

The economy had already been in recession for nine months before the collapse of Lehman because the bubble was deflating, but the Lehman bankruptcy hugely accelerated the pace of decline. This was the context in which Obama planned his stimulus package before he even entered the White House.

At that point, most economists still did not recognize the severity of the downturn, just as they had not seen the dangers of the housing bubble that had been building over the previous six years.

The Congressional Budget Office projections, which were very much in the mainstream of the economics profession, showed a combined drop in GDP for 2008 and 2009 of 1%, before the economy resumed growth again in 2010. This is with no stimulus. By contrast, the economy actually shrank by 3.1% in those years, even with the stimulus beginning to kick in by the spring of 2009.

Given this background, it was easy to see that the stimulus was far too small.  It was designed to create about 3 million jobs, which might have been adequate given the Budget Office projections. Since the package Congress approved was considerably smaller than the one requested, the final version probably created about 2 million jobs. This was a very important boost to the economy at the time, but we needed 10 million to 12 million jobs to make up for jobs lost to the collapse of the bubble.

The arithmetic on this is straightforward. With the collapse of the bubble, we suddenly had a huge glut of unsold homes. As a result, housing construction plunged from record highs to 50-year lows. The loss in annual construction demand was more than $600 billion. Similarly, the loss of $8 trillion in housing equity sent consumption plunging. People no longer had equity in their homes against which to borrow, and even the people who did would face considerably tougher lending conditions. The drop in annual consumption was on the order of $500 billion.

The collapse of the bubble in nonresidential real estate cost the economy another $150 billion in annual demand, as did the cutbacks in state and local government spending as a result of lost tax revenue. This brings the loss in annual demand as a result of the collapse of the bubble to $1.4 trillion.

Compared with this loss of private sector demand, the stimulus was about $700 billion, excluding some technical tax fixes that are done every year and have nothing to do with stimulus. Roughly $300 billion of this was for 2009 and another $300 billion for 2010, with the rest of the spending spread over later years.

In other words, we were trying offset a loss of $1.4 trillion in annual demand with a stimulus package of $300 billion a year. Surprise! This was not enough.

That is not 20/20 hindsight; some of us were yelling this as loudly as we could at the time.  It was easy to see that the stimulus package was not large enough to make up for the massive shortfall in private sector demand. It was going to leave millions unemployed and an economy still operating far below its potential level of output.

We are still facing the consequences of an inadequate stimulus. The reality is that we have no simple formula for getting the private sector to replace the demand lost from the collapse of the bubble.

Contrary to what Republican politicians tell us, private businesses don't run out and create jobs just because we throw tax breaks at them and profess our love.  If the government doesn't create demand, then we will be doomed to a long period of high unemployment -- just as we saw in the Great Depression. The government could fill the demand gap by spending on infrastructure, education and other areas, but in a political world where higher spending is strictly verboten, that doesn't seem likely.

The one alternative, which has been successfully pursued by Germany, is to reduce the supply of labor through work sharing. Companies reduce all their employees' hours and pay so everyone keeps their jobs. The government then pays the workers part-time unemployment benefits -- cheaper than paying someone full-time unemployment.

Germans have used this route to lower their unemployment rate to 5.2%, even though their nation's growth has been slower than ours.

Some bipartisan baby steps have been taken in this direction; we will need much more if we are to get back to near full employment any time soon. In a world where politics makes further stimulus impossible, work sharing is our best hope.

U.S. taxes & spending: Key facts

Here are somewhat random but indisputable facts on U.S. federal taxes and spending, all of it hyperlinked:

Corporate tax:

·        The U.S. collects less corporate tax relative to the overall economy than almost any other country in the world:  about 1.3 % of GDP in 2010, compared to 5 % in the 1950s.

·        WSJ citing the CBO: Corporate federal taxes paid fell to 12.1 % of profits earned from activities within the U.S. in fiscal 2011, the lowest % since 1972.

·        26 Fortune 500 companies paid no net federal income tax from 2008-2011.

·        WSJ:  More than 60 % of U.S. businesses with profits over $1 million pay zero corporate tax, since they are structured as pass-throughs.

·        Citizens for Tax Justice: From 2008-2010, 280 profitable Fortune 500 companies collectively paid an income tax rate of 18.5 % vs. the statutory 35 % rate, while receiving $223 billion in tax subsidies.  And at least 22 companies used offshore tax havens like the Cayman Islands (like Mitt Romney does).

Individual taxes:

·        CBO:  In 2009, the same year the Tea (Taxed Enough Already) Party was born, Americans paid the lowest average federal tax rate (17.4 %) in 30 years.

·        Bush tax cuts will cost $5.4 trillion if extended in full from 2013-2022. Romney-Ryan claim they will close tax loopholes and broaden the tax base, but repeatedly refuse to give specifics, most recently on FoxNews.

·        DC Johnston/Reuters: Per capita federal tax revenue was 31.5 % less in real terms in 2011 than in 2001, because of the recession but also Bush’s tax cuts.

·        On the “47 % who pay no income tax:”

o   Only about 17 % of households did not pay any federal income tax or payroll tax in 2009, despite the high unemployment and temporary tax cuts; in 2007, it was 14 %.

o   CBO: the poorest fifth of households paid an average of 4 % of income in federal taxes in 2007, the latest year for which these data are available.

·        Institute on Taxation and Economic Policy:  The bottom 20 % of U.S. households pay more of their income in state and local taxes than does the top 1 %.

·        Tax Policy Center: Romney’s tax plan would result in "large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers."

·        The Estate (“Death”) Tax affects only 0.6 % of Americans whose death would lead to the payment of any estate taxes.  Only 2.7 % of Americans receive an inheritance over $50,000.  However, elimination of the Estate Tax would cost $253 billion from 2012-2022. 

·        David Stockman, Reagan’s director of the OMB, told CNBC: "We couldn't afford those tax cuts back when they were implemented by Bush. We can't afford them now."

  

Spending and deficits:

·        NYT:  Before President Obama even took office, the CBO projected a $1.2 trillion deficit for 2009 and deficits in subsequent years, based on continuing Bush’s spending and tax policies. (The actual deficit in FY 2009 was $1.4 trillion.)

·        NYT: Only 17 percent of the increase in government debt in 2009 and 2010 was because of discretionary spending of any kind, including the stimulus bill.

·        More than 1/3 of the Recovery Act’s (stimulus bill) cost to-date has been for tax credits: $298 billion.

·        PolitiFact:  Growth in government spending under Obama is lower than at any time since President Eisenhower (adjusted for inflation).  Deficits have increased, nevertheless, because of a down economy and resulting lower tax receipts – and the Bush tax cuts.

·        OMB: Contrary to Romney’s claims, defense spending increased under President Obama, from $661 billion in 2009 to $693 billion in 2010 to $705 billion in 2011.

·        GAO:  Interest paid on the federal debt as a percentage of annual federal spending is lower under Obama – 6.4 % in 2011 – that at any time since the 1970s.  And the interest paid on federal debt as a percentage of GDP is at its lowest since WWII.

·        OMB:  As a result of recessionary unemployment, "income security" payments built into our system before Obama took office, such as unemployment insurance, disability pay, food stamps and housing assistance, increased from $431 billion in 2008 to $533 billion in 2009 to $622 billion in 2010 and slightly decreased to $597 billion in 2011. 

·        OMB federal debt figures (p. 140):  2009: $ 11.88 trillion; 2010:  $ 13.53 trillion; 2011: $14.76 trillion. That was a $2.88 trillion increase, or 24 %, over 3 years for President Obama.  Meanwhile, from 2002 to 2009, the federal debt increased from $6.2 trillion to $11.88 trillion.  That was a $5.88 trillion increase, or 91 %, over 8 years for President Bush.

·        Taken together, tax credits in the Recovery Act (stimulus bill) , and the payroll tax reduction for 160 million Americans in 2011 and 2012, both passed by President Obama, gave Americans $298 + $240 billion = $538 billion in tax relief.    

·        The non-partisan Committee For a Responsible Federal Budget projects that, without offsets that Romney’s campaign refuses to explain, his tax plan would increase the federal debt by $2.6 trillion.
·        Non-defense discretionary spending totaled 18 % of the federal budget in 2012. It includes: border control, education, environment, food safety, infrastructure, housing, veterans' healthcare, disaster relief, public safety, scientific research, etc.  

Baker: Failing arithmetic on national debt

Baker is the first pundit I know of who has made this point:  

While our debt to GDP ratio is approaching levels not seen since the years immediately following World War II, there is another key ratio that has been going in the opposite direction. This is the ratio of interest payments to GDP. This fell to 1.3 percent of GDP in 2009, its lowest level since World War II. While it has risen slightly in the last couple of years, the ratio of interest payments to GDP is still near a post-war low.

This gives us yet another example how the U.S. Government is not like a household.  How many of us can pay a lower interest rate as our debts grow bigger?  You and I can't.  But the USG can and does.    

Baker goes on to illustrate how interest owed on the national debt is more important than the absolute dollar value of outstanding debt, or the debt-to-GDP ratio:

Suppose that we issue $4 trillion in 30 year bonds at or near the current interest rate of 2.75 percent. Let's imagine that in 3 years the economy has largely recovered and that long-term interest rates are back at a more normal level; let's say 6.0 percent for a 30-year bond.

In this case the bond price would fall by over 40 percent meaning, in principle, that it would be possible for the government to buy up the $4 trillion in debt that it issued in 2012 for just $2.4 trillion, instantly lowering our debt burden by $1.6 trillion, almost 10 percentage points of GDP. If we had been flirting with the magic 90 percent debt to GDP ratio before the bond purchase, we will have given ourselves a huge amount of leeway by buying up these bonds.

Of course, this would be silly. The interest burden of the debt would not have changed; the only thing that would have changed is the dollar value of the outstanding debt. Fans of the 90 percent debt-to-GDP twilight zone theory may think that the debt burden by itself could slow the economy, but in the real world this doesn't make any sense.

Let's recall that America's debt-to-GDP ratio was nearly 120 percent after WWII.  "Yeah, but that was WWII!" you might say, "And after the Great Depression! No comparison!"

Well, yeah, it's hard to compare a war that lasted four years with two simultaneous wars that have lasted about 10 years and counting.  Meanwhile, the Great Recession wiped out $15.5 trillion in U.S. wealth -- about equal, coincidentally, to one year of U.S. GDP, and our total federal debt.  

And Dubya's Great Recession cost us 8.8 million jobs (more than the previous four recessions combined); as a result, many of those jobless people have qualified for "income security" payments built into our system that didn't exist in the 1930s, such as unemployment insurance, disability pay, food stamps, housing assistance, etc. Income security outlays increased from $431 billion in 2008 to $533 billion in 2009 to $622 billion in 2010 to $597 billion in 2011.  Next, more people opted for early Social Security benefits, plus they got a 5.8 percent cost of living increase in 2009, and for the first time the program ran a deficit.  Social Security outlays jumped from $617 billion in 2008 to $683 billion in 2009 to $706 billion in 2010 to $731 billion in 2011.  And let's not forget national defense spending, which increased from $616 billion in 2008 to $661 billion in 2009 to $693 billion in 2010 to $705 billion in 2011.

Finally -- and this is the factor so many people, especially on the right, overlook -- decreased economic activity -- combined with an extension of Dubya's tax cuts -- led to lower income and corporate tax receipts (and FICA receipts): down $419 billion in 2009 and $360 billion in 2010, compared to 2008.  

Meanwhile, overall spending increased $535 billion in 2009 (most of it thanks to Dubya) and $475 billion in 2010, compared to 2008.  

(See all the OMB's historical spending and revenue data here.)

So there are objective reasons why our deficits and debt have climbed.  It's ludicrous to blame it all on $475 billion in stimulus spending.

Next, let's look at the GAO's historical picture of annual net interest paid on the federal debt as a percentage of annual federal spending.  In 2011, interest payments were 6.4 percent of federal outlays.  From Reagan thru Dubya, that figure never fell below 7 percent.  In the decadent '80s it never fell below 8.9 percent.  In the dot-com '90s it never fell below 13.5 percent.  

Sure, interest rates will eventually go up as the economy recovers.  But first it has to recover.  Economic recovery should be our top priority right now, not paying off our debt when we enjoy historically low interest rates and suffer historically high unemployment.  Debt reduction now, which would cut GDP and raise unemployment, is putting the cart before the horse.

Just trying to put things in perspective.  Not that my Tea Partying friends will care....

Debt Worries: Economists Fail Arithmetic, Again

By Dean Baker

September 24, 2012 | Huffington Post

URL: http://huff.to/UzBh4o

Studies agree: Fiscal stimulus worked

This blog post on how the stimulus worked is too long to re-post so just check it out.

Here's the skinny: Out of 9 major economic studies on the effectiveness of the economic stimulus bill (American Recovery and Reinvestment Act), 6 said it had a significant positive effect on employment and economic growth.

These studies are in addition to the positive ratings of Obama's fiscal stimulus by the CBO, IHS Global Insight, Macroeconomic Advisers, and others (see tables p. 12).

"But we still have 9 pecent unemployment! Of course the stimulus failed!" my far-right friends will retort.

I can't dispute the current unemployment numbers, but then again, without ARRA things would be much worse. Also, let's remind ourselves of the size of the whole we're digging ourselves out of, thanks to Dubya's Great Recession: about 7 million jobs lost, and $15 trillion in household wealth. It's simply not realistic to think we can come back so quickly, especially when there is no source of extra demand (spending) out there besides government.

(Sigh) It's just too bad the stimulus wasn't big enough....

Did the stimulus work? A review of the nine best studies on the subject

By Dylan Matthews

August 24, 2011 | Washington Post

URL: http://www.washingtonpost.com/blogs/ezra-klein/post/did-the-stimulus-work-a-review-of-the-nine-best-studies-on-the-subject/2011/08/16/gIQAThbibJ_blog.html

Separating economic myth from reality

This analysis is worth reading in detail, but let me summarize:

1) Taxes have been going down and down, not up and up, historically speaking.

2) The stimulus did work -- as far as it was funded.

3) The stimulus was too small -- but not as small as we think, considering Obama's payroll tax cut (which was not part of the stimulus, so ProPublica is muddling things here.)

4) I'll quote this one verbatim since yous guys needs to understand it:

The stimulus was all projects.

Nope. The Recovery Act as passed was estimated to cost about $787 billion. More than a third of that was tax cuts, and another third was entitlements, such as unemployment benefits and Medicaid assistance. Of the $275 billion in spending by federal agencies, less than $200 billion was dedicated to projects.

The projected cost of the Recovery Act is now $830 billion, largely because of the qualification of more people qualifying for entitlements and the popularity of some tax credits.

5) The stimulus will have a lasting legacy.

6) The stimulus, being a combination of tax cuts, direct aid to states' budgets, and projects, has not been rife with waste, fraud, and abuse as alleged.

7) Infrastructure spending is important, but not all-important. (Duh.)

Economic Myths: We Separate Fact From Fiction

By Michael Grabell

August 18, 2011 | ProPublica

URL: http://www.propublica.org/article/economic-myths-we-separate-fact-from-fiction

Stimulus, RIP?

Stimulus, RIP

By David Weigel

July 8, 2011 | Slate

The stimulus bill passed more than two years ago, when Dave Obey still chaired the House appropriations committee. Obey's now retired from Congress, working as a lobbyist, but he talks about the stimulus fight as if it's still going on. Which, in many ways, it is—only now the battle is to convince people that it wasn't failure.

"This is the era of 24-hour news cycles," said Obey, who represented Wisconsin's 7^th district for 42 years before retiring in 2011. "You can have 95 percent of what you do make perfect sense, but when networks are starved for news, and politicians are starved for attention, all you need is one example of something going wrong and it's easy for demagogues to discredit what you're doing. It's like what Donald Rumsfeld said about terrorism. In order to be successful, we had to stop 100 percent of terrorist attacks. If you're a terrorist you only need to get it right once."

Veterans of the stimulus wars talk about it that way—as a war. They lost. The implication of the loss is that Keynesian economics are, arguably, as discredited with voters as neoconservative theories were discredited when the invasion of Iraq failed to turn its neighbors into vibrant democracies, highways clogged with female drivers.

This week, we got a concrete example of what it meant to lose. The Weekly Standard published a back-of-the-cocktail-napkin analysis of the seventh quarterly report on the stimulus, stipulating that every job created by its spending has cost $278,000. Republicans, who'd previously said the stimulus created no jobs, immediately started repeating the $278,000 figure. They kept doing it even after the magazine followed up, suggesting that the cost-per-job could have been as low as $185,000. $278,000, $185,000. $0.00? It didn't really matter, because the White House and liberal response was perfunctory. As the stimulus winds down, with most of the money spent, everyone knows that it failed.

This is a little strange. Yes, the economy is rotten, so voters can be excused when they pan the government's response to unemployment. But there's a lot of data that isn't terribly hard to read suggesting that the stimulus did create jobs. The analysis that the Weekly Standard tore apart found that the stimulus increased employment by about 400,000 jobs in the first quarter after it went into effect, and increased it by about 2.7 million at its peak. If you're deriding the price tag for those jobs, you're acknowledging that the jobs exist.

Did the stimulus do less than President Obama said it would? Absolutely. In the first months of 2009, when the president sold the bill, got it passed, and defended it, he tossed off predictions for job growth that got progressively higher and were never matched. At his most optimistic, he said the stimulus would be a success if it "created or saved" 4 million jobs. It fell far short of that. But ambitious, expensive bills have fallen short before, and it hasn't discredited their reasons to exist. George W. Bush's tax cuts were supposed to balance the budget by 2010. That hasn't happened, obviously, but tax cuts have not been discredited—in fact, they're central to the discussion about how to dig out of the recession now. Tax cuts are popular. When CNN polled public opinion of the stimulus in January 2010, it found that 56 percent of Americans flat-out opposed it, and 63 percent of them thought most of the funding had been included for "purely political reasons." A little while later, a CBS poll found that only 6 percent of people thought the stimulus created any jobs.

The people who wrote and defended the stimulus blame bad messaging.

"The president was never able to explain to the public that the debt and deficits being run up were not an accident," said Obey. "It was purposeful, but the administration never took on the core debate of why we had to borrow money in the short term, even though in the long term we had to pay it back. They didn't explain it, which led people to believe we were throwing money at a wall and seeing what stuck. The country needed to be re-educated about the Great Depression and the role deficit spending played in getting out of it. It needed to be told the story of 1937, when FDR prematurely pulled back from stimulating the economy."

This is what people who lose a political argument always say: We didn't get our message out. But in this case it's true. The demand-side spending argument was part of the stimulus sales pitch, but not the biggest part. When House Republicans unanimously voted against it, Democrats attacked them for their crime against "bipartisanship," and for opposing the tax cuts that made up about $280 billion of the package. Those tax cuts allowed Obama to fulfill a campaign pledge to give "a tax cut to 95 percent of Americans." The spending was more stimulative than the tax cut. The White House just didn't convince people of that.

So Keynesians started the stimulus debate in a hole, and it got deeper as watchdogs and Republicans looked for waste, frivolity, or anything that sounded like waste or frivolity. It didn't really work. When Obey uses the 95-percent-of-what-we-did-was-good line, he's hinting at how the worst-sounding stimulus projects defined the enterprise.

"Our Waterloo on this was the quote-unquote 'non-existent congressional district' problem," said Ron Klain, the former chief of staff to Joe Biden, who helped manage the effort to spot dumb-looking spending. A few hundred of the first reports on how money was being spent—a few hundred of about 90,000—misreported the details, showing spending in congressional districts that did not exist. The projects were real, the jobs were real, but there is no 57^th district in Minnesota or 22^nd in New Mexico. Someone had put the wrong number on a form. Still, those fictitious districts were the story. "We had a week of stories taking us apart on The Colbert Report and what not," sighed Klain.

The end result of stories like that has been a virtual collapse in the belief that government spending can spur economic growth. This week, which ended with a jobs report that points in big, flashing arrows to more recession, will change nobody's mind about the need for spending cuts. When I asked Sen. John McCain whether spending cuts should be approached with caution about the impact they'd have on employment, he rejected the premise.

"The people I rely on say that spending cuts are vital to the future of our country," he said, "because we don't want to emulate Greece. If we emulate Greece, then we have huge unemployment."

But was it a problem that the stimulus money was running out?

"We just learned, apparently, that the stimulus package was only $278,000 per job," said McCain. "We certainly can't keep that up."

Cost per job under stimulus bill?

Speaker Boehner and other Republicans have been citing the cost figure of $278 K per job created under the Recovery Act, aka the stimulus bill.

Boehner got it from a Weekly Standard report, which "arrived at its figure by dividing the cost to date of the stimulus bill, $666 billion, by the low end of the estimate of how many jobs the Council of Economic Advisers reported had been created by the legislation, 2.4 million."

But the Council of Economic Advisors' report also gave a high-end estimate of 3.6 million jobs created, which would lower the cost to $185 K per job.

Regardless, the White House correctly pointed out such math is "flawed," since such "spending didn't just fund salaries, it also went to the actual costs of building things -- construction materials, new factories, and such."

And if you think about it, it's logically impossible to spend $666 billion purely on jobs, jobs, jobs without any administration, materials, or overhead costs. Even simply cutting folks checks from the US Treasury and telling them, "Go out and work!" would entail an added cost.

For more info, I examined the NYT's detailed breakdown of stimulus "spending" and found about 37 percent of it was actually tax cuts for business and individuals. Pure spending was somewhere in the range of $420 billion. For those of you who never saw a tax cut you didn't like, check it out:

$116,200,000,000 New tax credit for workers

$69,800,000,000 Extend ATM for individuals

$14,800,000,000 Extend eligibility Child Tax Credit

$6,600,000,000 Incentive for first-time home buyers

$14,000,000,000 Tax incentive for alt. energy facilities

$4,700,000,000 Increase earned income tax credit

$5,900,000,000 Extension of bonus depreciation

$3,200,000,000 Deduction for banks buying bonds

$3,200,000,000 Tax cut for GM

$1,700,000,000 Energy; tax cuts for individuals

$1,600,000,000 Energy; tax cuts for business

$1,600,000,000 Tax cuts for bus. recognition of debt income

$947,000,000 Tax cut for business - loss carry-back

$829,000,000 Tax break for small bus. stock sales

$415,000,000 Reduce tax holding for S corporations

$231,000,000 Tax incentive to hire disabled

$203,000,000 Tax cuts - industrial dev. bonds

$192,000,000 Tax cuts for individuals - mass transit

$54,000,000 Tax incentive for alt. fuel pumps

$41,000,000 Increased small bus. tax deductions

$246 billion in tax cuts = 37 % of total Recovery Act

Now, I'm sure all you 'Bama hatas will now go out and spread the good news to your conservative buddies: that the stimulus gave almost $250 billion in tax cuts, resulting in 3.6 million jobs, $27 billion in small business loans, and 75,000 national projects.

This is not to mention Obama's payroll-tax cut for employees, enacted in December 2010 and which Democrats want to extend, which lowered Social Security payroll taxes paid by employees to 4.2 percent of earnings, putting $112 billion in workers' pockets over two years.

Over the next campaign cycle, I'm sure we won't hear a darn thing from the lib'rul media about Obama giving Americans more than $350 billion in tax cuts. But now that you know, I'm sure you'll evangelize the truth!

UPDATE (07.14.2011): I've seen the figure $280 billion in tax cuts used, so either my addition was deficient, or my source was not correct. Anyhow, that higher figure only bolsters my argument.

$278 K per Stimulus Job? White House Says No.

By Jake Tapper

July 05, 2011 | ABC News - Political Punch

URL: http://blogs.abcnews.com/politicalpunch/2011/07/-278k-per-stimulus-job-white-house-says-no.html

U.S. lokul ejukashun meetz reseshun

Listen up, all you conservative cavemen (and cavegals) who want to go back to the Laura Ingalls Wilder days of the Little Red Schoolhouse (minus that little b**tch Nellie, I presume): Your beloved model of locally funded and run primary schools has sunken into a fiscal crisis so deep even Michael Landon's angel can't pull it out. That dern economic cycle that you stake your life on means that kids unfortunate enough to be kids today get a worse education.

Aint the free market grand?

Come on, we're smarter than this. Public education should be centrally controlled and financed. Kids -- the future of our nation's economic productivity, and the guarantors of your beloved Social Security and Medicare, you Boomers -- should not be at the mercy of the business cycle.

Meanwhile, the Marxist, failed, redistributive stimulus bill that has brought affluent white seniors to the point of, well, actually leaving their homes, has been responsible for saving more than 342,000 school jobs, about 5.5 percent of all the positions in the nation's 15,000 school systems. "That's just socialism!" I can hear Glenn Beck sobbing from his mansion. I hope he and Nellie will share a desk in hell.


Districts Warn of Deeper Teacher Cuts
By Tamar Lewin and Sam Dillon
April 20, 2010 | New York Times

URL: http://www.nytimes.com/2010/04/21/education/21teachers.html

Wall St. is the best thing for socialism ever

Like I said before, Wall Street is to blame for burgeoning "socialism" in America, not dastardly lib'ruls. Greedy, gambling bankers caused this mess, and now primarily state governments, aided by the federal gov't (the lender of last resort), have to deal with the aftermath.

Obama and the Democrats didn't have to do a darn thing, this is happening at the state level all by itself: more Americans are collecting unemployment benefits and food stamps than ever before, and both are managed at the state level.

Live-free-or-die Texas has borrowed $1.6 billion so far from the federal government to pay residents' soaring unemployment benefits.

The much-criticized federal stimulus, by the way, went a long way toward plugging gaps in state budgets. The stimulus was much less effective than it should have been because (1) it was too small, (2) 37 percent of it was tax cuts, (which, oddly, we don't hear anything about from our angry teabagging/GOP friends) and (3) the federal fiscal expansion was matched by states' fiscal contraction, since most of them have passed balanced budget amendments -- making the national stimulus, in effect, much smaller. Automatic state tax increases on business to cover growing unemployment benefits is a result of the states' pay-as-you-go mandate.

If you weigh the states' budget cuts and tax hikes against the federal stimulus's spending and tax cuts, the net effect was about $246 billion pumped into the economy. Good, but not nearly enough. Thanks, Republicans!


Unemployment taxes slam businesses
By Tami Luhby
February 9, 2010 | CNNMoney.com

URL: http://money.cnn.com/2010/02/09/news/economy/unemployment_taxes/index.htm?hpt=Sbin

WashTimes: GOP hypocrites oppose stimulus, seek pet projects

So after I forward this article from the far-right Washington Times comes the part when Republicans go to Plan B, their usual fallback, whenever a liberal who believes in the positive role of government points out the hypocrisy and poison of Republicans in government who steal and deal in pork:

"Well, it just goes to show you that government is evil," Republican hacks reply. "They're all bums."

And they continue voting Republican.

At least my party, with all its warts, thinks government can be good. These guys think government is a necessary evil -- and a significant subset don't even think it's necessary. So how cynical and black-hearted must they be to hold such beliefs, and yet at the same time squeeze the federal budget for every dollar in pork and special favors they can get?


Stimulus foes see value in seeking cash
Pet projects irresistible to GOP lawmakers

By Jim McElhatton
February 9, 2010 | Washington Times

URL: http://washingtontimes.com/news/2010/feb/09/stimulus-foes-see-value-in-seeking-cash/

Did federalism cause stimulus to fail?

This may not be the only explanation for why the stimulus has not been as effective as hoped, yet we can't fail to mention that the federal stimulus bill has been counteracted by the states' tax hikes and spending cuts, and this explanation surely jibes with what many economists have argued all along: the stimulus must be big enough or it will fail.

The two-year Obama stimulus amounted to $787 billion, of which $70 billion was really just the usual taxpayers' annual exemption from the alternative minimum tax, and $146 billion was actually appropriated for the years 2011 to 2019. That leaves $571 billion that the federal government is pumping into the economy during 2009 and 2010. Subtract the amount that state and local governments are withdrawing from the economy (they have a combined shortfall of around $365 billion, but let's say they do enough fiscal finagling so that the total of their cutbacks and tax hikes is just $325 billion), and we're left with $246 billion.

At $787 billion, the stimulus came to 2.6 percent of the nation's gross domestic product for 2009 and 2010 -- not big enough, but a respectable figure. At $246 billion -- the net of the federal stimulus minus the state and local anti-stimulus -- it comes to just 0.8 percent of GDP, a level lower than those of many of the nations that the U.S. chastised for failing to stimulate their economies sufficiently.

But other major nations don't have federal systems that turn them into unstopped bathtubs in times of recession.

Fed Up With Federalism
How America's commitment to states' rights is undermining our economic recovery.

By Harold Myerson
December 2, 2009 | The American Prospect

URL: http://prospect.org/cs/articles?article=fed_up_with_federalism

After stimulus, Japan's recession ends

Japan emerges from recession

August 17, 2009 | CNN.com

Japan has joined the growing number of major economies that are back in black.

Japan's economy grew 3.7 percent on an annualized basis from April to June this year, the first time the world's second largest economy has seen positive growth in 15 months.

The announcement of preliminary figures by Japan's Cabinet Office comes after France and Germany surprised economists last week by posting 0.3 percent growth for the second quarter of the year.

The news that Japan has rebounded -- the hardest hit of the major economies because of its reliance on exports -- gives economists cautious optimism that the worst of the global recession is over.

"The economy has seen a bottoming out of global demand, which has pushed out net exports ... especially in high tech industries and basic materials, such as chemical, steel and so on because of Chinese demand," said Hiromichi Shirakawa, chief economist in Japan for Credit Suisse.

Japan's GDP grew just under 1 percent during the three-month period and trade increased 1.6 percent.

The uptick marks the end of the worst recession in Japan since the end of World War II. Japan's GDP fell at a record pace during the January-March quarter, when GDP was 15.4 percent lower than the same time period last year.

The Japanese economy was buoyed by a historic ¥15 trillion ($150 billion) stimulus package in May, which included unemployment benefits, aid to struggling companies, promotion of green industries and a variety of tax breaks.

"There are many times in the past when tax breaks and fiscal stimulus were offered and failed, but this time around, it worked," Shirakawa said.

Economists expect GDP to continue modest growth through the rest of the year, especially with an expected rebound in global auto sales this quarter. But whether the recovery can continue into the new year after the stimulus package runs its course remains a question.

"Japan's economy still is quite sensitive to global demand ... and for consumer demand to grow on a self-sustained basis still seems unlikely," Shirakawa said.

Markets rally to 2009 highs; Obama not to blame

Just remember: these gains for the DOW, S&P 500, and NASDAQ, plus lower than expected unemployment, do not mean Obama is doing a good job.  They do not mean the stimulus is working.  The stimulus, after 4 months, has already failed.  

Only if the markets fall are we allowed to give Obama credit.  That's the way it works.  Got it straight?  Good. 

Stocks spike to new 2009 highs 

Wall Street rallies as investors saw signs of stabilization on the labor front. Dow closes at highest level this year. 

By Alexandra Twin

July 30, 2009 | CNNMoney.com

URL: http://money.cnn.com/2009/07/30/markets/markets_newyork/index.htm?cnn=yes

Roubini: Demise of dollar's dominance

Here's red meat for all you rabid anti-stimulus folks. Have at it!

The Almighty Renminbi?
By Nouriel Roubini
May 13, 2009 | New York Times

THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar's status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear.

Traditionally, empires that hold the global reserve currency are also net foreign creditors and net lenders. The British Empire declined — and the pound lost its status as the main global reserve currency — when Britain became a net debtor and a net borrower in World War II. Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be only a matter of time.

But what could replace it? The British pound, the Japanese yen and the Swiss franc remain minor reserve currencies, as those countries are not major powers. Gold is still a barbaric relic whose value rises only when inflation is high. The euro is hobbled by concerns about the long-term viability of the European Monetary Union. That leaves the renminbi.

China is a creditor country with large current account surpluses, a small budget deficit, much lower public debt as a share of G.D.P. than the United States, and solid growth. And it is already taking steps toward challenging the supremacy of the dollar. Beijing has called for a new international reserve currency in the form of the International Monetary Fund's special drawing rights (a basket of dollars, euros, pounds and yen). China will soon want to see its own currency included in the basket, as well as the renminbi used as a means of payment in bilateral trade.

At the moment, though, the renminbi is far from ready to achieve reserve currency status. China would first have to ease restrictions on money entering and leaving the country, make its currency fully convertible for such transactions, continue its domestic financial reforms and make its bond markets more liquid. It would take a long time for the renminbi to become a reserve currency, but it could happen. China has already flexed its muscle by setting up currency swaps with several countries (including Argentina, Belarus and Indonesia) and by letting institutions in Hong Kong issue bonds denominated in renminbi, a first step toward creating a deep domestic and international market for its currency.

If China and other countries were to diversify their reserve holdings away from the dollar — and they eventually will — the United States would suffer. We have reaped significant financial benefits from having the dollar as the reserve currency. In particular, the strong market for the dollar allows Americans to borrow at better rates. We have thus been able to finance larger deficits for longer and at lower interest rates, as foreign demand has kept Treasury yields low. We have been able to issue debt in our own currency rather than a foreign one, thus shifting the losses of a fall in the value of the dollar to our creditors. Having commodities priced in dollars has also meant that a fall in the dollar's value doesn't lead to a rise in the price of imports.

Now, imagine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing imports and exports, as well as a store of value for wealth by international investors. Americans would pay the price. We would have to shell out more for imported goods, and interest rates on both private and public debt would rise. The higher private cost of borrowing could lead to weaker consumption and investment, and slower growth.

This decline of the dollar might take more than a decade, but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable. A system where the dollar was the major global currency allowed us to prolong reckless borrowing.

Now that the dollar's position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.

Nouriel Roubini is a professor of economics at the New York University Stern School of Business and the chairman of an economic consulting firm.

U.S. trails China, EU in green investments

U.S. trailing China, EU in 'green' investments
By Ben Furnas
April 20, 2009 | Center for American Progress

A February analysis by HSBC Global Research in Hong Kong projects that nearly 40 percent of China's proposed $586 billion stimulus plan—$221 billion over two years—is going toward public investment in renewable energy, low-carbon vehicles, high-speed rail, an advanced electric grid, efficiency improvements, and other water-treatment and pollution controls. This stimulus is on top of historic levels of government spending and private investment in renewable technology, energy efficiency, and low-carbon growth all across China. The upshot: China, according to a recent analysis, is "the largest alternative energy producer in the world in terms of installed generating capacity."

 

This massive stimulus plan will spend over 3 percent of China's 2008 gross domestic product annually in 2009 and 2010 on green investments—more than six times America's green stimulus spending as a percentage of our respective economies. This is about $12.6 million every hour over the next two years. In the United States, the American Recovery and Reinvestment Act invests $112 billion in comparable green priorities over the next two years, about half as much as China, according to HSBC. This represents less than half of one percent of our 2008 gross domestic product.

President Barack Obama has proposed additional public investment in renewable energy research of $15 billion annually, paid for by charging dirty energy corporations for their pollution. While this would amount to just one tenth of one percent of America's 2008 GDP, it would be a good start. With this money, the United States would finally join China and dozens of other nations across the world in providing public investment for renewable energy, including Japan, Germany, Canada, France, South Korea, Denmark, and Spain.

[By contrast,] in a series of energy bills in 2001, 2003, and 2005, the Bush administration plowed billions of dollars into dirty energy—oil, coal, and nuclear—while neglecting clean renewable energy industries. The 2001 energy bill gave 80 percent of its value to tax breaks for oil, gas, nuclear, and coal companies. The 2003 energy bill, drafted in secret with Vice President Dick Cheney and members of the oil, gas, coal, and electric industries, gave $23.5 billion to dirty energy and loosened environmental regulations. Finally, while the 2005 bill contained a token level of investment in renewable energy, it also provided even more support for dirty energy, offering $27 billion in subsidies for coal, oil, and nuclear energy.

 

But as the Bush administration doubled down on the energy of the past, nations across the world invested in the future. Japan, China, and European countries zoomed past the United States, with a combination of dirty energy regulations, public investments, and private market incentives.

In 2006, according to the most recent data from the Renewable Energy Policy Network, the United States, the world's largest economy, invested less in new capacity for renewable energy than either the EU-25 or China. In fact, according to the most recent data, the entire United States invests less in renewable energy per year than the country of Germany, which boasts less than one-third the population of the United States and an economy less than one-fourth our size.

 

The imperative for renewable sources of energy, energy efficiency, and green transportation and power infrastructure is clear. And yet, we continue to neglect these priorities while plowing tens of billions of dollars of subsidies into polluting and wildly profitable oil and gas companies that create far fewer jobs and exacerbate global warming.

President Obama's energy plan would eliminate $30 billion in giveaways to oil and gas companies and make polluting energy companies pay for their global warming pollution in order to invest in renewable energy infrastructure and cut taxes for 95 percent of working American families. This is the way to go.

FOX: 'Tea Parties' are 'tempest in a teapot'

My theory about these bizarre Tea Parties is that the conservative powers that be (Freedom Works and the Koch family foundations) want to distract their base from drawing some uncomfortable conclusions from the U.S. financial crisis.  Namely, that our capitalist system needs strong federal regulation; but more importantly, that greed as an incentive does not always produce the best results for society.  The housing bubble, sub-prime mortgages, predatory lending, and extreme leverage and risk-taking by banks -- these had nothing to do with high federal taxes or gov't spending.  As a response to these problems, the Tea Parties make no sense.  They're irrelevant. 

"But what about the stimulus package?" conservatives may counter.  The stimulus is supposed to be a partial remedy to the financial crisis.  Reasonably, conservatives cannot protest the treatment (stimulus) and ignore the disease (burst housing bubble).  But that's just what these Tea Parties are designed to do.  They want to pretend that high taxes and profligate spending got us into our current mess, which simply isn't true.


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This Tea Party Will Be the Fad That Flopped

By John Tantillo

April 11, 2009  | FOX News

I'd bet my Borsalino hat that five years from now the tea party of 2009 is going to be considered little more than a fad that flopped. In fact, it shouldn't even be compared to the monumental event that kicked our great country off with a rebellious bang.

The one thing I know Karl Marx got right was that history repeats itself: the first time as tragedy; the second time as farce.

This time it's a farce. Like anything marketed, popular movements need a symbol that resonates widely and deeply. The connection can't be complicated or second hand. It's got to have clout and it's got to instantly make sense to everyone.

For colonial Americans, tea was a powerful symbol. It was something they drank a lot of and it was taxed heavily and this taxation was something they had no say over. Throwing it overboard said everything that needed to be said. They didn't steal it; they rejected it. This was a statement that went straight to the British purse strings. It might have looked spontaneous, but it was sophisticated and made perfect sense in the context of the time.

Tea has nothing to do with our frustrations today. If tea was taxed at 100% most of us could still afford to drink it. Unfortunately, the tea of this year's tea party is just a recycled symbol and, not only that, this symbol doesn't make much sense.

After all, the colonials had no legal recourse to object to the taxation that was making their lives miserable. We do, even if it means an agonizingly long wait for the next election. Before you protest, you've got to figure out what you're protesting and the 2009 tea party simply doesn't help anyone do that.  Being angry isn't enough.  In marketing and branding, you must be for something –from there you can create a plan that can capture the hearts and minds of most Americans.

The second big problem with the tea party movement is its origin. As we all know, it began in the media with Rick Santelli's rant on live TV. It did not begin with the equivalent of Rosa Parks on a bus (a very vivid protest symbol to a very real injustice).  It is always better to start with reality, a "real" person standing for something, not a "media" person ranting about something.

In other words, the tea party isn't really grass roots and these days this perception matters –- the last election showed us this both in the Obama camp's powerful pull strategy and also with the "surprise" reaction to Palin in large part because she was a media and Washington outsider (another pull strategy success –- see my post on that here).

What about the merchandise? Merchandise can make things lose credibility and take away their seriousness –- that's one of the things happening now. Get the mug, but skip the revolution.

This is America, I'm never against someone making a buck, but the merchandising of the tea party shows better than anything that we're talking about a fad here, nothing more.

Just listen to Jason Kang, VP of marketing for Zazzle, an online retailer selling tea party items: "This is probably one of the bigger things –- not counting the election– that we've seen since the Client 9 sex scandal broke in 2008."

Hey, if a marketer's comparing your "serious" political movement with "Client 9 sex scandal" sales you know you're in trouble. By and large fads don't turn into long-lasting brands and they usually don't originate movements — they live and die alone.

I'm also concerned that the tea party will do further damage to Republicans and conservatives. I've written about how the Republican brand is in the marketing wilderness (see that post here).

One problem is that everyone seems to be getting too excited about not very much. From the sound of the tea party news coverage, you'd think we're talking about millions of pieces of tea party memorabilia being snapped up by a nation on the march  — I saw one commentator get enthusiastic about 50,000 views of a YouTube video on the tea party — that's a mighty low number of views for a mass movement especially when surfing dogs can garner millions.

And speaking about numbers, how exactly are the organizers going to measure the effectiveness of this thing?  What's the tactical yardstick to determine success?  Are the numbers going to have to be Obama campaign numbers or something more modest?  And while we're at it, remember how small turnout numbers at some McCain events worked against him . . . once you put them out there, the numbers can come back to bite you.

In marketing terms, the enthusiasm seems a little too desperate and that rubs off on the perception of brand Republican as being desperate as well.

Another problem is a perceived lack of imagination.

Recycling a great political symbol like the tea party only re-enforces the perception that conservatives aren't capable of being creative.

A third problem is negativity.

The tea party will be seen as the Republican party delivering another resounding "no" without offering any solutions. When the colonists dumped the tea, they were demanding representation. When they didn't get representation, they took representation by force — a positive negativity if you will.

The 2009 tea party isn't part of a constructive negotiation or a revolution, it's a rant without any consequences — just like Santelli's rant on air. Not paying the portion of ones' taxes going to programs you really object to would be a powerful statement — but I doubt if the tea partiers are going to get around to doing this.

My sense is that conservative commentators and opinion-shapers who are seen promoting the tea party may very well regret this decision later on when the real protest comes along and leaves them in the dust.

The real protest? Well, that's basically where I think all this is headed.

There's real frustration out there with creeping Big Government and it's probably going to grow, but it's too soon after the election for that many Americans to take a protest movement seriously. Also, none of us can predict the future except to say that it usually surprises us. Ten years ago no one would have predicted that Barack Obama would be president or a company with a strange name like Google would be one of our most successful enterprises.

No one knows what the real protest is going to be that galvanizes the Republican party and possibly even a nation, but my guess is that like the first tea party it will be innovative, memorable and based on the reality of the moment. It will probably be something like twitter-generated protests where hundreds of people spontaneously swarm the branches of banks that accept more bailout money. Or, if we're talking important food groups, let's see what happens if the government puts a hefty tax on fast food –- that'll be some party.

Again, I don't know what the real protest will be, but I guarantee that we'll all recognize it when it comes.

So let's wait for the political hurricane to come and not get too excited about this tempest in a teapot.

And remember, it's always easier to understand politics (and almost everything else in life) when you keep marketing and branding in mind.