So… the new day dawned bright, clear, and cold. But it was such a joy to fill the coffee pot from the tap, wash my face with hot running water, yadda, yadda. The simple joys of indoor plumbing that works!
New folks to follow… From The Hill:
Audiences usually treat presidents to a round of polite applause, but when President Obama addressed House Republicans on Tuesday, they started Twittering.
Just a week after being inaugurated and becoming the most powerful man in the world, Obama strode into the Republican redoubt on Capitol Hill, whereupon its denizens started texting accounts of the proceedings into cyberspace.
There could be no clearer demonstration of the way politics has moved into an age in which technology trumps formality.
While Obama implored Republicans behind closed doors to consider supporting his economic stimulus bill, GOP thumbs worked overtime, tapping updates onto the microblogging website for thousands to read.
The Republicans commended Obama throughout the meeting, but were quick to note their continued disagreement with the president and the House Democratic leadership after conservative blogs pounced on the friendly rhetoric. (Pundit Michelle Malkin, a frequent Twitter user herself, directed a message toward Burgess during the meeting: “You Tweeted during Obama [meeting]: ‘Sharp differences are muted.’ That’s exactly what’s wrong [with] the Republican Party!”)
This, of course, presupposes you care enough about politics to have your congress-critter tell you how his day is going via tweets. Imagine: “In the limo and off to Heidi’s place! Wish U wur me?” I’m not so sure that’s such a great ideer. But I’m considering it.
In today’s Politico… The Case for Doing Nothing. The lede:
Most of Washington has reached quick consensus: Government must do something big to shock the economy, and it should cost between $800 billion and $900 billion.
But dissident economists and investment professionals offer a much different take: Most of Washington is dead wrong.
Instead of fighting over what should go in the economic stimulus bill, pitting infrastructure spending against tax cuts and contractors against contraceptives, they say lawmakers should be fighting against the very idea of any economic stimulus at all. Call them the Do-Nothing Crowd.
“The economy was too big. It was all phantom wealth borrowed from abroad,” says Andrew Schiff, an investment consultant at Euro Pacific Capital and a card-carrying member of the stand-tall-against-the-stimulus lobby. “All this stimulus money is geared toward getting consumers spending and borrowing again. But spending and borrowing were the problem in the first place.”
Washington has a habit of passing legislation in a crisis and suffering from morning-after regrets — the Iraq war, the Patriot Act and last year’s original bank bailout plan come to mind. So we thought it would be wise to air the views of the naysayers toward Washington’s latest consensus approach.
I don’t have any regrets about Congress’ vote on the Iraq war OR the Patriot Act, but all this frantic bailing out worries me. Don’t get me wrong: I support certain types of bail-out activities when the failure to “do something” would result in catastrophe… the “too big to fail argument,” in other words. I also supported the relative pittance given in the form of $17.4 billion in bridge loans to the auto industry… a pittance, that is, compared to the currently proposed $800 billion stimulus package. Another case of too big to fail, not to mention the domino effect of GM et al going under, massive unemployment, and so on.
But the stimulus has me worried, not because of the reasons highlighted in the Politico article, which tend to focus on the superficial and specious. Reasons such as a recession that’s “weeding out the weak (companies),” and “shocking Americans into reducing their debt,” while (very) arguably good things, aren’t necessarily good reasons NOT to spend nearly one trillion taxpayer dollars. Nope. I disagree on two counts. First is the way the proposed stimulus monies would be allocated. The WSJ has a few highlights in this space, including the graphic on the right that I purloined from this article, which says, in part…
Most of the rest of this project spending will go to such things as renewable energy funding ($8 billion) or mass transit ($6 billion) that have a low or negative return on investment. Most urban transit systems are so badly managed that their fares cover less than half of their costs. However, the people who operate these systems belong to public-employee unions that are campaign contributors to … guess which party?
Another "stimulus" secret is that some $252 billion is for income-transfer payments -- that is, not investments that arguably help everyone, but cash or benefits to individuals for doing nothing at all.
As for the promise of accountability, some $54 billion will go to federal programs that the Office of Management and Budget or the Government Accountability Office have already criticized as "ineffective" or unable to pass basic financial audits. These include the Economic Development Administration, the Small Business Administration, the 10 federal job training programs, and many more.
Oh, and don't forget education, which would get $66 billion more. That's more than the entire Education Department spent a mere 10 years ago and is on top of the doubling under President Bush.
Pet-projects that have languished on the Democrats’ back-burner for years, in other words. Only about ten percent of the projects in this bill are worthy investments in infrastructure, power grid improvements, and broadband projects, by the WSJ’s accounting.
But it’s the Financial Times (UK) that identifies my principal objection to this latest boondoggle… the humongous deficits we’ll incur. Excerpt:
The US debate over the fiscal stimulus is remarkable in its neglect of the medium term – that is, the budgetary challenges over a period of five to 10 years. Neither the White House nor Congress has offered the public a scenario of how the proposed mega-deficits will affect the budget and government programmes beyond the next 12 to 24 months. Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package.
What we need is a medium-term fiscal framework, one that lays out an anticipated schedule of taxes and spending consistent with the needs of the economy and government functions. Rather than soundbites about ending pork-barrel projects or scouring the budget for waste, or about the relative multipliers of tax cuts versus spending increases (both of which depend on expectations about the future, a point mostly overlooked in the debate), we should be reflecting on certain basic fiscal facts, the most important of which is that the US government faces huge and potentially debilitating structural deficits as far as the eye can see.
In rough numbers, the US federal tax system collects about 18 per cent of gross national product, while the total of just five categories of public spending – Social Security (retirement and disability), health (Medicare, Medicaid), veterans’ benefits, defence and homeland security and interest payments – eat up about 18 per cent of GNP. Yet government has more to do – for example, providing the justice system; help for the poor and unemployed; science and technology research; energy systems, transport and other infrastructure; diplomacy and international aid; natural hazards mitigation; training; and the future costs of financial clean-up. Let us add in the fact that state and local governments are broke and need increased federal transfers, and that America’s ageing population, broken healthcare system and growing underclass all require increased fiscal attention. We currently pay for all of this, if we do so at all, by borrowing from China and from the future.
Does the foregoing scare you? It sure scares ME. At some point in time the Chinese will either decide to quit lending us money, or they’ll do something much more nefarious… they’ll begin attaching strings to the money they lend us… as in “you can spend it on this, but not this…” and so on. Not up front, of course… T-Bills and Notes don’t come with contracts. But the Chinese could wield influence in policy decisions, like no aid for Taiwan, discontinuing anti-ballistic-missile defense programs, or the setting of tariffs and duties. Couldn’t happen? Think again. And remember: “money IS power.”
But I feel our Chinese lenders are the least of our problems. A government cannot simply “print money” without underlying value without suffering consequences… terrible consequences. A lot of folks are too young to remember hyper-inflation, which plagued Argentina as recently as the 1980s and currently rages in Zimbabwe. But the classic case is the Weimar Republic… From an article at forexhound.com:
Concerns about the global financial system and economy are increasing and now there is a dawning realization that the cheap money, irresponsible lending practices, trillions of dollars of derivatives, massive leverage and government profligacy of recent times may lead to hyperinflation in some countries internationally. Due to the prodigal money printing and creation of fiat currencies in order to bailout much of the banking system and a continuing meltdown in the asset backed securities market and derivatives market, the threat of Weimar Germany is being mentioned more often, including on the front page of the Financial Times.
There is now a real risk of Warren Buffett’s “financial weapons of mass destruction” leading to what some have termed the neutron bomb of a meltdown in the out of control derivates market which now has a value in the hundreds of trillions ($40 trillion credit derivatives alone). The US Treasury is backstopping some $600 trillion in derivatives and the Fed and the Treasury are doing the same for the entire ‘structured finance’ segment.
These figures are of a magnitude far greater than the World War I war reparations that the Germans had to pay which led to their hyperinflation. It is worth remembering that Germany was one of the, if not the, strongest powers that the world had ever seen at the end of the 19th century and many saw Germany surpassing the British Empire which was in decline, as a superpower. Germany was one of the strongest nations in the world – culturally, scientifically, militarily and economically and a superpower of the time.
Enter hyper-inflation and misery on a scale unknown to ALL Americans living today. One would think the specter of hyper-inflation would be enough to make our politicos think long and hard about the stimulus Obama is proposing. But apparently not… Obama himself, when asked about the inflationary aspects of the stimulus and the ballistic trajectory of federal deficits said “we’ll deal with that later.” Famous last words, and all that.
Here’s a good primer on the concept of stimulus plans in a White Paper published by the Council on Foreign Relations. More doom and gloom here, here, and here.