Economics

'We're Making This Up As We Go'

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Has any story beginning with the phrase "a bipartisan group of senators" ever been good news? The New York Times reports that "a bipartisan group of senators worked furiously in backroom negotiations on Thursday to cut the cost of the more than $920 billion economic stimulus package." The product of this furious work will be completely haphazard and arbitrary, at best producing a total figure somewhere between $819 billion (the estimated cost of the House bill) and $920 billion, with no rhyme or reason to what is cut and what is left in. "We're trying to focus it on spending that truly helps stimulate the economy," says Sen. Susan Collins (R-Maine). "People have different views on whether or not a program meets that test."

No kidding. Take the $1 billion that President Obama wants to revive Bill Clinton's Community Oriented Policing Services (COPS) program, under which the federal government pays the salaries of local police officers. You might think this appropriation would fail the stimulation test, since police departments presumably will not simply grab warm bodies off the street, hand them badges and guns, and put them to work on the thin blue line. Given the time required for training, it seems unlikely that the money for new cops would make its way into the economy in time to save us from the recession. Yet Sen. Patrick Leahy claims the COPS money would stimulate the economy "as fast as, or faster than, other spending" (which is probably true, since the other spending includes construction projects that won't be done until 2017). He notes that "in police hiring, nearly 100 percent of the money goes to creating jobs," which he says is "particularly important in the current economic crisis, since many police departments are already reporting increases in crime and cuts in their budgets and their forces." Chuck Wexler, executive director of the Police Executive Research Forum, adds that "from an economic stimulus standpoint, if you can use new police to stabilize a neighborhood, consolidate crime-reduction gains, then you can have a considerable impact on the local economy."

If COPS money is an economic stimulus, anything is. As Sen. Lindsey Graham (R-S.C.) notes, "We're making this up as we go." Still, neither Graham nor any other senator is questioning the need to burn some huge sum of money as a sacrifice to the god of economic stimulus. "The question is not doing nothing versus doing something," says Senate Minority Leader Mitch McConnell (R-Ky.). "The question is the appropriateness of an almost $1 trillion spending bill to address the problem." The Republicans' idea of fiscal conservatism is cutting a $1 trillion behemoth overflowing with pork fat down to a lean, mean $800 billion.

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  1. Indiana Jones quote!!! yay!
    (sort of)

  2. I’m starting to hope for the whole thing to fail miserably, cast the world into global depression, mass hysteria…

    Just scrap it all and start over…with me in charge. Who wants a cabinet post?

  3. I’m glad i don’t pay taxes.

  4. start preparing for the revolution.

  5. Who wants a cabinet post?

    I want Party Czar. Or at least Cocaine Czar.

  6. police departments presumably will not simply grab warm bodies off the street, hand them badges and guns, and put them to work on the thin blue line.

    That’s right. They must be warm bodies with a history of animal cruelty.

  7. “from an economic stimulus standpoint, if you can use new police to stabilize a neighborhood, consolidate crime-reduction gains, then you can have a considerable impact on the local economy.”

    From an economic stimulus standpoint, you could pay arsonists to burn down unoccupied/repossessed houses.

  8. Ah, fuck.

    I’ll take one of those Czarships, if you don’t mind.

  9. a bipartisan group of senators worked furiously in backroom negotiations

    Clarification, please. Does “backroom negotiations” mean blowjobs or buggery, or both?
    Did they hire Nancy Pelosi to pop out of a cake?

  10. How much “stimulus” for my state?
    You get my vote when it equals $ ________.

    You wanna see the Any House member’s view on the subject?

  11. Nice, appropriate Mencken excerpt on the front of the Mencken Society Web page.
    http://www.mencken.org.

  12. police departments presumably will not simply grab warm bodies off the street, hand them badges and guns, and put them to work on the thin blue line.

    That’s right. They must be warm bodies with a history of animal cruelty.

    You’ve got to weed out the overly intelligent ones too. It takes time.

  13. Did anyone bother to ask the senator if he plans to end the program once the economy recovers? How can any permanent program be justified with “economic stimulus”?

  14. Fed money paying for local cops? Great idea. It worked so well for highway money. The government NEVER uses that as blackmail. Nope. Never. I especially don’t see the feds directing LE policy if they’re paying the bill. Nope. Never. That’d be as absurd as the feds dictating how much CEOs can be paid if they take federal money. That’s just fanciful…

  15. I heard the Chinese voted to cap Congress’s salary until the US pays back all the money we owe them.

  16. Jacob,

    Since both a trillion and 800 billion are absurd to you, what number would you consider an acceptable and plausible stimulus number? Are you in the “no stimulus at all” camp? Are you in the “no spending only tax cuts” camp?

    I don’t mean to be snarky. But as details of the “plan” have filtered out my conversations have tended to focus on what the acceptable level of wasteful/useful spending might be. So it is handy to know if someone considers the useful spending level to be nil.

    bb

  17. So it is handy to know if someone considers the useful spending level to be nil.

    The spending level should be nil.

  18. Oddly enough, I’m not terribly worried at this point about the stimulus bill. It will accelerate forces that barring Wiemar adventures, will be beyond the control of politicians.

    From what I’ve seen in Treasury bonds, the spread between 2 and ten year notes is getting wider and wider. By this summer I am guessing (after TARP 2.0 + Stimulus + Residual War Costs) the deficit facing Uncle Sam this year at over $2 trillion. That’s 15% or so of GNP.

    I don’t know who’s going to keep buying increasingly speculative debt instruments like these Treasuries. China will have its own “stimulus” packages at work (not just the $600 billion one from last year), and Japan I am guessing will need to build more useless bridges etc. with their own stimulus packages.

    Also, in China’s case, it does not make any sense to sit on close to a trillion bucks in American cash that will be inflating. It also doesn’t make sense for them to buy Treasuries with that cash, especially long-term securities for only 3% or so. It DOES make sense for them to take that cash and go on a buying spree of American assets given the fire-sale prices you can pick them up for at this time.

    Given our debt needs, it takes central banks the size of China or Japan to finance the disaster. Petrostates and smaller sovereigns just don’t have the dough to buy enough (even if they were foolish enough to want to) to make a difference.

    Throw in the impending hoard of printed money waiting in our banks, which the pols are trying to figure out how to give away, we’ll be looking at double-digit interest rates on government debt a’la 1979 by the end of this year. Such ballooning numbers will crush hopes for more “stimulus” and put Obamanator and Co. in the unsavory position of needing to jack Fed rates to somewhat approximate bond rates. So at that point it will be relative political suicide for these jokers, or tits-up. I’ve got my popcorn ready and the plasma tuned to C-Span…it might be all I’m able to afford food-wise by the end of 2009.

  19. Hiring people doesn’t create jobs, and paying them doesn’t increase demand.

    More brilliant economic insights from Reason.

  20. Has any story beginning with the phrase “a bipartisan group of senators” ever been good news?

    A bipartisan group of senators has been trapped in an abandoned mineshaft with a rabid wolverine. . .

  21. How is a 30-year salary and 20-year pension temporary spending? It is an utter lie to say this stimulus bill will be temporary and include money for more cops.

  22. If I were president, I’d order every single federal agency — including defense — to cut its budget by 20 percent immediately. I’d bypass the unions.
    Then I’d push for halving the corporate tax rate, and eliminating capital gains taxes.
    Then I’d suck my own fat cock.

  23. They are cutting out things that are actually useful, while leaving in a RIDICULOUS amount of garbage that is nothing more than lobbying gone wrong (Or good if your the lobbyist.

  24. The Republicans’ idea of fiscal conservatism is cutting a $1 trillion behemoth overflowing with pork fat down to a lean, mean $800 billion.

    Does the plural refer to Susan Collins and Olympia Snowe? Or most of the Senate Republicans?
    The only GOPers I’ve heard advocating an 800 billion “stimulus” are the ladies from Maine.

  25. If I were president, I’d order every single federal agency — including defense — to cut its budget by 20 percent immediately. I’d bypass the unions.
    Then I’d push for halving the corporate tax rate, and eliminating capital gains taxes.
    Then I’d suck my own fat cock.

    I’d say the latter is the most likely to happen.

  26. Hiring people doesn’t create jobs, and paying them doesn’t increase demand.

    Hiring someone to dig a hole doesn’t increase prosperity, and paying them doesn’t create wealth.
    joe is a stupid stupidhead with a bloody boil on his fat lazy ass.

  27. Nick –
    I’ll take the Pastry Czar position please.

    mmmm… danish…

  28. I’d say the latter is the most likely to happen.

    Jamie is very flexible.

  29. It’s quite striking how many people on the right opinion on the stimulus don’t even know what the term “economic stimulus” means, and think that arguing about the long-term return on a line item is somehow relevant to the question of its stimulatory effect.

  30. “…people on the right offering opinions on the stimulus…” that is.

  31. I’m going to take up drinking again!
    Seriously. I’m getting drunk tomorrow night.

  32. Hiring people doesn’t create jobs, and paying them doesn’t increase demand.

    Borrowing 1 trillion dollars to do it and nationalizing banks doesn’t increase investor confidence.

  33. Can I just ask: How is creating jobs which the federal government will PAY THE SALARY of temporary!??!!?1

  34. It’s quite striking how many people on the right opinion on the stimulus don’t even know what the term “economic stimulus” means, and think that arguing about the long-term return on a line item is somehow relevant to the question of its stimulatory effect.

    Translation: The ends justify the means.
    Pragmatic prick.

  35. It’s one thing to talk about stimulus as a jump start. It’s another to say “it’s amazing how nobody wants to discuss paying this guy $500 to jump start our collective car without going on and on about how they think our battery and alternator are broken”

  36. “The question is not doing nothing versus doing something,” says Senate Minority Leader Mitch McConnell (R-Ky.). “The question is the appropriateness of an almost $1 trillion spending bill to address the problem.”

    KY provides an awesome (read: entertaining) Senatorial dichotomy. McConnell isn’t always right, but he’s a damn good approximation of “fiscal conservative” and an intellectual. Then there’s Jim “I played teh baseballs!” Bunning who usually comes across as a Hannah-Barbera villain.

  37. I always hate “bipartisan” because it makes it sound like there’s only supposed to be two political parties. Do they call it “tripartisan” in Britain?

  38. Joe-

    Creating trillions of dollars in debt to solve the “crisis” is authentic brilliant insight.

    “change you can believe in” It is so hilarious. Lets increase government spending, lets create more debt and lets create more waste. Brilliant. But, it is “change you can believe in”.

  39. So, what’s the multiplier on hiring cops? 500 million?

  40. joe | February 6, 2009, 12:32pm | #

    Hiring people doesn’t create jobs, and paying them doesn’t increase demand.

    I don’t see this argument being made. Rather, I think they are saying that the COPS program won’t result in hiring.

    It could, however, result in reduced pressures on many strained municipal budgets that usually fund police.

  41. You’re welcome, FrBunny. Kentucky is truly a laboratory in democracy. And a powerful example of the nightmares it can produce.

  42. MONORAIL.

  43. spending that truly helps stimulate the economy

    Oh, well that’s all right then. I’d hate to see them inflate like crazy and spend it on things that hurt the economy, like the war on drugs or further encroachments on our civil liberties.

    -jcr

  44. Reinmoose,

    Borrowing 1 trillion dollars to do it and nationalizing banks doesn’t increase investor confidence. Investors had no confidence before this bill came up, either – but I’ll point out that Sweden’s experience of nationalizing (in the actual, non-metaphorical use the term) their banking sector in the 30s, giving them a good scrub, and then privatizing them again did a great deal to restore investor confidence.

    You raise a good long-term concern about public debt and business-friendliness, though. It will have to be addressed once we’ve got our feet back under us.

    Ever drive on ice? Ever skid? You’re driving down the road, and you start to skid to the left, towards oncoming traffic. If you turn to the right, you just skid more. You have to regain control of the car first, and THEN start to maneuver. If you don’t do both of these, in the proper order, then you get hit by the traffic.

    Similarly, there’s a two-step process here. Noting that you need to “get the car under control” doesn’t refute the perfectly valid observation that you need to steer away from the oncoming traffic.

  45. Er, “skid to the left” meaning the rear end of your car comes around on your left, and the whole car slides leftward.

    It’s counterintuitive, but the way to keep from crashing into oncoming traffic in that situation is to turn the wheel to the left, towards that traffic, until the wheels catch.

  46. Hiring people doesn’t create jobs, and paying them doesn’t increase demand.

    Not all hiring has beneficial effects, Joe. See, when the Dear Leader “makes a job”, it gets paid for by robbing people who earned the money in the first place. Those people in turn, can’t hire the person who’s now doing a government job instead of working in the private sector and creating wealth.

    Are we going too fast for you?

    -jcr

  47. Obama’s answer to the “failed ideology” that tax cuts solve all our problems:

    Don’t just cut taxes. Cut taxes AND INCREASE SPENDING.

    Why didn’t we think of it before?

  48. Hiring people doesn’t create jobs, and paying them doesn’t increase demand.

    Allocating money that won’t get spent for a year or more due to the need to find and train candidates won’t do shit for the economy now. We can also question whether COPS will go to new jobs, or just to pay the salary of existing officers while state resources are diverted elsewhere. If it’s the second, we’re playing a shell game with the money and not getting any stimulus effect.

    Of course, the whole exercise is a shell game with us as the suckers. We should be getting better at 3 card monte, shouldn’t we?

  49. libertymike,

    Creating trillions of dollars in debt to solve the “crisis” is authentic brilliant insight.

    No, it’s just simple common sense, and conventional economic wisdom.

    domo,

    Rather, I think they are saying that the COPS program won’t result in hiring. Avoiding layoffs and sparking new hiring are different manifestations of the same thing – stimulating demand by increasing employment and wages over where they would otherwise be.

  50. Yeah, I’m going to take a page out of Obama’s book: ask for a demotion and start wracking up my credit cards.

  51. I heard the Chinese voted to cap Congress’s salary until the US pays back all the money we owe them.

    Won’t this drive the high-quality minds currently running the country out of government life? What will become of us?

  52. John Randolph, if you EVER find yourself thinking that the difference in our positions is because I just can’t follow your childish reasoning, it means you don’t actually understand the issue, or the arguments on the other side.

    Those people in turn, can’t hire the person who’s now doing a government job instead of working in the private sector and creating wealth. And if this stimulus bill was being funded by a tax levy, instead of deficit spending, then your argument might make some sense, because the hiring would be place-shifted instead of time shifted.

    Am I going to fast for you? Seriously, you really do display an egregious ignorance about any economic observations that haven’t been spoon fed to you for the purpose of supporting what you already believe.

  53. Ever drive on ice? Ever skid? You’re driving down the road, and you start to skid to the left, towards oncoming traffic. If you turn to the right, you just skid more. You have to regain control of the car first, and THEN start to maneuver. If you don’t do both of these, in the proper order, then you get hit by the traffic.

    Similarly, there’s a two-step process here. Noting that you need to “get the car under control” doesn’t refute the perfectly valid observation that you need to steer away from the oncoming traffic.

    Car maneuvering, metaphorically, smells of policy change, not stimulus. Where’s the stimulus in this metaphor?

  54. It’s counterintuitive, but the way to keep from crashing into oncoming traffic in that situation is to turn the wheel to the left, towards that traffic, until the wheels catch.

    Thanks Dad

    I’m going to assume that was for the benefit of those who might not know.

  55. I’m going to take up drinking again!
    Seriously. I’m getting drunk tomorrow night.

    Jesus Christ, Jamie! We’re in crisis mode!
    Tomorrow will be too late; some bartender is depending on you to keep him off the soup line.

  56. Obama’s economics is even more voodooy than the original voodoo economics.

    Now we can spend our way to prosperity.

    That’s right people! Buy a lot of shit, pretend not to see the credit card bills, and eventually, you income will increase and you’ll be able to pay for it.

    Yes, I know, televisions have never gotten anyone a better job before. But, we’re in uncharted territory here. Anything can happen! Bold, persistent, experimentation!

    If the television doesn’t do it, maybe the designer shoes will!

    (I’m beginning to think the entire Democratic Congress has been reading ‘The Secret’).

  57. Strike that, I’ll just work part-time instead of taking an actual cut in pay so I don’t have to work as much but get to go to lots of good steakhouses and lakefronts.

  58. Allocating money that won’t get spent for a year or more due to the need to find and train candidates won’t do shit for the economy now. We can also question whether COPS will go to new jobs, or just to pay the salary of existing officers while state resources are diverted elsewhere.

    Thank you, T, for demonstrating why funding the maintenance of jobs- that is, helping local police departments avoid layoffs – is an efficient way to prop up demand in the short term without a time lag.

    Excellent point, and one that is often overlooked by people on the right.

    If it’s the second, we’re playing a shell game with the money Time-shifting is the point.

    …and not getting any stimulus effect. This either refutes what you wrote above, or demonstrates my point about righties not knowing what stimulus means. Which is it?

  59. or for that matter, for the people who never saw the movie “Cars”

  60. Reinmoose,

    In the metaphor, turning the wheel to the left, towards the oncoming traffic, is the stimulus. Turning it back towards the right, once the wheels are gripping again, is longer-term debt reduction.

  61. Rather, I think they are saying that the COPS program won’t result in hiring.

    Avoiding layoffs and sparking new hiring are different manifestations of the same thing – stimulating demand by increasing employment and wages over where they would otherwise be.

    Possibly. In my town, at least, the cops union would prevent there ever being layoffs. So if we were to get federal money – it would simply reduce our tax burden. It would effectively be a tax cut and/or capital injection into the city budget. Which I have no problem with.

    I do think that having more COPS is probably less stimulative than other sorts of job creation.

  62. Ever drive on ice? Ever skid? You’re driving down the road, and you start to skid to the left, towards oncoming traffic.

    In that situation, the best thing to do, obviously, is stand on the gas.

  63. I’m beginning to think the entire Democratic Congress has been reading ‘The Secret’.

    might be best comment yet on the subject. I will be plagerizing you mercilessly, Hazel Meade…

  64. In the metaphor, turning the wheel to the left, towards the oncoming traffic, is the stimulus. Turning it back towards the right, once the wheels are gripping again, is longer-term debt reduction.

    No – steering to the left is a neutral activity if you have sufficient time to gain traction. You’re not losing anything by doing it.

  65. Keynesian economics is a lot like ‘The Secret’. Money is supposed to attract more money.

    So, the way to get rich is to buy some expensive designer clothes and walk around in them. The money will just gravitate towards your wealthiness vibes.

    Similarly, if the government borrows money and spreads it around, something magical is supposed to happen that causes even more wealth to be created than the original spending.

    The Multiplier Effect. The Law of Attraction. What’s the difference?

  66. That is, if you steer to the left and gain control, only to still hit the oncomming traffic (maybe you were too close, maybe they tried to steer around you), you never lost anything by steering to the left. However, that’s not how a $1 trillion stimulus runs. If it works and pays itself off faster than the “do nothing” approach would have, then the incredible risk was a benefit. If not, then you’re that much further in debt and potentially have more dammage.

  67. Reinmoose

    I’ll play devils advocate. What is the downside to stimulus? That it won’t result in increasing jobs and demand? I would argue that it must. Even to the extent that it is stolen, misappropriated, or spent on ditch digging/refilling – it will do something for the economy. Whats the difference between paying a guy to dig/refill a ditch, and just giving him a tax refund check? Can you argue that the money would be better put to use by privately motivated individuals? Of course. But even if the government makes a “bad deal” to buy infrastructure, the cash will go to the firm that contracts to do it, then to their employees and owners, and then into the economy. Sure the corrupt government teat suckers get the most benefit, but that’s not an argument against doing stimulus, it’s an argument against the method of doing it being proposed.

  68. domo –
    market distortion for products and services for which there is little demand, and then continued pressure to prop up those sectors of the economy on the basis that people have jobs there. Basically creating permanent liabilities, and then having to spend the money to keep them up. Not to mention, with the language of protectionism and “OMG JOBS!” coming out of this thing, do you really think that we, as a society, will be able to grasp “ok, we spent our 1 trillion folks, it’s over – you who had jobs because of the money we spent, you can lose them now”
    No.

  69. Whats the difference between paying a guy to dig/refill a ditch, and just giving him a tax refund check?

    The most immediate difference is administrative overhead. Tax cuts don’t require any extra spendingby the state. But spending slices maybe 10-30% off the top to pay for the burceaucrats who are going to administster the program.

    Keep in mind that those people aren’t actually contributing any net productive power to the economy. The money would still be there whether they are getting paid or not. So their jobs are just make-work. Siphoning money away from productive workers towards people who are just pushing paper in jobs that wouldn’t otherwise exist.

    one of the flaws in the Democrats outlooks is that they throw all “jobs” into the same bucket. it doesn’t matter what kind of jobs rae getting created, as long as they are “jobs”. That’s why you see so much waste in unionized public works jobs. Workers standing around doing nothing. Because all they care about is the total number of jobs. They don’t distinguish between productive work and unproductive work. Efficiency in production is the enemy, since it requires fewer workers.

    So you end up with this philosophy of effectively “do things as inefficiently as possible so as to maximize the amount of labor used”.

  70. He notes that “in police hiring, nearly 100 percent of the money goes to creating jobs,”

    As far as the economy goes, its exactly as stimulating as putting those people on welfare. Neither cops nor welfare recipients play any role in the economy except as pure consumers.

    Anyone care to offer a principled argument that massive increases in welfare spending are “economic stimulus.”

  71. Yeah, um, I’m new here. Is that Joe guy always so annoying?

  72. In the metaphor, turning the wheel to the left, towards the oncoming traffic, is the stimulus. Turning it back towards the right, once the wheels are gripping again, is longer-term debt reduction.

    Again with the fantasy that this bill isn’t setting a new baseline, and that in a year or two we will go back to circa-2007 budget levels.

  73. R C Dean –
    That’s about what I was meaning to conclude from my statement, only I would have said it in a lot more words.

  74. that last comment was regarding your 2:06pm comment

  75. Wait – no it wasn’t. But it was a very good point.

  76. continued pressure to prop up those sectors of the economy on the basis that people have jobs there.

    I consider this a very good point. To wit, at some point in the future when stimulus is inappropriate, we will still be “stimulating” and it will be politically impossible to back away.

    The most immediate difference is administrative overhead. Tax cuts don’t require any extra spendingby the state. But spending slices maybe 10-30% off the top to pay for the burceaucrats who are going to administster the program.

    I would consider this to be equivilent to a tax refund check for middle management. I don’t think it washes.

    The money would still be there whether they are getting paid or not. So their jobs are just make-work.

    But my original strawman is that make-work is no worse than tax refunds, because you are essentially giving the money away anyway.

    They don’t distinguish between productive work and unproductive work.

    Remember, I stipulated this in my original post. I realize that it’s less productive than private sector economic activity – but then if private sector were expanding, we wouldn’t be doing it. Ie. the question is not inefficient v. efficient – it’s between inefficient activity and none.

  77. Ok, here we go:
    It’s WORSE than putting people on welfare.

    Jobs = liability. Welfare can be terminated.

  78. If putting people to work is the goal, we could get rid of all the heavy earth-moving equipment and go back to digging ditches with shovels.

    Why stop there? If it takes one man two days to dig a trench three feet deep and 30 feet long with a shovel, how long would it take 100 men using spoons?

  79. how long would it take 100 men using spoons?

    We’re making sure that they have the proper health protection, right? Like dust masks and stuff? And they will get at least a 15 minute break every 30 minutes, and 2 hours for lunch, right? And they are all going to make the exact same amount of money, right?

  80. joe, what is your take on the different areas where the stimulus money is being placed? It sounds like you favor the whole concept, which is fine, but do you have any criticisms of the different parts of it?

    Personally, I don’t like the idea at all, but if I WERE going to do this, I think I would want to infuse money into depressed housing along with the roads and bridges. Instead of making new home construction projects, the workers and all the things they and the homeowners need to buy to fix old existing properties would be a quick benefit because less planning needs to be done, it raises home values, it provides jobs to people who are currently getting less work, it leads to greater property tax revenue (again, something if I were in favor of at all, I would want it to be greater), it could be done in the form of directed tax breaks, or cash payments on a project basis, whatever.

    You could even use some abandoned buildings that get rebuilt to house homeless people.

    Rebuild some schools rather than just throw money at administrators and teachers. Throwing money at the NEA is just ridiculous. My take, your thoughts?

  81. I would consider this to be equivilent to a tax refund check for middle management.

    There’s a difference between creating a middle-management job, solely for the purpose of dispensing money to others, and giving a tax refund to an existing middle-managment job.

    Not all middle management jobs are necessarily unproductive. But in the former case, it’s a job that exists solely to attempt to create other jobs – not for some direct economic purpose.

  82. Joe,

    You’re the one arguing for fighting fire by dousing it with gasoline. I’m speaking to you like you’re a dolt, because you are demonstrably a dolt. Historical examples abound of the failure of the policies you advocate. Read and learn.

    -jcr

  83. There’s a difference between creating a middle-management job, solely for the purpose of dispensing money to others, and giving a tax refund to an existing middle-managment job.

    Yes, it’s unfair to the middle managers who do have jobs – but in terms of stimulus to the economy, how is it different?

  84. spending stimulus should be zero…whether you are involuntarily time-shifting the spending(taking our childrens savings) or involuntarily side-shifting spending from workers to parasites…Increasing aggregate “demand” is not a good thing…it is taking away from people who would save money (building up the productive capacity of the world) and shifting it to people who will make a call on current resources…increasing prices for those who are not politically connected….deflation is good for the saver and bad for the wasters, leveraged debt junkies, Goldman sach bankers etc.

    Poor kids getting out of college and high school or fired autoworkers need house prices to drop more, they want food prices to drop and if they are counting on government to give them a job then they need to learn some skills that are useful in the real world. The sooner they learn some real skills the better and the sooner house prices drop another 50% the better…proping shit up with my kids future income another 2 years is not good for the long term health of the economy it is just good to a few millionaire and billionaire friends of Congress that get scandalous contracts.

  85. But, but but…

    The Soviet Union had 100% employment all the time! Surely, the key to economic recovery must be taxing and spending as much as possible!

    Oh, and Joe: google for “courtier’s reply”. Your defense of Keynesianism is highly similar to theologian’s defense of their brand of wishful thinking.

    -jcr

  86. “the question is not inefficient v. efficient – it’s between inefficient activity and none.

    saving is efficient…as prices come down on resources the savings increase in value even quicker and then legitimate investment opportunities become available. Those who are the least prone to instant-gratification/wasteful spending/ponzi schemes/over-leveraging…are the ones who make the investment decisions for society and our societies investment profile has better performance than if it had been invested by prostitute crazed lying politicians with 2 year time horizons.

    If you really think saving is inefficient then I guess you’d be in favor of just expanding the money supply by 10%-20% year every year…10 percent inflation is a strong disincentive to save?

  87. Throwing money at the NEA is just ridiculous.

    It’s worse than ridiculous, it’s actively destructive.

    -jcr

  88. in spite of the illogical arguments of the keynsians and the 100% foolproof knowledge that this stimulus will lead ot disaster…I want the biggest package possible with zero tax cuts…$5 trillion spent on STD prevention, ACORN and Goldman Sachs Executive retreats would be ideal. We need a train wreck, the keynsians are too numerous. Pure economic meltdown is preferable to middling along and then starting a world war as “Bipartisian comprimise”.

  89. Nick,

    You are making the worst mistake possible. You are attempting to engage joe in a polite, substantial conversation. He will only see it as a sign of weakness. The best thing to do is to ignore him.

  90. Gabe –
    Excellent point re: saving. Those who made good decisions are benefitting right now. I’m seeing the purchasing power of my savings go up INSANELY over what it was 6 months ago. The amount of sales, low stock prices, and investment opportunities have shot up so much that I can purchase significantly more with the same amount of money than I could before.

    The stimulus is basically setting national policy equivalent to the investing and spending habits of the largest block of Americans, who have shown an ability to get into massive debt and make repeated bad investment decisions.

  91. 10 percent inflation is a strong disincentive to save?

    It’s a strong disincentive to save currency. It’s a pretty good reason to save anything else.

    -jcr

  92. Gabe, to defend my strawman, I would offer the following: Holding cash is inefficient in terms generating productive economic activity. You are saying that there are no legitimate investment opportunities at current valuations, and that is certainly one viewpoint. Just bear in mind, that hoarding cash in a fractional reserve economy creates conditions of illiquidity that can cause default, failure, and liquidation in firms even if the underlying business models are sound. Allowing legitimate businesses to be choked out as a result of liquidity issues ends up in unproductive uses of capital as well, like down time, lawyers, middlemen as well. I’m sure you would point out that the government is ill suited to decide which companies fail – which I agree with.

  93. domo,

    If the police union won’t allow layoffs, isn’t it more likely that the town would respond by laying other people off?

    P Brooks,

    In that situation, the best thing to do, obviously, is stand on the gas. Actually, no. Quite the opposite, you take your foot off the gas, as slower-rotating tires will grip faster than quickly spinning ones. If you stand on the gas, you’re just going to spin them. I don’t think this has much to do with the economy, though.

    Reinmoose,

    No – steering to the left is a neutral activity if you have sufficient time to gain traction. You’re not losing anything by doing it. Actually, steering to the left will make the car move to the left somewhat, so you are “losing” something. Say the car has just started fishtailing, and is still facing only a little towards the right; steering to the left will cause the car to bear left somewhat, but it’s better than going into a spin.

  94. If the police union won’t allow layoffs, isn’t it more likely that the town would respond by laying other people off?

    In my town? Not remotely. All city employees have unions, and powerful ones at that.

  95. As far as the economy goes, its exactly as stimulating as putting those people on welfare. Neither cops nor welfare recipients play any role in the economy except as pure consumers.

    Anyone care to offer a principled argument that massive increases in welfare spending are “economic stimulus.”

    OMFG.

    “All that’s going to do is increase consumption. What does increasing consumption have to do with stimulus?”

    I used to think that one of the strong points libertarianism offered was an firm grasp of economics. I don’t think that anymore.

    I grok that there are philosophical objections to the stimulus bill, but seriously, WFT? RC Dean writes, essentially, “That’s only going to increase consumption, what does that have to do with stimulus,” and NOBODY sees anything wrong with that?

  96. Nick,

    Spending to avoid cuts in operations budgets is actually better than capital improvements, from a strictly stimulatory consideration, because it’s immediate. The money gets into circulation in the very next paycheck.

    Now, considering the longer-term, non-stimulus effects of spending, capital projects actually produce stuff that will still be providing benefits for years to come, but they tend to have long lead times.

    I’m concerned that the stimulus bill includes a lot of things that won’t actually inject money into the economy for a while.

    I like your housing idea, though. The size of each individual project is small enough that there wouldn’t be as much time spent on the design phase.

  97. The stimulus bill should include a project to smash John C. Randolph’s brain into Gil Martin’s at high speed.

    Astrophysicists would greatly benefit from modeling black hole collisions.

  98. The best thing to do is to ignore him.

    And they said irony was dead.

  99. The stimulus bill should include a project to smash John C. Randolph’s brain into Gil Martin’s at high speed.

    And another lefty reveals his lurid fantasies of inflicting violence on his opponents.

    It’s hilarious how these touchy-feely squishy liberals are all brownshirts at heart.

    -jcr

  100. I love this blog

  101. domo:
    “You are saying that there are no legitimate investment opportunities at current valuations, and that is certainly one viewpoint.”

    I am not saying there are “no legitimate” investments…just that they will increase in number and size as the call on resources from crappy decision makers decreases….if nasa scientist were all fired then there would be great opportunities for entrepreneurs who wish to do high tech type ventures…and as DEA agents and stock brokers were fired there would be lots of opportunities for new private security firms and people seeking to get dentists to invest in new businesses.

    defaults would occur even in business with relatively sound business models…especially those that used too much leverage…would it be unfair to punish those who expected or political establishment to inflate it’s way out of debt?….maybe…if you want to argue that then I’ll say ya …maybe it is best to just destroy the dollar through inflation…that way our kids are out of debt and your not punishing hte wise small biz who bet on irresponsible monetary policy…but afterwrds whent he currency is destroyed we should put a system in place that will prevent this terrible stuff from happening again.

  102. As Sen. Lindsey Graham (R-S.C.) notes, “We’re making this up as we go.”

    Truer words never spoken.

  103. And another lefty reveals his lurid fantasies of inflicting violence on his opponents.

    It’s hilarious how these touchy-feely squishy liberals are all brownshirts at heart.,/i>

    It’s a supercollider joke, dimwit. Your brains are like subatomic particles.

    Read a book fer chissakes.

  104. defaults would occur even in business with relatively sound business models…especially those that used too much leverage…would it be unfair to punish those who expected or political establishment to inflate it’s way out of debt?….maybe…if you want to argue that then I’ll say ya …maybe it is best to just destroy the dollar through inflation…that way our kids are out of debt and your not punishing hte wise small biz who bet on irresponsible monetary policy…but afterwrds whent he currency is destroyed we should put a system in place that will prevent this terrible stuff from happening again.

    I think that inflating our way out of debt is inevitable. My main interest is that it’s done in a way that can be reversed and causes the least amount of long term damage. Like you, I wish for meaningful reforms to prevent it from recurring.

  105. Is inflating our way out of this much debt even possible? Seems like a hell of a chore.

  106. Did the democrats notice that Obama’s SEC employees are still relying on “executive privelege” to avoid answering questions about Madoff?

    I personally know a international tax lawyer who worked directly with Madoff…he says that Madoff always managed to mention that he was good old buddies with Levitt(head of the SEC)…which explains why the SEC harassed little asset management shops for months on end and avoided Madoff even when people were sending them warning letters for months.

    Think Obama will clear this up? not a chance

    http://www.youtube.com/watch?v=8PlLCKW4zuY

  107. oh ya it is possible…the only questions are who does the money go to first and when do they decide to do it…the people who get to decide might prefer to wait a little longer so they can get cheaper assets from desperate sellers before they inflate…that is all they are waiting on. They also can manage to pass crazier legislation if they can whip teh public in a bigger frenzy first, so there are plenty of reasons to string this out a while.

    Like Rahm says “Never let a serious crisis go to waste” and if you can create a couple extra crisis…don’t waste the opportunity to do that either!

    The “leaders” get to decide how to do it to maximize benefits to them and we have to just sit here and try not to get destroyed by whatever avalanche they create.

  108. Joe,
    What about eliminating the payroll tax?…it seems that even you would agree that this would help make upward mobility more feasible in this country and give help to those who need it most…this seems like a natural comprimise between republicans who want lower taxes and democrats who want to help the poor….of course that is only if you are naive and think democrats and republicans actually want those things.

  109. Yes, it’s unfair to the middle managers who do have jobs – but in terms of stimulus to the economy, how is it different?

    How is it different from dumping money out of a blimp, er, helicopter?

    Who bother with the whole working part? Why not just hand out cash?

  110. “I think that inflating our way out of debt is inevitable. My main interest is that it’s done in a way that can be reversed and causes the least amount of long term damage. Like you, I wish for meaningful reforms to prevent it from recurring.”

    I think inflating our way out of debt is inevitable as well, but now I don’t think its going to be any kind of a controlled process.

    We’ve got some seriously bad timing with this kind of debtgasm. We’re going to rack up the (on the books, anyways) national debt by a good 10% a year or so for the next two to three years at least it seems. These “toxic assets” are going to have some phat interest rates on them at auction in the next 12 months. We’ll come out of the Treasury bender just as the entitlement disaster starts to take that first big “CHOMP!” out of the Fed’s budget with the oncoming Boomers. I don’t see how the wonks will have a whole lot of input on the situation at that point.

    I noticed an incoherent sliding-car analogy regarding ideology on this current situation earlier in this thread. But in six or seven years at the current debt rate + Entitlement Disaster I see this analogy as being one where the steering wheel is no longer connected to the wheels. At that point the car is just going to crash how it wants to, damn the “driver” (the government) or his unfortunate passengers (us).

  111. Statement of Congressman Ron Paul
    United States House of Representatives

    Statement on Federal Reserve Board Abolition Act

    February 3, 2009

    Madame Speaker, I rise to introduce legislation to restore financial stability to America’s economy by abolishing the Federal Reserve. Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people.

    From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts.

    With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America’s exports or the low rate of savings should be enthusiastic supporters of this legislation.

    Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of special interests and their own appetite for big government.

    Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

    In fact, Congress’ constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation’s founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true freemarket economy.

    In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans’ standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.

  112. Gabe,

    That could be a good stimulus idea, especially if you eliminate the payroll tax for incomes below, say, median income.

    Tax rebates or cuts provide greater stimulus when they are targetted towards the bottom of the income scale, because poorer people are more likely to spend the extra money than save or invest it.

  113. Joe,

    Still hunting in vain for information regarding those 1930’s Swedish bank nationalizations (you mention them in your 1:09 post).

    Can you post an article link, or recommend a text that might provide more information?

  114. Me:In that situation, the best thing to do, obviously, is stand on the gas.

    Joe: Actually, no. Quite the opposite, you take your foot off the gas, as slower-rotating tires will grip faster than quickly spinning ones. If you stand on the gas, you’re just going to spin them. I don’t think this has much to do with the economy, though. [emphasis mine]

    ****

    I don’t know what I was thinking, joe; subtlety really isn’t what you do well.

  115. Economy Rescued!

    God Bless courageous Republicans Arlen Spector, Olympia Snowe, and Susan Collins!

  116. Me:In that situation, the best thing to do, obviously, is stand on the gas.

    Joe: Actually, no. Quite the opposite, you take your foot off the gas, as slower-rotating tires will grip faster than quickly spinning ones. If you stand on the gas, you’re just going to spin them. I don’t think this has much to do with the economy, though. [emphasis mine]

    ****

    I don’t know what I was thinking, joe; subtlety really isn’t what you do well.

    Wow.

  117. Read a book fer chissakes.

    That’s advice you would do well to follow, Joe. Start with Bastiat’s The Law so that you can learn why you’re morally bankrupt, and then try Murray Rothbard’s America’s Great Depression so that you can learn why you’re wrong on a practical level. If you’d like to go as deep as understanding why you still believe what politicians tell you, try Extraordinary Popular Delusions and the Madness of Crowds.

    This will of course present you with the choice between holding on to your socialist leanings or acknowledging the way the world actually is, so it’s quite understandable if you avoid doing so.

    -jcr

  118. JCR:

    Well said, but the masses are content in their delusions.

  119. No nation has ever inflated itself out of debt.

    Look at the Weimar Republic or Zimbabwe.

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