The recent post by Jason Williams ["Some (Reality Based) Thoughts on the Stimulus"] is basically a counterargument to my earlier “Thoughts on the ‘Stimulus‘” post, which criticizes the Democratic stimulus plan.
Jason’s post is revealing for it demonstrates the kind of argumentation being used to discredit (not disprove) those who oppose the Democratic agenda.
Throughout the debate on Tuesday, Jason repeatedly alleged that those in favor of the stimulus enjoyed the support of “most economists,” whereas the puny opposition derived its objections from the phony expertise of House Republicans, the Wall Street Journal, and Rush Limbaugh. Jason’s infatuation with associating virtually any argument against the stimulus to House Republicans and “listening to Rush Limbaugh,” are clear examples of how legitimate points are being lost in the world of political spin; these kinds of attacks are classics, pulled straight from the playbook.
By discrediting the source or by establishing an absolute claim to credibility, the debate itself becomes more of a “gun show” than an actual discussion, with both sides scrambling to discredit, not disprove. This is apparent in Jason and Company’s constant ridicule of sources from the Wall Street Journal, yet unabashedly partisan sources (mainly blogs) like OpenLeft, Hiuffington Post, and Daily Kos are considered appropriate and accurate. And of course the expertise of select individuals like Paul Krugman (disregard his blatant partisanship, as well), automatically disprove any adverse claim and transforms the contender into a “true conservative alarmist.”
In Jason’s “reality based” post, 7 points are confronted which I supposedly ascribe to:
1. You can’t stimulate the economy and promote a political agenda at the same time.
2. Tax cuts stimulate the economy better than spending
3. This plan increases the national debt.
4. Only infrastructure jobs count as economic turnaround.
5. Even Paul Krugman Admits This Isn’t 1930
6. The New Deal didn’t pull us out of the depression, the war did.
7. Government spending reduces private spending.
It must be recognized that these 7 points are fabricated by Jason, and at times makes it seem that Jason is in fact arguing with himself, not me.
“You can’t stimulate the economy and promote a political agenda at the same time.”
Jason, if you care to read my post once again, you will notice that the thing called into question is what is intended by the economic stimulus. I raise the question whether the intention behind the stimulus is to promote an agenda, or to stimulate the economy, and “could it be both.” Again, what is being called into question is the intention of this stimulus. Instead of addressing this at all, an entire paragraph is devoted to proving how the economy can be stimulated while still championing a political agenda (i.e. Bush Tax Cuts).
If the Democrats were serious about stimulating the economy, the creation of this bill wouldn’t have been limited to input from just House Democrats and their Speaker. If truly serious, the plan may just try to confront the housing crisis and credit crisis which have propelled the US into such dire circumstances. And if this bill was primarily intended to create jobs, hundreds of billions of dollars more would have been allocated for sectors with significant percentages of unemployment (manufacturing and construction), and not just government jobs with relatively low unemployment rates. If job creation truly was the focus of this stimulus, then why is so much of it devoted to extending unemployment benefits and subsidizing healthcare?
Is the agenda or the economic stimulus paramount? Well, even advisors to President Obama are confessing that parts of the bill will do absolutely nothing, what makes you so confident then that this bill has the good intentions you seem to assume? I question the intent behind the stimulus, mainly because this bill doesn’t directly confront any of the causes of this economic crisis, and as you admitted yourself, it is riddled with pork projects. Undoubtedly you will express your support for pork projects, no matter how futile, for they employ workers. The “reality based” assumption behind this idea may be fun to entertain, but Harvard economists like Jeffrey A. Miron would probably disagree. For the assumption is that government spending will have some “social or economic value,” yet as we have seen so often with pork projects, such things are rarely the impetus behind the projects themselves.
“Tax cuts stimulate the economy better than spending”
Hmm, I never said that.
“This plan increases the national debt”
If the government “tightens the belt” right now, it will further deflate the economy. This is one of the biggest mistakes FDR made.
I will agree with you that FDR made a serious mistake by trying to balance the budget during the Depression. Yet I see serious dangers in the way in which the stimulus has not been explicit about how this kind of debt will be handled in the future. From Jeffrey Sachs at the Financial Times:
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.
If the present stimulus package is adopted without a medium-term plan, it will go the way of the earlier stimulus package and the Tarp, yet also put the US into a fiscal straitjacket that could paralyse public sector action in critical areas for a decade or more to come.
Jason, as we have seen with the bailouts, this money is coming from a foreign source (China), and will have to be eventually paid back by the American taxpayer. How long can we balance a raging national debt with a moribund economy, and still pay for all of the programs which require so much money?
You say:
In a nutshell, yes it is frightening to add billions to an already ballooning national debt, but the fact that Bush and the Neo-Cons have been spending so much in Iraq for nearly a decade does not change economic facts.
It seems peculiar to me that while extolling the virtues of government spending, you take the time to lambast the spending of “Bush and the Neo-Cons” for spending on the War in Iraq. If government spending is the solution to our problems, Jason, why hasn’t spending on the War in Iraq and the War on Terror in general, stimulated our economy?
“Only infrastructure jobs count as economic turnaround”
Uh, when did I ever say that? My exact words were:
Jason was quick to point out that this economic stimulus was most effective because it would “qucikly create lots of jobs.” Yet what still puzzles me is how “lots of jobs” are going to spring from such a weak infrastructure allotment; just about 1/5th of the stimulus will be actually used for infrastructure projects. Just $30 billion (5%) is going for roads and bridges, and slightly more will go for replacing electrical grids; that makes up only a little more than 10% of the stimulus.
How does anyone expect me to believe that a stimulus which only grants about $70 billion for infrastructure (which will create jobs), and yet throws $127 billion “over the next two and a half years to individuals and states for health care alone.” On top of that, nearly a quarter of the money going to state/local governments will be consumed by social programs: food stamps, extending unemployed benefits, and subsidizing health insurance. Medicaid for the unemployed, for example, will be covered 100% by the federal government until 2010.
Jason, there is obvious benefits from an increase of jobs in the realm of infrastructure. Yet I am still confused as to how expanding unemployment benefits will create all of these jobs you are speaking of. Maybe you need to educate me with your Econ 1010 textbook, but I am still unaware of how spending more money on unemployment benefits and health insurance subsidies is going to lead to “rapid job creation.”
As we all know, this economic stimulus is primarily for the purpose of creating jobs, right? This bill allocates a much higher percentage towards expanding benefits than improving infrastructure. Does that mean that all of these jobs coming from unemployment benefits and healthcare subsidies are more reliable and valuable than those in infrastructure? By the looks of this stimulus, that seems to be the assumption.
This is from Martin Feldstein, a Harvard economist and president emeritus of the National Bureau of Economic Research:
On the spending side, the stimulus package is full of well-intended items that, unfortunately, are not likely to do much for employment. Computerizing the medical records of every American over the next five years is desirable, but it is not a cost-effective way to create jobs. Has anyone gone through the (long) list of proposed appropriations and asked how many jobs each would create per dollar of increased national debt?
The largest proposed outlays amount to just writing unrestricted checks to state governments. Nearly $100 billion would result from increasing the “Medicaid matching rate,” a technique for reducing states’ Medicaid costs to free up state money for spending on anything governors and state legislators want. An additional $80 billion would be given out for “state fiscal relief.” Will these vast sums actually lead to additional spending, or will they merely finance state transfer payments or relieve state governments of the need for temporary tax hikes or bond issues?
The plan to finance health insurance premiums for the unemployed would actually increase unemployment by giving employers an incentive to lay off workers rather than pay health premiums during a time of weak demand. And this supposedly two-year program would create a precedent that could be hard to reverse.
The problem with the current stimulus plan is not that it is too big but that it delivers too little extra employment and income for such a large fiscal deficit. It is worth taking the time to get it right.
And what of all those other projects outlined? Is it likely that we will see an ecomonic recovery any time soon? A great perspective can be found by one of Obama’s earlier advisers, who criticized similar plans for a stimulus by saying:
“Practically speaking, however, public works involve long start-up lags. Large-scale construction projects of any type require years of planning and preparation. Even those that are “on the shelf” generally cannot be undertaken quickly enough to provide timely stimulus to the economy. For major infrastructure projects supported by the federal government, such as highway construction and activities of the Army Corps of Engineers, initial outlays usually total less than 25 percent of the funding provided in a given year. For large projects, the initial rate of spending can be significantly lower than 25 percent.
“Some of the candidates for public works, such as grant-funded initiatives to develop alternative energy sources, are totally impractical for countercyclical policy, regardless of whatever other merits they may have. In general, many if not most of these projects could end up making the economic situation worse because they would stimulate the economy at the time that expansion was already well under way.”
Hmm. I’ll side with the Obama adviser.
“Even Paul Krugman Admits This Isn’t 1930”
Jason, again, you are spinning out of control on this one. I cite Paul Krugman because he openly favors government spending on infrastructure, AND he is consistently reminding the public that the same methods of recovery used during the Great Depression are not necessarily applicable in today’s world. That is precisely why the credit crisis and the housing crisis need to be addressed if any economic stimulation is going to take place, not just immediate government spending.
“The New Deal didn’t pull us out of the depression, the war did”
Please read my post and comments here: http://kvnuforthepeople.com/2009/01/29/paul-krugman-and-the-new-deal/comment-page-1/#comment-50952
Jason, you want to know the truth? The most obvious reason for the US remaining in an economic depression for nearly a decade was because of protectionists acts like the Hawley-Smoot Tariff, which effectively limited American access to foreign markets and placed extremely protectionist barriers to trade. That act, in my opinion, drastically exacerbated the crisis and left the US economically weak for years. Yes, I realize that this was a Republican policy (protectionism used to be a Republican hallmark), and I am of the impression that had the nation not passed the act, the US would have escaped from the Great Depression years before.
Nevertheless, Jason, I see some dangerous protectionist standards coming from this stimulus bill, which makes me even more opposed to it than before. By “buying American,” we are essentially cutting off one of our only positive economic resources for the time being. International trade has been probably the most economically beneficial characteristic of our country over the past few decades. Thanks to free trade policies, the US has had access to markets all over the world, and likewise, foreign investment in the US has been on the rise. This country benefits TREMENDOUSLY from trade, and yet, if the US were to return to the kind of protectionism that has stunted its growth periodically, this nation will certainly see an extended recession. From the International Herald Tribune:
China recently surpassed Japan as the U.S. government’s largest creditor. Any decision by Beijing to move its money would deal a dizzying new blow to an already tottering American economy. Yet relations between China and the new Obama administration are off to a rocky start.
For now, Beijing continues to loan Washington money by buying Treasurys and other U.S. government securities, helping to finance the ever-growing U.S. budget deficit. But there are signs its leaders may be considering trimming these holdings as that country experiences its own economic slowdown. Strains between the two economic powerhouses seem to be growing with the change in administrations.
The latest irritants are a “buy American” provision attached to White House-backed stimulus legislation moving through Congress and criticism of China’s currency policies by Vice President Joe Biden and Treasury Secretary Timothy Geithner.
Jason, have you entertained the thought that China could possibly do just that, “trim these holdings” in the US? Do you know what that would do for future spending projects? Do you know what that would do to all of your precious special programs? If I were Obama, I wouldn’t press my luck with China right now.
Another observation about Obama and protectionism from The Times:
Politicians are turning protectionist on the sly, slipping manufacturers discriminatory subsidies, dressing up state aid as training, raising tariff barriers and inhibiting global capital flows by encouraging the banks that they now part-own to intervene to concentrate their lending “at home”.
Trade leadership will have to come from Britain because it will not come from the America of Barack Obama. There, “economic patriotism” is the new protectionism, prettily wrapped in stars and stripes but just as damaging to the world’s prospects of recovery as was the 1930s variety.
Is Mr Obama a protectionist? Instinctively, yes; he has never seen a free-trade deal he would actually vote for, and he talks about trade policy as a tool “to support good American jobs”. But as the election campaign wore on, he toned down his invective against foreign competition, and, because his economic team is basically free trade, the jury is still out.
The verdict, however, will be in very soon. At the behest of the most protectionist Congress in memory, Mr Obama may be about to repeat, at the dawn of his presidency, the same historic error that the much derided Herbert Hoover made just before quitting the White House in 1933. In the depths of the Great Depression, he signed into law the innocent-sounding Buy America Act. It required the US Government to use American suppliers in all public contracts. Less notorious than the Smoot-Hawley Tariff Act, “Buy America” did huge damage. It proved a disaster for US manufacturing exports and the global economy. Other governments followed suit, and it took decades to begin to reverse the closure of markets.
Good luck, Obama.
“Government spending reduces private spending”
From Jason:
Sometimes true, other times not. Definitely not the absolute Marc makes it out to be, and either way, completely irrelevant.
I love how you “find” all of these claims that I am secretly making. Where have I ever made the assertion that governmenbt spending reduces private spending? Or is this just a convenient tagline for you to tackle?
Yes it’s our cash. Yes it’s excessive spending. Yes it’s going to lead to the Democrats getting their way on the programs they would like to see better funded. But elections have consequences, my Republican friends, and more money for Planned Parenthood or the NEA may infuriate you, even make your blood boil, but it doesn’t not change the fact that federal spending will do more to create jobs, positively effect our GDP, and get us more quickly to a point when we can again focus on our national debt than a few tax cuts for millionaires (all the Republicans have suggested at this point) will ever — or could ever — do.
No, it’s actually China’s cash, and it sure is excessive. Federal spending will “positively effect our GDP?” Please explain in detail what contribution Planned Parenthood makes towards our GDP? Hopefully our GDP will fare better during Obama’s economic stimulus than it did during the Great Depression, despite all of those government jobs.
This economic stimulus is losing its momentum, and not because everyone is listening to Rush Limbaugh or because House Republicans are operating a major propaganda machine. It is because more and more Americans and economists alike are skeptical that such an expensive, pork-riddled stimulus plan will actually achieve what it is envisioned to.
Hundreds of economists have come out in condemnation of this stimulus; economic experts from universities around the United States, some of which are Nobel laureates. Martin Feldstein of Harvard, who argued for an economic stimulus last year, has been highly critical of this plan and proposes that it be reexamined and better designed.
Jason would like to make this simply a debate between the “conservative alarmists” on one side, and the experts, economists, and “reality based” on the other. But such a view of this issue is simply not supported by reality. Jason’s counterarguments consistently misrepresented my position and my views (especially on the Great Depression), and were plagued with classic political spin. He associates all detractors with his Republican foe, as if they are official representatives of the party.
Jason, I am a Republican, but I never voted for Bush. I never felt comfortable with the War in Iraq. I have ALWAYS been critical of Republican spending habits under the Bush presidency, and I have NEVER been one who ascribes to “compassionate conservatism.” I don’t like most of the House Republicans, including Boehner, and I feel that their objections to the stimulus plan are weak and not sincere; they would rather play political games than actually revive their own party. So if you want to disprove my claims, it would be wise to stop trying to discredit me by consistently associating me with “the Republicans.”
But in closing, I have little faith in this stimulus plan. It is allocating monies to the wrong areas and doesn’t even attempt to solve this country’s credit and housing crisis, which need to be addressed somehow. The stimulus is plunging this nation into more and more debt. It is protectionist. It is pork. It is not realistic in terms of timing. And the benefits that it will supposedly provide for the economy are secondary to the Democratic social agenda.
Hopefully this will be one of the last of my posts on this subject, for I am needing to get more sleep and I can’t remember what a razor looks like! And Jason, if you truly value freedom (and not just when it comes to criticizing the PATRIOT act or the War in Iraq), I suggest reading “Capitalism and Freedom” by Milton Friedman. Having free markets is the only way in which to remain truly free… if the government can’t even respect your right to a free contract, how do you expect it to respect any of your other rights? Down with this stimulus.
- Marc