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The state of the economic stimulus package
Posted: 05 February 2009 10:47 AM   [ Ignore ]
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Polls show that the economic stimulus package is rapidly declining in terms of public popularity (35 percent or so last I checked).

Congress set forth a package with less reliance on tax cuts than the one proposed by President Obama.

Republicans objected to the failure to emphasize tax cuts and the presence of considerable spending in the that they claim will not produce short-term economic stimulus.  No Republican voted for the bill in the House.

Democratic lawmakers do appear to have loaded the bill with the normal types of government spending that the party likes, so that it becomes difficult to distinguish between normal government spending and economic stimulus.

Who’s right, or are all wrong?

Did Obama exhibit weakness in letting his party shoot through a bill that failed the test of bipartisanship?
Are the Republicans being so finicky about the bill that they are mostly to blame?
Did the Democatic lawmakers in Congress send a message to Obama that they are the ones really in charge of the country’s direction (implications for bipartisanship?).

What should be done to right the process?

This is a big issue for all, not just U.S. citizens, for the U.S. economy touches nearly every part of the globe in a big way.

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Posted: 05 February 2009 01:45 PM   [ Ignore ]   [ # 1 ]
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Well, for starters the media is wrong for all the talk of failure three weeks into the term. It will be years before we see the extent to which the stimulus approach was the right decision, but the media and most Americans have attention spans and expectations inconsistent with reality.

As for the differences betweent the parties, it’s always tough to separate partisanship from ideology. The Dems emphasize government spending and the Repubs tax cuts because those are the dominant ideological biases in each party. I, of course, am in the Dem camp, but that’s an old argument. Obama recently said the Republican objections, “echo the very same failed economic theories that led us into this crisis in the first place, the notion that tax cuts alone will solve all our problems,” and I absolutely agree. There certainly has been some “payback” posturing by the Dems, which is unfortunate, and the Republicans are already working towards making everything Obama does look like a failure for the next election, so there’s plenty of the usual political BS. Still, I think there are also honest ideological differences behind a lot of the disagreement, and it’s appropriate that each side promote their approach and impede their opponents’ when the issue is so important.

That said, there doesn’t seem to be as much spirit for working together to solve problems in the legislative branch as I’d like to zsee. The Dems are utilizing their majority to push through their preferred package because they won enough seats that they can. They could, I’m sure, have made more effort to get some Republicans on board. Obama is certainly making such an effort in the Senate. And the Republicans are refusing to acknowledge that Obama won on a platform that differs from the economic theories they espouse and have implemented, so they are refusing to acknowledge that old arguments that cutting taxes is sufficient to stimulate business growth and job creation at a level that will dig us out of this mess aren’t washing with many Americans anymore.

So there’s probably both honest differences of opinion and traditional partisanship at work. And despite a large electoral majority for Obama and the shift in seats towards Dems in the legislature, Obama didn’t win such a huge popular vote margin that he can afford to be as solidly liberal economically as I’d like him to be. So there will have to be compromises, and that means nobody will be entirely happy. The key is, as I said at the outset, waiting an appropriate interval before judging the results, which is painfully difficult for most people. I think Obama is doing what he can and should to cast the effort in terms of Americans with real differences working to solve the problem in a responsible way despite their differences. I think Congress (both sides, and the House more than the Senate) could do a better job than they are of following that leadership.

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Posted: 05 February 2009 07:20 PM   [ Ignore ]   [ # 2 ]
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mckenzievmd - 05 February 2009 01:45 PM

..... The Dems emphasize government spending .....

[ What is Congress Stimulating—column in Thurs. WSJ ]

what is most striking is how much “stimulus” money is being spent on the government’s own infrastructure. This bill isn’t economic stimulus. It’s self-stimulus.

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Posted: 05 February 2009 09:41 PM   [ Ignore ]   [ # 3 ]
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Jackson - 05 February 2009 07:20 PM
mckenzievmd - 05 February 2009 01:45 PM

..... The Dems emphasize government spending .....

[ What is Congress Stimulating—column in Thurs. WSJ ]

what is most striking is how much “stimulus” money is being spent on the government’s own infrastructure. This bill isn’t economic stimulus. It’s self-stimulus.


I think the bill could be a lot better but the article complains about building infrastructure which isn’t a bad thing it will at least create construction jobs. Arguing an ideological point for less government is not what i consider a legitimate argument unless it can be proven to be ineffective. The total amount listed was about 2% of the bills budget so it is a little nit-picky for an economic emergency. Personally I think it would be nice for the bill to be used almost completely for a middle class tax break, that and restructuring and fixing our credit system.

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Posted: 05 February 2009 11:32 PM   [ Ignore ]   [ # 4 ]
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Jackson,

The article you provided assumes that the spending it is discussing is clearly, self-evidently not a good thing for the economy. That’s just knee-jerk anti-governmentism, not really an argument against the spending. If the government spends a sum of money improving the energy efficiency of its buildings, for example, the long-term effect is reduced cost and the short-term effect is creation of jobs in an industry that ultimately reduces costs and energy use for its customers, including those in the private sector. How is this not an appropriate way to both stimulate in the short-term and redirect, in the long-term, the economy?

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Posted: 05 February 2009 11:48 PM   [ Ignore ]   [ # 5 ]
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mckenzievmd - 05 February 2009 01:45 PM

The key is, as I said at the outset, waiting an appropriate interval before judging the results, which is painfully difficult for most people. I think Obama is doing what he can and should to cast the effort in terms of Americans with real differences working to solve the problem in a responsible way despite their differences. I think Congress (both sides, and the House more than the Senate) could do a better job than they are of following that leadership.

I have quite a few disagreements of various sorts with your response, but I want to focus on the bill as it is and what you think should be done.

Do you view the bill as a reasonably crafted remedy to our present economic ills? 

If yes, what should be done to get it implemented, taking into account the apparently differing approaches to bipartisanship being taken by Obama and the Democratic leaders in Congress?

If no, same question.  What should be done about it?


I see a hint from you that the stimulus package can only be judged in hindsight based on what we suppose are its effects.  But even Keynesian economists agree that the free market is likely to adjust itself even if it does so painfully.  So a good result isn’t necessarily caused by the stimulus package.  Do you think there are means of judging the stimulus package prior to waiting for results?  Or do you see any government spending pretty much as stimulating as any other?


My two cents, just to stir that pot a tad:  Some spending is much more likely to stimulate the economy than other types (same goes for tax cuts).  Spending on infrastructure is good, if it feeds into what is known as a multiplier effect in economics.  The Eisenhower initiative to establish the interstate highway system, for example, gave us something we didn’t really have before (an efficient interstate highway system).  It fed growth via the trucking and tourism industries, among other things.  That despite its purpose in permitting the military to move about the country as part of Cold War readiness.  Fixing a bridge doesn’t do the same thing (we’ve already got a functional bridge in most cases) and even building a bridge doesn’t necessarily create much of a multiplier effect depending on its location.

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Posted: 06 February 2009 03:49 AM   [ Ignore ]   [ # 6 ]
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danlhinz - 05 February 2009 09:41 PM

The total amount listed was about 2% of the bills budget so it is a little nit-picky for an economic emergency.

I agree that if the hose has a few leaks and still puts out the fire, everyone will be happy. 

I like the idea which has been proposed to put it directly into reducing the Social Security tax to individuals and companies—it doesn’t have a lot of bureauracy/overhead and would get money into the system quickly.  I haven’t read a lot about it though.

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Posted: 06 February 2009 03:57 AM   [ Ignore ]   [ # 7 ]
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mckenzievmd - 05 February 2009 11:32 PM

Jackson,

The article you provided assumes that the spending it is discussing is clearly, self-evidently not a good thing for the economy. That’s just knee-jerk anti-governmentism, not really an argument against the spending. If the government spends a sum of money improving the energy efficiency of its buildings, for example, the long-term effect is reduced cost and the short-term effect is creation of jobs in an industry that ultimately reduces costs and energy use for its customers, including those in the private sector. How is this not an appropriate way to both stimulate in the short-term and redirect, in the long-term, the economy?

Brennan you make some good points.  I didn’t read this as knee-jerk criticism, I was reading it as a discussion of some of the specifics.

What part of the plan do you like the best?

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Posted: 06 February 2009 06:59 AM   [ Ignore ]   [ # 8 ]
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What I find problematic is that the rich people are running out of ideas and means to get richer. I really don’t see how a stimulus package is going to help them to get richer; the economy is not a perpetual motion machine. In my opinion a war is imminent.

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Posted: 06 February 2009 07:51 AM   [ Ignore ]   [ # 9 ]
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Some of the best writing about this package comes from Paul Krugman, and he’s been writing about it a lot, both in his columns and his blog.

Columns HERE, blog posts HERE.

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Posted: 06 February 2009 08:29 AM   [ Ignore ]   [ # 10 ]
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Does Krugman know what to do to fix the economy?

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Posted: 06 February 2009 08:32 AM   [ Ignore ]   [ # 11 ]
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George - 06 February 2009 08:29 AM

Does Krugman know what to do to fix the economy?

Well, that’s something of a loaded question. He has very firm ideas, yes.

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Posted: 06 February 2009 08:54 AM   [ Ignore ]   [ # 12 ]
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Anybody have a link to the details of the plan as passed in the house? I’m able to find a lot of commentary and generalizations but not specifics.

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Posted: 06 February 2009 09:10 AM   [ Ignore ]   [ # 13 ]
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mckenzievmd - 06 February 2009 08:54 AM

Anybody have a link to the details of the plan as passed in the house? I’m able to find a lot of commentary and generalizations but not specifics.

Summary of the bill:
http://appropriations.house.gov/pdf/PressSummary01-15-09.pdf

And this looks like the full deal:
http://appropriations.house.gov/pdf/RecoveryBill01-15-09.pdf

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Posted: 06 February 2009 10:15 AM   [ Ignore ]   [ # 14 ]
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Thanks Bryan.


I thinkk Obama claimed during the election to be interested in both stimulating the economy in the short-term and re-making many aspects of government and the economy over the longer term. The latter goal will, of course, be objected to on principle by conservatives, but I hesitate to get into the stale debates about the overall role of government, regulation of markets, progressive taxation, social safety nets, and all the right/left stuff because I have no hope of significant changes in opinion on these topics in anyone already firmly committed to their position, and I have no new arguments. I support the goals of technological modernization, chanegs in the nagture of the energy base, tigher regulation of financial markets, greater government involvement in healthcare and such social welfare issues, but I understand other members don’t and I have limited interest in those debates.

As far as what I like about the bill, I particularly like the energy and science research investments, and I support much of the infrastructure investment. There are bits and pieces I am less convinced are useful (digital television conversion assitence and omse of the block grants to state and local governments). But I also think any such bill is going to have something for everyone to love and to hate. The general tenor of the bill is consistent with Obama’s campaign rhetoric (which did, after all, convince a majority to elect him) and with my vision of the role of government generally and in the current crisis. The perfect shouldn’t be the enemy of the good, and I think it’s basically a good bill.

And while I agree with Krugman about most things, I think he takes an unrealistic stand on the issue of bipartisanship. True, Obama won the election and the policies of the preceding administration were widely disliked. And, true, the Dems won a larger majority because they were able to convince their constituencies that current policy was wrong and that they would make changes. So the President and the Dems certainly have a good foundation for making sweeping changes in government. Still, the country is by no means unified behind a liberal economic or social policy, and compromises will have to be made that people like me don’t like. So it goes. I certainly don’t think the Republicans are purely interested in “trimming the fat,” though. I think they’re stuck on the “big government is bad” rhetoric that has been so successful plitically (though I would argue not in real terms). They’s proven themselves every bit as pork friendly as the Dems despite they’re rhetoric, and they’re standing on the rubble their policies have created, so the rhetoric is not persuasive IMO.

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Posted: 07 February 2009 11:52 AM   [ Ignore ]   [ # 15 ]
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  * Tax cuts ($275 billion):
      o Payroll tax cuts ($500 for each individual, $1000 for couples)
      o $2500 tax credit for higher education
      o $7500 non-repayable tax credit for first-time home buyers (for houses bought until July 1)

  * Education investments ($141.6 billion):
      o $79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities distributed through existing state and federal formulas, $15 billion to states as bonus grants as a reward for meeting key performance measures, and $25 billion to states for other high priority needs such as public safety and other critical services, which may include education
      o $41 billion to local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion)
      o $15.6 billion to increase the Pell Grant by $500
      o $6 billion for higher education modernization

  * Health care investments ($112.1 billion):
      o $87 billion for a temporary increase in the Medicaid matching rate for the states
      o $20 billion for health information technology, including electronic medical records to prevent medical mistakes, provide better care to patients and introduce cost-saving efficiencies
      o $4.1 billion to provide for preventative care and to evaluate the most effective healthcare treatments.

  * Welfare/unemployment ($102 billion):
      o $43 billion for unemployment benefits and job training
      o $39 billion for short-term Medicaid insurance and Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) subsidy
      o $20 billion for the Food Stamp Program

  * Infrastructure investments ($90 billion):
      o $31 billion to modernize federal and other public infrastructure with investments that lead to long-term energy cost savings
      o $30 billion for highway construction
      o $19 billion for clean water, flood control, and environmental restoration investments
      o $10 billion for transit and rail to reduce traffic congestion and gas consumption

  * Energy investments ($58 billion):
      o $32 billion funding for an electric smart grid
      o $20 billion for renewable energy tax cuts
      o $6 billion for weatherizing modest-income homes

  * Telecommunications investments
      o $650 million for Digital TV-to-analog converter box coupons and Digital TV education.
      o $350 million for a broadband data collection effort to allow states to track—and specifically, map—the availability of broadband access
      o $2.85 billion to implement a wireless and broadband deployment grants program, with $1 billion of that set going to wireless.[6]

Stimulus_Act_of_2009

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