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Saturday, January 31, 2009

Jobs not pork

President Obama's so-called Stimulus bill passed by the House is supposed to "jump start" the economy and to create or preserve jobs. Strangely, however, the bill as written will do neither.

There are certain clear requirements for federal actions which will stimulate the ecomony. First, the federal expenditures have to be made quickly. Additional federal spending in the next few months will have a positive effect on economic activity. Spending in 2010 and 2011 will not help get the economy moving. Strangely, the vast majority of the President's stimulus spending will not come until next year and thereafter. It's as if the patient goes to the doctor who prescribes an antibiotic but says not to take it for at least a year. Even an idiot would know that this would not work.

Second, federal expenditures have to be directed towards increasing sustained economic activity and, where possible, creating jobs. Much of the President's package does neither. For example, hundreds of millions of dollars directed at the treatment of STD's will not increase economic activity in any way. Nor will these funds help those who are suffering temporarily from the effects of the recession. This is just a typical Democrat social program which should be looked at separately and not passed under the cover that it is somehow a stimulus measure. The same is true of the family planning money that was removed from the bill when it was brought to light. Also, the massive health insurance sections of the bill such as the five year federal subsidy for COBRA fall into this category. It may well be that the funding of COBRA is a salutory measure, but it has nothing at all to do with stimulating the economy. Its inclusion is simply another dishonest move by the Democrats to slip their pet programs through under cover of the purported stimulus package.

Even the public works projects funded by the bill do not meet the needs of the economy. Large public works projects cannot simply be started on short notice. It takes years of design and planning before the work begins. As a result, the bill will fund billions of unnecessary projects -- those that were already designed but were put on hold since the need for them was not worth the expenditure. The funds will also pay for projects which were to have gone ahead anyway, but instead of state and local funds paying for them, there will be federal money used. Again, this is not going to stimulate the economy.

Third, even the tax cuts will not help. Tax cuts could easily be aimed at creating jobs, but they are not. How hard would it be to include a meaning ful investment tax credit in the bill? After all, business investment is the most significant driver of new jobs. A new facility or piece of equipment requires new employees to run it. Alternatively, it would also be easy to reduce the corporate tax rates. During the fall debates, Obama agreed with McCain that US corporate tax rates were too high and were reducing US economic growth. So now, it should be a no-brainer to reduce those rates.

Fourth, the enormous growth in federal spending and the defecit while not doing much to help increase economic activity puts the country at significant risk of major inflation once the recession ends. The money supply has increased more in the last year than in the twenty preceeding years combined, all due to the government. Throwing another trillion dollars of defecit spending on top of that will just make matters that much worse. We may well see inflation like the Carter years when prices rose inexorably and quickly. Sure, this may help with the federal deficit since the US will be able to pay back the debt with dollars of much reduced value. The inflation, however, will basically wipe out the retirment savings of most Americans. Those who live on fixed incomes will rapidly be impoverished. the social security problem will move on to disaster status and then get worse. To make matters worse, the capital available from private sources, the life blood of our economic system, will also be worth less. In other words, this misguided "stimulus" package will reduce the ability of the economy to grow in the future.

It seems amazing to me that after ten days in office, the Obama Administration is poised to get passed a bill which will likely spell doom for the economy for a long time to come. Shouldn't the American people expect some sort of rational action from the White House. Where are the people who will explain the need for the programs that have nothing to do with the economy. Where are the economists who can explain why this plan will help. Who is minding the Store? Obama still has time to correct these problems and to change the stimulus package into one that will accomplish something beneficial for the economy. Absent quick action by the President, however, things are going to get a lot worse here in the US.

Don't pay any attention to the scandal behind the curtain

In December, I was wondering whether the return of the Democrats to the White House would bring back the scandal a day that we used to have with the Clintons. It looks like it has. and, the reaction from the media and the new administration is also very Clintonian.

I just finished reading about the latest "honest mistake" by a new appointee to the Obama Cabinet. First we had the Treasury Secretary who "overlooked" the fact that he had to pay self employment tax for four years. He overlooked the quarterly memos from his employer, the International Monetary Fund, that explained that all US citizens employed by IMF had to pay that tax. He also overlooked the annual check that he received from the IMF to pay the employers' portion of that tax. Indeed, he overlooked the fact that this money from the IMF came in each case with a memo explaining that the funds were intended to be sent on to the IRS as part of the total tax payment. He also overlooked the fact that after getting caught by the IRS and having to pay these taxes for the years for which he was being audited, he also had the same problem for two other years which he ignored. Indeed, he did not even think about this problem; he just overlooked it. Of course, once he was nominated to be Secretary of the Treasury, he suddenly remembered this previously overlooked problem and paid the tax just days before his confirmation hearings. How could anyone doubt that this was an honest mistake.

Now we have Tom Daschle who also "overlooked" hundreds of thousands of dollars of taxes due to the US Governement. Daschle is supposed to be Secretary of HHS. In that role, he will not run the IRS like Geitner, rather, he will head the agency that is tasked with preventing fraud from those who deal with the government regarding most of the federal benefit programs. It warms my heart to know that the head of that department is someone who could "overlook" all of that income on which he was supposed to pay taxes. I am also encouraged that Daschle was able to leave the Senate and honor his commitment (AND THE LAW) not to become a lobbyist attempting to influence his former Senate colleagues. I am sure that it is a mere coincidence the Dashle's wife became a lobbyist who dealt with all of the Senators. Those who think that this is a problem obviously are mean spirited and untrusting; they probably are those who do not overlook the law, but actually attempt to follow it. I am sure that if there were anything wrong with Mrs. Daschle becomming a lobbyist, the Senate leadership under Harry Reid (who has three sons who are lobbyists but who never mention their father during their lobbying activities) will block Daschle's nomination.

I do not want to slight President Obama in this post. After all, he has managed to overlook his commitment that lobbyists would not be appointed to his administration. First, the number two guy at Treasury and now another one at Defense have managed to have their years of emplyment as lobbyists overlooked. I bet it was just an honest mistake.

Nor do I want to forget Bill Richardson. He was appointed Commerce Secretary only to have to withdraw his name since he and the President managed to "overlook" the fact that Richardson was involved with an on-going corruption investigation in New Mexico. I guess the prosecutors are checking to see if Richardson had just made a dishonest mistake.

Since posts cannot exceed fifty pages, I also will not mention Hillary and Bill, the poster children for "overlooking" ethical and legal requirements.

The point here is this: Obama has been in office less than two weeks and the drumbeat of scandal has not just started, but rather has been booming. The media, however, has been silent about this and the Senate has already approved Geitner as Secretary of Treasury.

In truth, the question seems to be this -- what is the difference between the Blagojevich administration in Illinois and the Obama Administration in Washington? Answer -- just the names.

It has been a while

I have not been posting for quite some time due to a combination of post election ennui and personal matters which have taken up most of my time. Hopefully, I will now have time to resume this blog on a much more regular basis.