David Brooks, writing in the New York Times, describes the fiscal stimulus bill making its way through congress:
The bill marked up Wednesday in the Appropriations Committee is a muddled mixture of short-term stimulus haste and long-term spending commitments. It is an unholy marriage that manages to combine the worst of each approach — rushed short-term planning with expensive long-term fiscal impact. The bill has three essential failings. First, it lacks any strategic vision. This $825 billion bill has to be passed within weeks. There’s no time for fundamental rethinking or new approaches. Instead, there’s a sloppy profusion of 152 different appropriations — off-the-shelf ideas that mostly create costlier versions of the status quo.
…Eleven of the programs in the bill account for the vast majority of the actual job creation. The rest may be worthy or not, but they have little to do with stimulus. The total package is so diffuse, it costs $223,000 to create a single job.
Second, the bill has relatively modest short-term impact. Many parts don’t even pretend to be stimulus measures, like funding for basic research, or special ed programs. But even the parts of the bill that aim to stimulate will have modest near-term impact. A study by the Congressional Budget Office found that less than half of the money for infrastructure and discretionary programs would be spent by Oct. 1, 2010.
According to The Washington Post, of the $30 billion devoted to highway spending, only $4 billion will be spent in the next two years. Less than $3 billion of the $18.5 billion for renewable energy and less than half the financing for school construction will be spent by 2011.
The Appropriations Committee chairman, David Obey, fulminated against the C.B.O. Wednesday, and the uselessness of economists in general, but he had no answer to these findings.
Read the full article here. It looks like Democrats couldn’t even wait a month to start the big spending.
HP, are you under the impression that big spending has just now “started”? It’s comments like these that perpetuate the myth that Democrats and Republicans are somehow different on this issue. I know you voted for Barr, and I’m happy about that, but you still seem stuck with this mentality that Democrats are big spenders and Republicans aren’t. If the last 8 years hasn’t woken you up on this issue, what will? Remember the $700 billion bailout, which Bush pushed and McCain supported? Did you notice how our actual deficit doubled from $5 trillion to $10 trillion under Bush? I’m just as much against Obama’s additional bailout as anybody, but don’t pretend Republicans are any different.
We should have figured it out after Reagan and Bush. I used to buy off on the excuse that this was a necessary evil in order to fight the greater threat of communism. I no longer believe that. Reagan was very much a big spender, as was Bush Sr. Bush Jr ought to have simply cemented in my mind what I should have already known. But it did take Bush for me to finally realize this fact. You need to wake up to this fact as well.
Could have picked a better column for the above mentioned reasons….
Things I oppose:
1. The wall street bailout.
2. People who insist on making political points from it, when it’s obviously a bi-partisan effort. (I’m looking at you, HP)
“Fiscal spending spree” seems to describe the work of every session of Congress and presidental term since I started voting in 1976. The only discernible differences are the differences in length and size of the sprees. Hmmm…maybe we are down to the “size matters” question…heh…
Sorry for the late reply…I caught an ugly cold this weekend and have been out of it for a few days. Just catching up on stuff now.
Jon,
For the millionth time, let me restate that I do not believe the GOP to be the “in a vacuum fiscal party”. In case I have not made myself clear in the past, let me restate it here: I believe the GOP to be the fiscal party only as far as it is compared to the Democratic party. Please, please, write it down. Save it. Memorize it. It gets tiring having to repeat it.
In other words, for every “big spending” Bush did (ie, NCLB, Prescription drug plan, Bailout, etc) Democrats wanted more spending, not less. Now you may say this difference is insignificant, and that is a valid point, but my point here is that there is a difference.
Its really no different than voting Democrat because you hate wars. Regarding wars, the two really are not that different. But on the margin, one can make the argument that Democrats are less inclined to go to war than Republicans are. And some people vote based on that difference, however small it may be. My emphasis here is on the difference regarding spending. The difference may be small, but its a difference that some people choose to vote on.
LaurenceB,
To be honest, I don’t know if I oppose all bailouts. One can make good arguments on both sides. Economists themselves dont agree on the solution, see here. Sure, my instincts tell me to be against them, but really, in this case I am not sure if I should trust my instincts. Nobody wants to go through another great depression.
With that said, I wouldn’t have attacked the proposed fiscal spending program if it, you know, attempted to be a “fiscal stimulus”. But this is - assuming of course David Brooks is factually reporting here - not so. This is a fiscal stimulus in name only, with the intention of giving every Democratic constituency a piece of the taxpayer pie.
Fair enough, HP, but I still think your statements do imply there is a noteworthy difference between Democrats and Republicans. I’ll grant they are different. It’s almost like saying there can be no tie in baseball. He was either safe at first base or he was out. Super high resolution cameras can show us which was true. That’s what is necessary to recognize the difference in spending between Republicans and Democrats. A super high resolution camera. By the naked eye it looks like a tie.
Also note that a lot of the supposed opposition to spending from Republicans is probably intended to whip up people like yourself to cheer lead as if Republicans are better, when really at the end of the day these Republicans may not really care that much. But the effect is that this creates the appearance of diversity in Washington.
Jon,
But then one can say the same thing regarding wars. Obama’s plan on withdrawing troops from Iraq is really no different - maybe a couple months, at most - than Bush’s. But people choose to vote on that difference.
Regarding this “fiscal stimulus”, there is a clear difference: Republicans emphasize tax cuts that go directly to the taxpayer to be used at his/her choosing. Democrats emphasize handing out tax payer money to every Democratic constituency in the last 20 years. In the end it may all be politics but its still a difference.
Couldn’t agree more on your war point.
On the stimulus, yeah, that’s a difference. Is it a difference that is going to lead me to cheer lead for Republicans? No. The rich pay too much in taxes, but so do the poor. Sure, the income tax is aggressive. But sales taxes, payroll taxes, and the inflation tax are regressive. Who pays more as a percentage? Don’t really know, but it’s not as lopsided as it appears when you only consider income tax, as Sean Hannity types like to do. The poor are getting screwed with government as well. Keep in mind also that rich special interest groups are the ones that persuade Washington to go to war, to funnel money to favored groups, etc. These are top 1% types benefiting from that, not poor people. The poor don’t have lobbyists.
My point is that however you look at it, tax cuts are more fiscally conservative than a spending program that could go on indefinitely.
In addition, tax cuts, which can be made immediately available, are much more of a fiscal stimulus than spending that most of which will not even be seen until years later, see here.
I think thats worth blogging about.
The tax cuts in this stimulus bill will be paid for by borrowed money that will eventually need to be repaid with interest. From a fiscal perspective, that is no different than the spending in the bill.
Someday, this knee-jerk enthusiasm the Republicans have for tax cuts has got to come to terms with that reality. Tax cuts without spending cuts (such as the ones in the stimulus bill), are equivalent to increasing government spending. From the taxpayer point of view, there is no difference.
Now, you claim that tax cuts will stimulate the economy better than creating jobs through government spending. That may be true - its a complicated question, and I don’t claim to know. But if it is true, then it follows logically that the eventual cost of the tax cuts (which will someday have to re-paid plus interest with tax money from Americans), will be a drag on the economy. Because taxes are bad. Indeed, if we accept your premise (taxes bad for economy, tax cuts good), then the eventual damage to the economy of these tax cuts will be greater than the good they do now - since they will need to be re-paid with interest by taxes.
This is a very long way of making my point. Which is: Tax cuts are not free money.
Bush had a plan for withdrawing troops? And his date was just a few months beyond Obama’s? Can you point me to it? What was his date?
Because I could have sworn that he (and all the Republican candidates) were dead set against setting time lines.
LaurenceB,
Regarding your first point, I agree: tax cuts without a reduction in spending is the same as spending. However, from a “fiscal stimulus” point of view, tax cuts are superior because they can be implemented immediately. On the other hand, spending, especially spending done right, can take years to go into affect. For example, the current spending part of the fiscal stimulus has about 8% of it going into affect in 2009, see here.
Second, if were going to be “spending” tax payers money, I consider it much more efficient to do so by letting them spend it how they want - instead of washington. So in this sense also tax cuts are different than spending.
Regarding the Iraq troop withdraw, see here, here and here. I think a year and a half is about the same time, within months, that Bush would have started significantly reducing troops as well, especially after the success of the surge. Either way, so far with Obama regarding Guantanamo and Iraq, its all talk. He promises to do XYZ within a year+…but we all know how valuable politician promises are, dont we? Wait and see is what I say.
Ah, I see now what you were referring to.
I think it would be much more accurate to call that “Maliki’s plan” than “Bush’s plan”.
Jon, history shows:
Abe Lincoln (R) Civil War
Woodrow Wilson (D) WWI
Franklin Roosevelt (D) WWII
Lyndon Johnson (D) Vietnam
Harry Truman (D)& Dwight Eisenhower (R) Korean War
(NOTE: Truman started it, Eisenhower inherited it)
George Bush (R) Middle East (Not wars, but occupations)
Looks like four for the (D) and one for (R), since Korea was started under Truman and the Middle East is an occupation, not a war.
Where is the evidence for the TAX CUTS under the last 8 years of Bush? Please show me some solid evidence that tax cuts under the Bush administration stimulated anything?
Cause the rationale was used for everything
to stimulate, to go to war, to bounce back from 911…etc…
Easy. See here, here, here, here, here, here and here. Pay special attention to the picture in the WSJ article from the last link (find it here). As they say, a picture is worth a thousand words. I could provide more links but that should be enough.
With regard to the fiscal stimulus, lets look at the evidence of tax cuts vs. spending. Take Obama’s Chief economic advisor’s word for it.
Christina Romer, who along with Ben Bernanke, is considered the foremost authority on recessions, argues that, “A dollar of tax cuts raises GDP by about three dollars.” This compared to a multiplier of between 1 and 1.4 for fiscal spending. In other words, tax cuts carry more than double the firepower as spending.
Then take the recent research of University Of Chicago economist Harald Uhlig who argues that:
The study can be found here.
Or take the study by MIT economist and now chief economist at the IMF Olivier Blanchard and Università Bocconi economist Roberto Perotti who find:
In addition to all of the above, you also have economists Mark Bils of the University of Rochester and Pete Klenow of Stanford, see here. They make the same argument that Harvard University economist Ed Glaesar made here.
There is also professor of economics at Stanford University John Taylor, who argues for a permanent tax cut as the best fiscal stimulus, see here.
Thanks for asking.
So now going from theory to practice—Why is ish all f’ed up right now, if according to the theory(ies) you espouse and under so much stimulus over the last 8 years by the unprecedented Tax cuts?
Just a simple question….
First, let me point out that my links above were more experience than theory. In other words, they took past “fiscal stimulus” and past economic recessions, in the US and around the world, and studied what worked and what didn’t. Tax cuts seemed to do better.
With that said, to answer your question of what went wrong, it’s not a simple answer but if you have the time, I suggest you read this post. It gives the best overview I have seen to date. Well worth the read.
One more point Gerardo, if you are still reading this. Do me a favor and read this post by very liberal Democrat Berkeley economist Brad DeLong. After reading it, check out this fact check response by moderately conservative Harvard economist Greg Mankiw. You tell me: who is intentionally misleading on this issue? You know my answer.