The Stimulus Is A Failure

[Vanguard]

Keynes got parts of Keynesianism wrong. Why should Obama repeat Keynes' mistakes?

[Dinner]

http://www.msnbc.msn.com/id/26315908/vp/35248987#35322522

Republican anti stimulus hypocrisy where they trash the stimulus bill, voted no, and then went home to praise its effect in their home district and the jobs it created. The lies and double talk is just outrageous.

http://thinkprogress.org/touting-recovery-opposed/

Mean while, The Washington Times bashes the GOP for bashing the stimulus and then trying to cash in on the stimulus's success.

http://www.washingtontimes.com/news/2010/feb/09/stimulus-foes-see-value-in-seeking-cash/

Sen. Christopher S. Bond regularly railed against President Obama's economic stimulus plan as irresponsible spending that would drive up the national debt. But behind the scenes, the Missouri Republican quietly sought more than $50 million from a federal agency for two projects in his state.
Mr. Bond was not alone. More than a dozen Republican lawmakers, while denouncing the stimulus to the media and their constituents, privately sent letters to just one of the federal government's many agencies seeking stimulus money for home-state pork projects.

The letters to the U.S. Department of Agriculture (USDA), obtained through the Freedom of Information Act, expose the gulf between lawmakers' public criticism of the overall stimulus package and their private lobbying for projects close to home.

Rep. Joe Wilson, South Carolina Republican who became famous after yelling, "You lie," during Mr. Obama's addresses to Congress in September, voted against the stimulus. Nonetheless, Mr. Wilson elbowed his way into the rush for federal stimulus cash in a letter he sent to Mr. Vilsack on behalf of a foundation seeking funding.

[Dinner]

It just goes on and on. The Republicans lie, trash the stimulus, voted against it, and then try to claim credit for the jobs created in their home districts. How anyone can stomach these lies and hypocrisy is beyond me.

[Dinner]

Even right of center Politico.com blasts the hypocrites calling it the GOP's "cash and trash strategy".

They’re plying reporters with polls raising doubts about the stimulus, demanding that Democrats say whether they still support the stimulus and declaring, as Minority Whip Eric Cantor did on the “Today” show Wednesday, that “the stimulus hasn’t worked.”




There’s just one catch: According to a tally kept by the White House, at least 65 congressional Republicans have touted the stimulus dollars that have flowed into their own states.




Georgia Rep. Phil Gingrey is one of them.

Gingrey calls the stimulus a “boondoggle” and a “dismal failure” — and like all House Republicans, he voted against it last year. But when Cedartown, Ga., got $625,000 in stimulus funds to help build new sidewalks, Gingrey made sure he was on hand to present the city with an oversize check signed by “Uncle Sam.”

http://www.politico.com/news/stories/0110/32118.html

[Drake Tungsten]

I'm shocked that politicians would denounce a pork-laden bill to the national press while simultaneously touting the pork they got for their own home districts. Who can even imagine such a thing?

Anyway, it's good to know that Oerdin is completely fine with the fact that the "stimulus" bill was really just a gargantuan collection of pork barrel projects.

[Drake Tungsten]

Just look at all the stimulating that's going on!

New Wind Farms in the U.S. Do Not Bring Jobs

Despite all the talk of green jobs, the overwhelming majority of stimulus money spent on wind power has gone to foreign companies, according to a new report by the Investigative Reporting Workshop at the American University's School of Communication in Washington, D.C.

Nearly $2 billion in money from the American Recovery and Reinvestment Act has been spent on wind power, funding the creation of enough new wind farms to power 2.4 million homes over the past year. But the study found that nearly 80 percent of that money has gone to foreign manufacturers of wind turbines.

So Where Are the Jobs?

"Most of the jobs are going overseas," said Russ Choma at the Investigative Reporting Workshop. He analyzed which foreign firms had accepted the most stimulus money. "According to our estimates, about 6,000 jobs have been created overseas, and maybe a couple hundred have been created in the U.S."

http://abcnews.go.com/WN/wind-power-equal-job-power/story?id=9759949

[Whoha]

Why surely this is all part of Obama's plan to double our exports in the next 5 years. They will certainly start buying our goods and services now that they've been stimulused.

[ricketyclik]

I thought this was a good interview that corrects a lot of common misperceptions.

How Obama got Keynes wrong

NEW YORK (Fortune) -- The Obama White House likes to say that the theories of John Maynard Keynes form the foundation for its fiscal policies. Most notably, it draws upon the legendary British economist's idea of spending big to pull out of a recession.

But one economist says the administration has gotten Keynes only half right. Allan Meltzer of Carnegie Mellon is one of the most influential monetarists of the past 50 years. He has served in the Department of the Treasury under President Kennedy and on the Council of Economic Advisors during the Reagan Administration. He also authored the book, Keynes's Monetary Theory: A Different Interpretation.

While the Obama team is laying out huge sums of money, Meltzer says it's neglecting a key part of Keynes' plan: You can't run up a debt without a way to cover it.

Meltzer recently sat down with Fortune editor-at-large Shawn Tully. Below are edited excerpts from their conversation.

If Keynes were alive today, what would he think of President Obama's fiscal policies?

He would roll over in his grave if he could see the things being done in his name. Keynes was opposed to large structural deficits. He thought that they chilled rather than stimulated the economy. It's true that we're stuck with large deficits now. The goal should be to reduce them, not to take on new spending that makes them worse.

The structural deficits were in place before Obama took office.

Today, deficits are getting bigger and bigger with no plan to significantly lower them. Keynes understood what the current administration doesn't understand that the proper policy in a democracy recognizes that today's increase in debt must be paid in the future.

We paid down wartime deficits. Now we have continuous deficits. We used to have a rule people believed in, balanced budgets. And now that's gone.

Didn't Keynes advocate temporary deficit spending in a recession?

Keynes wanted deficits to be cyclical and temporary. He wouldn't have been in favor of efforts to raise tax rates in a recession to eliminate deficits. He viewed that as suicidal.

I'm uncertain of what taxes were raised, but it certainly raised eyebrows internationally when W Bush lowered taxes for on the wealthy just before going into a hugely expensive war. Perhaps Obama was addressing this mistake?

He was opposed to the idea that governments should balance the budget during a downturn, and advocated running short-term deficits to spur the economy.

The type of stimulus he advocated was very specific. He said it should be geared towards increasing private investment. He viewed private investment, as opposed to big government spending, as the source of durable job creation. He also said that the deficits should be self-liquidating, so that the increased economic activity caused by the stimulus inevitably generated a combination of extra tax revenues and lower unemployment payments. With higher revenues and lower outlays, the deficit would disappear.

The Obama administration's main objective, in the name of Keynes, is boosting consumption. That sounds very different from the focus on investment that you say Keynes advocated.

Keynes didn't favor at any time that I know spending to increase consumption. He didn't want that, and in fact he believed that was taken care of by the marketplace.

Keynes wanted to increase employment by smoothing the amount of investment through the up and down parts of the business cycle. He knew that recessions cause a decline in investment, and that the fall in investment caused unemployment to rise. So he wanted the government to stabilize investment through a recession.

But isn't all private investment's return (and thus stimulus) derived from consumption?

What specific policies did Keynes advocate for smoothing investment?

Keynes is very vague on the subject. He believed that the government should plan and direct investment, but not nationalize it. He talked about how well utilities were run under state regulation in Britain. Keynes wanted to apply that model to more of the economy. He thought government planning of investment was the best way to reduce risk for private companies and lower interest rates to spur investment.

Did Keynes champion tax cuts or government spending increases in a recession?

Again, he was extremely vague. On spending, he did say that deficits should be temporary and self-liquidating. He clearly did not advocate long-term spending in excess of revenues, since that causes structural deficits.

But if you're already in a structural deficit (not of your making) and you want to stimulate investment/consumption, where do you have to go?

Nor did he specifically recommend tax reductions for individuals or companies. Those types of cuts, however, are an obvious way to achieve his goal of boosting investment in a recession. And it's been used with great success by his Keynesian disciples. For example, the Kennedy Administration tax cuts were championed by Keynesian economists, and proved very successful at raising investment.

And one of the leading Keynesians, Franco Modigliani, developed a theory of consumption stating that temporary tax cuts are mainly saved or used to reduce debt. Milton Friedman, the ultimate champion of free markets, independently developed an alternative model that came to the same conclusion. The temporary reductions under Carter, George W. Bush and Obama were all failures, since people spend more only when they're confident their take home pay will rise permanently.

This is standard economic theory that the current administration ignores.

What would Keynes think of Obama's stimulus plan?

It's unbelievable that a man whose main theme was to smooth investment comes to be the proponent of redistributing income away from the people and companies who do the investing.

My advice on the stimulus plan was, don't do it. Let's look at the plan. First, a lot of the money was used to reduce the deficits of state and local governments by increasing the federal debt. It was simply money transferred from the federal government. The economic multiplier effect was zero.

But of course, once the state governments spend it there is a multiplier. If the US stimulus was like Australia's, the aim was to get the money out to where it would do some long-term good, and funds-starved state governments had a good idea of how to do that.

BTW, the economic multiplier effect would have to have been at least one when transferring to the states, assuming they passed the spending on.

Second, the temporary tax cuts went to paying off credit cards and other debts, not spending that would have increased economic growth.

The same criticism occurred in Australia, but of course it is bogus - stimulus money put in to paying of debt brings forward other discretionary spending.

url]http://money.cnn.com/2010/02/04/news/economy/meltzer_keynes.fortune/index.htm[/url]

[Drake Tungsten]

Why do the posters who know the least about a subject always write the longest replies?

[ricketyclik]

Why do people without the arguments attack the messenger?

[Drake Tungsten]

Um, I'm the messenger. You're the ****** asking stupid questions.

[DinoDoc]

Why do the posters who know the least about a subject always write the longest replies?

I his defense most of that post was quoting you. The "**** like" questions were only sprinkled through it.

[ricketyclik]

They seem perfectly reasonable to me.

[Drake Tungsten]

That's why you're a ****.

[ricketyclik]

I bow to your superior intellect, as amply demonstrated by your counterpoints.