Michael
Feb 5th 2009, 02:01 PM
Why I oppose the stimulus bill
First of all, let me say that 99% of what the Republicans are whining/complaining about in the stimulus bill is just plain bullshit or demogoguery. I can't be bothered to even address their talking points on the issue. Like the Democratic majority, the Republican minority is just playing pure partisan political games here.
Both parties have their eye on the 2010 mid-terms here and that's what this 'stimulus bill' is all about. Both parties are fantically trying to position themselves for that next election cycle with this 'stimulus bill'. That's why Republicans are going to try to turn the bill into just another Republican tax-cut bill. The Democrats of course are DESPERATE to get the Republicans to 'sign-on' to the bill so that the Democrats can use that to deflect the heat they are going to get when the US economy doesn't magically jump back into the black by the time the 2010 mid-terms come around. Either way, I'm not impressed with either party's position here. Neither party is actually trying to address the economic issue at all. They are both just playing political games and that doesn't really interest me at all.
I'm concerned about macro-economics. Recessions naturally follow economic expansions. This is the normal business cycle that has been going on for well over a century now (at roughly 9-10 year intervals).
Recessions serve the function of eliminating these useless or inefficient enterprises, or those badly managed ones that made foolish expansions during the peak of the expansion market. For the longterm efficiency of the markets, it is necessary that the rot is allowed to be culled - by the market itself. During recessions, well managed companies tend to do rather well. It is only badly managed companies, or inefficient companies that suffer during a recession.
I fundamentally believe that public policy is best served when the economy is based on sound economic fundamentals. Ergo, interfering with the natural cycle of recessions is not good public policy.
At the moment, the US house-building industry, the US mortgage-finance industry, the US finance-banking industry and the US automotive industry are all scaled up to, and operating at, about 120 to 130% of actual market demand. These sectors have over-expanded and/or have been badly managed (usually both). They have production capacity far in excess of what the market requres/demands. These sectors all need to see 15-30% reductions in overall capacity. Until that happens, the US economy will by carrying a whole lot of dead weight and uncertainty and the recession will drag on.
I respectfully submit that $800 billion in 'stimulus' spending is just a huge waste of taxpayer money. Every penny spent on tax credits and tax cuts in the bill is a waste (just a pander to the tax-cutting Republicans). Tax cuts make-up at least half of this bill. Supply-side economic theory has never actually been observed to occur in the real world (despite several high profile attempts to foster it). In the best case scenario, every dollar of tax cuts equals about $1.01 in GDP boost. That's about a 1% return on one's investment. Thus, $400 billion in tax cuts is just essentially just $400 billion in revenue-sucking tax cuts - nothing more, nothing less.
Ergo, there is only about $400 billion in actual stimulus spending here. And that's just about (maybe) 25% of the actual ($1.6 trillion) GDP drop that is expected in 2009. I just don't see how adding $400 billion of debt spending and $400 billion in tax revenue reductions is going to even remotely affect the fall in aggregate demand by anything more than a tiny fraction of one percent.
On this basis, I just don't think that loading hundreds of billions of public debt onto one's grandchildren (and hundreds of billions more next year as the additional revenue-sucking tax-cuts kick in) just for a quarter point of GDP this year is actually worth it.
First of all, let me say that 99% of what the Republicans are whining/complaining about in the stimulus bill is just plain bullshit or demogoguery. I can't be bothered to even address their talking points on the issue. Like the Democratic majority, the Republican minority is just playing pure partisan political games here.
Both parties have their eye on the 2010 mid-terms here and that's what this 'stimulus bill' is all about. Both parties are fantically trying to position themselves for that next election cycle with this 'stimulus bill'. That's why Republicans are going to try to turn the bill into just another Republican tax-cut bill. The Democrats of course are DESPERATE to get the Republicans to 'sign-on' to the bill so that the Democrats can use that to deflect the heat they are going to get when the US economy doesn't magically jump back into the black by the time the 2010 mid-terms come around. Either way, I'm not impressed with either party's position here. Neither party is actually trying to address the economic issue at all. They are both just playing political games and that doesn't really interest me at all.
I'm concerned about macro-economics. Recessions naturally follow economic expansions. This is the normal business cycle that has been going on for well over a century now (at roughly 9-10 year intervals).
Recessions serve the function of eliminating these useless or inefficient enterprises, or those badly managed ones that made foolish expansions during the peak of the expansion market. For the longterm efficiency of the markets, it is necessary that the rot is allowed to be culled - by the market itself. During recessions, well managed companies tend to do rather well. It is only badly managed companies, or inefficient companies that suffer during a recession.
I fundamentally believe that public policy is best served when the economy is based on sound economic fundamentals. Ergo, interfering with the natural cycle of recessions is not good public policy.
At the moment, the US house-building industry, the US mortgage-finance industry, the US finance-banking industry and the US automotive industry are all scaled up to, and operating at, about 120 to 130% of actual market demand. These sectors have over-expanded and/or have been badly managed (usually both). They have production capacity far in excess of what the market requres/demands. These sectors all need to see 15-30% reductions in overall capacity. Until that happens, the US economy will by carrying a whole lot of dead weight and uncertainty and the recession will drag on.
I respectfully submit that $800 billion in 'stimulus' spending is just a huge waste of taxpayer money. Every penny spent on tax credits and tax cuts in the bill is a waste (just a pander to the tax-cutting Republicans). Tax cuts make-up at least half of this bill. Supply-side economic theory has never actually been observed to occur in the real world (despite several high profile attempts to foster it). In the best case scenario, every dollar of tax cuts equals about $1.01 in GDP boost. That's about a 1% return on one's investment. Thus, $400 billion in tax cuts is just essentially just $400 billion in revenue-sucking tax cuts - nothing more, nothing less.
Ergo, there is only about $400 billion in actual stimulus spending here. And that's just about (maybe) 25% of the actual ($1.6 trillion) GDP drop that is expected in 2009. I just don't see how adding $400 billion of debt spending and $400 billion in tax revenue reductions is going to even remotely affect the fall in aggregate demand by anything more than a tiny fraction of one percent.
On this basis, I just don't think that loading hundreds of billions of public debt onto one's grandchildren (and hundreds of billions more next year as the additional revenue-sucking tax-cuts kick in) just for a quarter point of GDP this year is actually worth it.