httpv://www.youtube.com/watch?v=s2MjQ17kDng

Is the stimulus superfluous?
by Donald Lambro

The biggest unasked question in today’s economy is whether it has started turning around before President Obama’s spending-stimulus program has fully gotten under way. There is growing evidence that the U.S. economy is showing signs of life amid increasing reports that Obama’s nearly $800 billion economic stimulus is trickling into the economy at an ever-slower pace. We’ve had two back-to-back months of increased existing-home sales. Banks are making a comeback as the administration’s stress tests largely acknowledged. Bank of America’s stock rose by nearly 10 percent Monday after a favorable recommendation from Goldman Sachs, as did other financial equities. Bank deposits are up, mortgage loans are rising, suggesting that credit has begun flowing again, and we are seeing an uptick in construction.

This week, the National Association of Home Builders (NAHB) put out a report saying that builders’ confidence in the market for new homes climbed for the second straight month. David Crowe, NAHB’s chief economist, said the renewed confidence level “indicates that home builders feel we’re at or near the bottom of the market.” And the decline in housing prices appears to be slowing.

Consumer confidence is rising, too, though retail sales remain sluggish and unemployment, now at 8.9 percent, continues to rise, but the signs suggest the economy clearly has begun bottoming out.

Federal Reserve Chairman Ben Bernanke, who has been the unsung hero in the Fed’s heavy lifting in this recovery, predicted as much. “We continue to expect economic activity to bottom out, then to turn up later this year,” he told lawmakers earlier this month. “The pace of contraction may be slowing.” The White House maintains, of course, that all of this is the result of the administration’s economic stimulus and its other recovery policies. But there are reports to the contrary that suggest the flow of infrastructure spending to the states has been slow and that much of the critical decision-making at the U.S. Treasury has been “on hold” because of bureaucratic snafus, White House micromanaging and unfilled job slots in key positions.

Late last month, the Government Accountability Office (GAO) released a report on Obama’s infrastructure spending that estimated that only $49 billion of the nearly $300 billion being sent to the states would be spent by the end of fiscal year 2009.

The report, said Brendan Buck of the House Republican Study Committee, “reveals that stimulus dollars are mired in typical glacial bureaucratic processes.”

Among the GAO’s findings on the stimulus act’s Highway Infrastructure Investment spending: Only “two of the 16 states (studied) had agreements (with the Department of Transportation) covering more than 50 percent of their states’ apportioned funds, and three states did not have agreements on any projects.”

In a front-page article last week, the New York Times elaborated on the GAO’s findings under the headline, “Stimulus Aid Trickles Out, but States Seek Quicker Relief.”

The Times’ findings: “Nearly three months after President Obama approved a $787 billion economic-stimulus package, intended to create or save jobs, the federal government has paid out less than 6 percent of the money, largely in the form of social-service payments to states.”

While the White House and the president say that the program is right on track and creating jobs, “they have actually spent relatively little so far,” the Times said.

Over at Treasury, decision-making has slowed to a crawl or delayed altogether. While Secretary Timothy F. Geithner and the White House have made dramatic proposals, “carrying out those policies has bogged down because critical decisions about how to do so aren’t being made,” the Washington Post’s David Cho reported Monday. Nearly four months into Obama’s presidency, the department is without a deputy secretary and other top people are missing from its senior ranks.

The result: After announcing a plan to relieve banks of toxic assets, it isn’t clear who will carry out its details. After announcing a $15 billion plan in March to open up credit for small businesses, “it is still struggling to get off the ground” after officials said it would not work.

The trouble is as much Geithner’s inability to manage a bureaucracy as large as Treasury as it is the White House’s propensity to micromanage all of its decision-making — right down to the design of the department’s Web site.

Meantime, the economy seems to be making a comeback of its own, and some economists are suggesting that maybe much of Obama’s stimulus-spending plan isn’t needed.

When I asked American Enterprise Institute economist Kevin Hassett whether he thought that a lot of the stimulus spending may come too late and may not be needed at all, he replied, “You raise a good point, if the third quarter starts out strong after a good second quarter, then we might well have too much stimulus.”

But the political reality is that if the economy begins to improve in the second half of this year, as many predict it will, the administration will claim that it is due to its stimulus spending — even when very little of it has been spent.

The 2009 De-Stimulus Program Risks “A Lost Decade”
by Wayne Winegarden

Throughout his first 100 days President Obama has amply demonstrated his fundamental belief that government knows best. His rash and intrusive decisions intended to return the U.S. economy to prosperity illustrate that his instincts are all wrong. Consider the following telling actions: President Obama spent more time pondering who should be the “first dog” than how $2 trillion of taxpayers’ money should be spent; he fired the head of GM; and, he suggested to the BCS how the national college football champion should be determined.

The Obama administration’s doctrine that only a large activist government – one that spends large sums of money as fast as possible – can ensure that the U.S. will have a prosperous future is sadly at odds with economic history. Excessive government spending and economic growth are like oil and water – they do not mix. Economic growth in the U.S. will be meager at best if Obama’s policies are implemented, even after the current financial and mortgage crisis passes. And, if the spending spree is not arrested, we could then be facing a Japanese-style lost decade.

Governments raise money by taking resources away from the private sector through taxes and borrowing. Because all borrowed revenues must be paid back in the future, money borrowed today simply represents additional tax burdens tomorrow. All government revenues, therefore, represent a tax on the productive sector. Taxes create a divergence, or wedge, between people’s efforts and their reward for that effort. The separation of reward from effort diminishes incentive to work, save and invest.

Since the end of World War II, there has been 6 distinct periods where government’s role in the economy changed course. These periods provide stark examples of the adverse impact from high and/or rising total federal, state and local government spending on the economy’s growth rate. Reciprocally, they illustrate the beneficial impacts from low and/or falling government spending on the economy.

When looking at the impact of the government on the economy it is the impact on the private sector that is most important. The broadest measure of economic growth that is most often reported in the news is Gross Domestic Product or GDP. Included in GDP is total government spending – typically government spending is approximately 20% of total GDP. Because government spending is part of GDP, GDP is not an appropriate measure for determining the impact of government spending on the economy. Instead, GDP adjusted to net out total government spending and government transfer payments such that just the value of private sector production is the appropriate measure. The value of the private sector can be calculated based on data from the U.S. Bureau of Economic Analysis.

Between 1950 and 1965, total government expenditures relative to the size of the private sector were low. Additionally, although the government grew quicker than the private sector, the growth was slight, rising from 27% of the private economy in 1950 to 32% of the private economy by 1965. Average private sector growth, adjusted for inflation, was a robust 3.6% per year during this period.

1965 was a defining year. With the start of President Johnson’s “War on Poverty” and other “Great Society” programs, the relationship between the government and the economy changed dramatically. Between 1965 and 1983, growth in total government expenditures significantly outpaced the growth in the private sector. By 1983, total government expenditures were now nearly one-half the size of the private economy. Growth in the private sector, adjusted for inflation, subsequently slowed to 2.5% per year during this period. The implications from the slowdown in private sector growth are tremendous. Had the economy continued to grow at its previous average growth rate, it would have been 20% larger in 1983 – an additional $884 billion in private sector earnings.

Since 1983 the relative size of government has never come close to returning to its pre-1965 levels. Between 1983 and 2007 government spending has vacillated between periods of restraint followed by periods of rapid growth. The outcome for the economy was quite predictable. Government spending restraint during the Reagan and Clinton years helped fuel average annual private sector growth of 5.1% and 4.5%, respectively. During the Bush I and Bush II years, control over government spending weakened, which was reflected in slower average annual private sector rates of growth, 1.0% and 2.0% respectively.

This brings us to today. Trillions of dollars have already been thrown at fighting the current financial crisis. Add to this the trillions of dollars that the Obama Administration wants to commit to socialize health care and address greenhouse gas concerns and total federal, state and local spending commitments will simply explode to unprecedented heights.

U.S. economic history clearly shows that a relatively large and/or growing government sector saps the vitality of the private sector; so does Japan’s. The record intrusion of government that the Obama Administration is trying to launch will cause growth in the private sector to stagnate.

Such a dire outcome is only inevitable if we continue traveling down our current path, however. Arresting the extreme growth in spending will help re-establish a sound policy foundation in which our economic recovery from the current financial crisis can flourish. Continuing down the current path threatens the global economy with another lost decade; this one occurring in the U.S.

Back to the Future?
by Mona Charen

It was May 1939. In less than two years, the Empire of Japan would spoil America’s splendid isolation (a term that actually refers to a period in British foreign policy) and drag us into World War II, thus ending the Great Depression.

But on that May afternoon, electric fans cooled the House Ways and Means Committee room as the congressmen puzzled over the economy’s persistent doldrums. No previous recession had lasted even half as long. The unemployment rate had again topped 20 percent — though it had been seven years since the New Deal began. Henry Morgenthau, Roosevelt’s Treasury Secretary, was testifying, and he was brutally honest about the results of the greatest (to that time) experiment in Keynesian fiscal policy.

“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises … I say after eight years of this Administration we have just as much unemployment as when we started … And an enormous debt to boot.”

Burton Folsom Jr. in his new book, “New Deal or Raw Deal,” has unearthed the above quote and much more — an extraordinarily timely bit of historical housekeeping. Over the weekend we learned that several GOP governors, starting with Louisiana’s Bobby Jindal, are going to decline funds from the “stimulus” bill just passed by lopsided Democratic majorities in Congress. This, too, has happened before.

In 1932, Congress passed the Emergency Relief and Construction Act. Congress made $300 million (I know, today we spend that on disposable coffee cups for the agriculture department) available to the states to relieve unemployment. Some states, like Illinois, seized disproportionate shares ($55.4 million) while other states, like Massachusetts, declined all federal help. Gov. Joseph Ely believed that relief should remain a local matter. The Boston Civic Symphony performed a number of concerts to benefit the unemployed. Boston College and Holy Cross played an exhibition football game for charity. And the city’s schoolteachers agreed to donate 2 percent of their salaries for six months to benefit the poor.

But with Washington handing out funds and other states gobbling them up, Massachusetts voters realized that they were paying for the relief of Illinois’ citizens and again privately for their own. They traded Gov. Ely for a Gov. James Michael Curley, who would play the game under the new rules. (Bostonians were so fond of Curley that, later in his career, he remained mayor of Boston despite having to serve two years of his mayoral term in a federal penitentiary.)

Obama’s Stimulus
by Phyllis Schlafly

Under the subterfuge of helping the economy, Barack Obama’s stimulus plan legislates vast new spending programs to finance liberal policy goals that are unnecessary and undesirable. The flow of taxpayers’ money will be so gargantuan as to make Lyndon B. Johnson’s Great Society expansion of the welfare state look puny.

Barack Obama revealed his long-term goals in a radio interview on Chicago’s WBEZ-FM in 2001. Asked about the Earl Warren court decisions that started long lines of activist decisions in many areas, Obama argued that the Warren court didn’t go far enough: The Warren court changed the laws, but failed to address the economic issues to bring about “redistributive change.”

Obama complained that “the Supreme Court never ventured into the issues of redistribution of wealth” or “economic justice” and failed to “break free from the essential constraints that were placed by the Founding Fathers in the Constitution.” The stimulus plan is designed to break through those constitutional restraints on government action.

Here are some of the major “change” provisions of the 1,000-plus page act that all admit no member of Congress read before passage. This list doesn’t include any of the dozens of “porky” items that Sen. Chuck Schumer, D-N.Y., boasts Americans don’t care about (and usually don’t know about).

First, the stimulus bill repeals the essentials of welfare reform passed by the Republican Congress in 1996. It was reluctantly signed by President Bill Clinton after he realized the public was demanding reform, and after it proved popular, he tried to take credit for it.

LBJ’s Great Society welfare was probably the worst of all liberal policies because it was directly responsible for destroying marriage by subsidizing illegitimacy and divorce, thereby creating a matriarchy dependent on government handouts. It wasn’t poverty that destroyed marriage in the lower-income classes, it was the liberal policy of giving taxpayers’ money to women, thereby making the husband and father irrelevant and even an impediment to the flow of easy money.

By setting limits on government handouts, the 1996 welfare reform encouraged welfare recipients to get jobs or job training, to make themselves self-sufficient and to end their long-term dependency on government.

The Obama stimulus plan increases the taxpayers’ money that the federal government gives to the states for welfare, and reverses incentives by giving bonuses to states that put more people on welfare. The stimulus is even worse than the Great Society policies of the 1960s.

That is a good example of the Obama goal to spread the wealth around (regardless of the harm it does).

Second, the stimulus plan calls for nearly doubling federal spending on education, which means doubling federal control. This money gives Obama the opportunity to spread his friend William Ayers’ “social justice” teaching (i.e., that America is an oppressive and unjust society) throughout K-16 education.

This goal will be facilitated by Obama’s appointment of Arne Duncan for secretary of education, who like Obama and Ayers, is an alumnus of the Chicago political machine. Duncan made news last year with his plan to open a “gay-friendly” public high school in Chicago with a curriculum teaching “the history of all people who have been oppressed and the civil rights movements that have led to social justice and queer studies.”

The gay-friendly school, to be called “Pride Campus,” was quietly put on hold after Duncan’s appointment as secretary of education was announced.

Third, the stimulus plan calls for Obama “change” by giving government control over access to medical treatments plus surveillance over online medical records for every American. Giving bureaucrats the power to decide which procedures have “clinical effectiveness” and may be used means nationalizing the health care industry and rationing medical care.

Fourth, the stimulus bill greatly expands by about $23 billion nearly every element of the welfare state, including food stamps, Medicaid eligibility, the earned income tax credit, the Special Supplementary Nutrition Program for Women, Infants and Children, and child-support enforcement for single moms. The governors have just awakened to the fact that the stimulus plan will require their states to raise business taxes if they accept this new free money.

Fifth, Obama’s claim that the stimulus plan cuts taxes is a fraud. A large percentage of the alleged tax “refunds” is just another handout because it will go to people who don’t owe any income taxes.

Sixth, the announced purpose of the stimulus is to create jobs, but Obama’s photo-op to illustrate this at Caterpillar Tractor in Peoria, Ill., turned into a political donnybrook. National television showed Obama speaking to some of the 20,000 whose jobs have been outsourced by Caterpillar and implied that the plan will enable them to be rehired.

Minutes later, Obama was contradicted by Caterpillar’s CEO, who warned that, on the contrary, more layoffs are coming. It looks like the stimulus will create more government jobs plus an estimated 300,000 jobs for illegal aliens, but not much for anyone else.

httpv://www.youtube.com/watch?v=bEZB4taSEoA

The Real Lessons of the Great Depression
by Michael Barone

“Not since the Great Depression.” “Not since the 1930s.” You hear those phrases a lot these days, and with some reason. As Congress prepares to pass the Democratic stimulus package, it may be worthwhile to look back at Franklin Roosevelt’s New Deal and consider how well it worked as policy — and politically.

There’s a fairly broad consensus on policy that some of Roosevelt’s actions made a positive difference but that they didn’t get us out of the Depression. Amity Shlaes in her path-breaking “The Forgotten Man” makes a strong case that some of Roosevelt’s moves blocked recovery, and even his admirers admit that his policies led to a sharp recession in 1937-38. After eight years of the New Deal, unemployment remained at 15 percent in 1940 — double the figure for today. What really got us out of the Depression was World War II. The total number of employed persons and military personnel increased from 44 million in 1938 to 65 million in 1944.

So it would be unwise to copy the New Deal as a recipe for economic recovery. And the policies that produced the wartime boom are not replicable today. We are not going to have rationing, wage and price controls, government spending nearly half the gross domestic product, 91 percent tax rates and a 12-million-man military (the equivalent today would be 27 million).

There has been general agreement, however, that Roosevelt’s policies were politically successful. Most of us in the political commentary business make frequent use of the phrase “New Deal Democratic majority” and tend to believe that Roosevelt’s policies worked for his party for a long generation extending into the 1960s.

I think the picture is more complicated than that. Democrats did win big in the 1934 and 1936 elections. They made big gains in large cities and factory towns, many of which were staunchly Republican in the 1920s. But these gains were not sustained, as the effects of some New Deal policies — high taxes on high earners, the unionization-promoting Wagner Act and jobs programs like the WPA — became apparent.

In early 1937, unions engaged in sit-in strikes in auto and steel factories; they were plainly illegal, but Democratic governors in Michigan and Ohio refused to enforce court orders against them. Later that year, the “capital strike” Shlaes describes led to a sharp recession.

The jobs programs were widely criticized as “boondoggles” and “leaf-raking.” Allegations of political favoritism and corruption were widespread. In the 1938 off-year elections, Democrats lost 81 House seats, 51 of them in the industrial belt from Pennsylvania and Upstate New York west to the Upper Midwest. The Democratic governors of Michigan and Ohio were defeated for re-election. The congressional district that included Flint, Mich., site of the first sit-in strike, went from Democratic to Republican; so did most congressional districts in Ohio.

As pro-New Deal historians have conceded, New Deal policies no longer had congressional majorities, given the opposition of many Southern Democrats. Nor was the outlook for Democrats rosy as the 1940 elections approached. Polling, then in its rudimentary stages, suggested that Republicans would win if the election were decided on domestic issues.

But in September 1939, World War II broke out in Europe. In June 1940, France fell; Adolf Hitler and Joseph Stalin, then allies, seemed to have most of Europe under their sway. Just days later, the Republicans nominated Wendell Willkie, an attractive candidate with no experience in foreign policy. The Democrats met in July, and Roosevelt sent a letter saying that he did not want to be a candidate. But, with help from the Chicago commissioner of sewers piping over a loudspeaker, “We want Roosevelt!” the president was renominated. He won his third term in November not, as he put it later, as “Dr. New Deal,” but as an experienced leader when the nation was facing grave peril.

“The American people in their righteous might will win through to absolute victory,” Roosevelt declared in his Pearl Harbor speech, and so they did by September 1945. In my view, it was the war effort, the mobilization of big government, big business and big labor, that much more than the New Deal enhanced the prestige of the state. It got Americans proud of thinking of themselves as small cogs in very large machines. It made them amenable to statist policies that they would never have accepted in the 1920s and at which many of them were bridling in the late 1930s.

No two political times are ever the same. But as we watch the stimulus package moving to passage, we get the whiff of bailout favoritism and crony capitalism that was also present in the New Deal. The forced unionization envisaged by the card-check bill may prove to be no more popular than the unionization forced by the sit-ins was in Michigan and Ohio in 1938. Today’s Democratic programs may get as mixed a political reaction as the New Deal did in the years before World War II.

The Worst of All Worlds
by David Limbaugh

At the risk of beating a very live horse, the worst of all the horrible things about President Barack Obama’s “stimulus” bill is that even if it worked to stimulate the economy beyond the president’s wildest expectations, it would cause a further explosion of the national debt, which would become a worse “catastrophe” than the one this bill promises to alleviate.

Yet the president is so eager to start spending the people’s money he can barely be trifled to acknowledge the growing debt as a concern. When backed into a corner, all he can do is attack the credibility of his critics on the issue, as if pointing fingers at the other kid in the schoolyard either exculpates him or addresses the problem.

Twice during his tightly controlled prime-time marketing infomercial, billed as his first presidential news conference, he aimed partisan fire at Republicans for daring to raise the issue.

He said: “When it comes to how we approach the issue of fiscal responsibility … it’s a little hard for me to take criticism from folks about this recovery package after they’ve presided over a doubling of the national debt. I’m not sure they have a lot of credibility when it comes to fiscal responsibility.”

He used the same specious argument to deflect another objection to the bill: that it’s long on pork and short on stimulus. He said, “First of all, when I hear that from folks who presided over a doubling of the national debt … I just want them to not engage in some revisionist history. I inherited the deficit … and the economic crisis that we have right now.”

The Bush administration is certainly vulnerable to the charge that it spent way too much. Unfortunately for the always-campaigning President Obama, however, this is not a valid response to the question of whether he should spend more now.

The relevant question is not which party is guiltier but what is the right thing to do. Even if the Republicans were the worst hypocrites in the history of the universe, would that make it any more prudent for President Obama to embark on a mission to trump them? Indeed, that he is citing GOP fiscal profligacy as an excuse and license for more just confirms that debt is not on his mind; government debt is never on a liberal’s mind except as a tactic to win arguments or elections.

Another argument Obama often invokes to divert attention from the debt elephant in the room is that he has a mandate to proceed.

But did 53 percent of the electorate sign on to the expenditure of trillions of more dollars we truly don’t have and probably can’t get in our lifetimes just so he and his fellow social planners could finally get a crack at cranking out their mad-scientist experiments to perfect society through confiscation and redistribution of the people’s private property and income? Looking at recent polls and market trends, it would appear not.

Folks, the proponents of this boondoggle can’t even point to an obscure theory to suggest this bill might pay for itself, even if it miraculously catapulted the economy into robust growth mode. We couldn’t have afforded the readily visible costs of this bill, not to mention the hidden ones experts have identified, even before the separate trillion-dollar bailout fiascos. How much less can we tolerate them now?!

And that’s without factoring in the looming entitlement quagmire that one party, for purely political reasons, has refused to address. It’s also without considering the other horrors in Obama’s grab bag that could reduce America to Third World financial straits all by themselves, such as global warming mandates, socialized medicine, open-borders-driven entitlements, doubling our foreign aid commitments, and reversing welfare reform.

Adding insult to injury, contrary to the falsely claimed economic consensus, this legislation, with its emphasis on non-stimulative spending and non-stimulative demand-side tax cuts, has not been optimally crafted to stimulate the economy. Even if Obama’s neo-Keynesians were correct that government spending is the answer, this bill wouldn’t come close to fitting the bill and, in the long run, probably would have a counter-stimulative effect.

So this plan is the worst of all worlds — unless you are a once-closet socialist trained in the grand academic tradition of Chicago street organizing who finally sees an opportunity to “come out” and work your wonders on the poster nation for greedy and decadent capitalism, the United States of America. It involves incomprehensible spending in aggravation of an already dangerous national debt load; a possible net retardant effect on economic recovery; greater government control over the economy, with a consequent diminution of our liberties; and a necessary reduction of essential government services.

Frankly, I think it’s just about time to panic here — and the market apparently shares that sentiment.