Wednesday, December 17, 2008

Just itching to spend

What would you do if you were running out of money? Buy more stuff you couldn't afford by borrowing (against your future) or would you stop spending and start working (producing) to get money?

Well, like a person who just received a new credit card with a huge (ridiculous) limit cannot wait to break it in, it seems President Elect Obama is just itching to start spending.

Obama looking at $850 billion jolt to the economy
By JIM KUHNHENN, Associated Press

WASHINGTON – Anxious to jolt the economy back to life, President-elect Barack Obama appears to be zeroing in on a stimulus package of about $850 billion, dwarfing last spring's tax rebates and rivaling drastic government actions to fight the Great Depression.
Obama has not settled on a grand total, but after consulting with outside economists of all political stripes, his advisers have begun telling Congress the stimulus should be bigger than the $600 billion initially envisioned, congressional officials said Wednesday.
Obama is promoting a recovery plan that would feature spending on roads and other infrastructure projects, energy-efficient government buildings, new and renovated schools and environmentally friendly technologies.
There would also be some form of tax relief, according to the Obama team, which is well aware of the political difficulty of pushing such a large package through Congress, even in a time of recession. Any tax cuts would be aimed at middle- and lower-income taxpayers, and aides have said there would be no tax increases for wealthy Americans.
While some economists consulted by Obama's team recommended spending of up to $1 trillion over two years, a more likely figure seems to be $850 billion. There is concern that a package that looks too large could worry financial markets, and the incoming economic team also wants to signal fiscal restraint.
In addition to spending on roads, bridges and similar construction projects, Obama is expected to seek additional funds for numerous programs that experience increased demand when joblessness rises, one Democratic official said.
Among those programs are food stamps and other nutrition programs, health insurance, unemployment insurance and job training programs.
Obama advisers, including Christina Romer and Lawrence Summers, have been contacting economists from across the political spectrum in search of advice as they assemble a spending plan that would meet Obama's goal of preserving or creating 2.5 million jobs over two years.
Among those whose opinions Obama sought were Lawrence B. Lindsey, a top economic adviser to President George W. Bush during his first term, and Harvard professor Martin Feldstein, an informal John McCain adviser and the chairman of the Council of Economic Advisers under President Ronald Reagan.
Feldstein recommended a $400 billion investment in one year, Obama aides said, and Lindsey said the package should be in the range of $800 billion to $1 trillion. The aides revealed the discussions on condition of anonymity because no decisions had been reached.
"I do recommend $400 billion in year one and expect a similar amount in year two," Feldstein said in an e-mail message. "The right amount depends on how it is used."
Lindsey could not be reached.
Obama aides also pointed to recommendations by Mark Zandi, the lead economist at Moody's and an informal McCain adviser who has been proposing a $600 billion plan.
"I would err on the side of making it larger than making it smaller," Zandi said in an interview. "The size of the plan depends on the forecast — the economic outlook — and that is darkening by the day."
"Even a trillion is not inconceivable," he said.
Only one outside economist contacted by Obama aides, Harvard's Greg Mankiw, who served on President Bush's Council of Economic Advisers, voiced skepticism about the need for an economic stimulus, transition officials said.
The advisers say they agree with economic forecasts that predict that without a government infusion unemployment will rise above 9 percent and not begin to come down until 2011.
Senate Majority Leader Harry Reid, D-Nev., said Wednesday that Obama has indicated that Congress will get his recovery recommendations by the first of the year.
"He's going to get that to us very quickly and so we would hope within the first 10 days to two weeks that he's in office, that is after Jan. 20, that we could pass the stimulus plan," Reid said. "We want to do it very quickly."
In a letter to Peter Orszag, Obama's choice to be White House budget chief, Reid asked, among other things, that the stimulus package include tax relief for middle-class families, including a reduction in rates and an extension of the child tax credit.
Obama's aides have said they hope to work with Republicans in writing the bill, particularly in the Senate, where the GOP could slow action if it chooses. This week, House Speaker Nancy Pelosi said Democrats were preparing their own recovery bill in the range of $600 billion, blending immediate steps to counter the slumping economy with longer-term federal spending that encompasses Obama's plan.
A stimulus package that approaches $1 trillion could run into significant Republican opposition in Congress. It also could cause heartburn for moderate and conservative Democratic lawmakers, known as Blue Dogs, who oppose large budget deficits.
"Republicans want to work with the president-elect to help get our economy on the path to recovery, but we have grave reservations about taking $1 trillion from struggling taxpayers and spending it on government programs in the name of economic 'stimulus,'" House Republican leader John Boehner said in a statement.
In February, Congress passed an economic stimulus bill costing $168 billion and featuring $600 tax rebates for most individual taxpayers and tax breaks for businesses. Pelosi largely bowed to President Bush's insistence to keep the measure free of spending on federal projects.
The upcoming effort would dwarf that earlier measure as well as a $61 billion stimulus bill the House passed just before adjourning for the elections. That measure died after a Bush veto threat and GOP opposition in the Senate.

Wow. Just wow. George Bush was irresponsible and unconservative in how he spent money. Obama will make him look like a miser in his first two weeks in office. Don't be fooled by the term "stimulus"- this is a "bankrupting our country's future" package straight up. Jolt the economy in the very short term? Maybe. Causing the inevitable but needed market correction to be more brutal in the not so long term future? For sure.


Michael Lockridge said...

The more they pick at the scab, the longer it will take to heal.

Is nobody looking at the history of the Great Depression? Few analysts considered the "fixes" to be of any real value, and most believe that the recovery took years longer due to the "help."


Roger Mann said...

“President-elect Barack Obama appears to be zeroing in on a stimulus package of about $850 billion, dwarfing last spring's tax rebates and rivaling drastic government actions to fight the Great Depression.”

I doubt this government “stimulus” spending will jolt the economy even in the short term. Everything I’ve read indicates that the “drastic government actions to fight the Great Depression” only caused it to last about a decade longer than it should have. If it didn’t work in the past, what makes these geniuses running our country think it will work now? Why not “drastically” cut government spending and implement significant across the board tax cuts instead? I’d love to hear Obama’s explanation of why that wouldn’t work!

Rick Calohan said...

We reap what we sow. We voted for Bush because we knew he was “better” than Gore or Kerry on the Pro-Life issues. We knew that W would be better on defense or so we thought because Republicans tend to be pro-Military. Thinking that even though he was a “compassionate” conservative we knew he would cut taxes and with a Republican congress they would control spending.

While we can praise Bush and those who serve our military and emergency responders from any further attacks like 9/11, that his tax cuts did avoid a an economic depression, that the liberation of people who were oppressed by Saddam Hussein in Iraq, and the Taliban in Afghanistan, we must admit our short comings. Bush did not slow or reduce the growth of Government, if we had pulled out after ‘Mission Accomplished’ this country may have been better off and Iraq and Afghanistan would know should you cause us anymore trouble we will be back and we will burry you and your offspring will not be able to locate your bones. But no we stayed to be pop up targets for Al Qaida and victims of road side bombs.

While cutting taxes did increase revenues, we did not decrease spending. Such foolishness left unchecked has caused the current economic calamity not only with the government but with private industry. Now that Government and Business have come together to bankrupt this country further and continue the foolishness to not reduce government spending we have become indebted to the communist nation of China.

What this nation needs is a Treasury Secretary and Federal Reserve Board Chairman like Joseph as it is written in Genesis 41, if not then perhaps we the Chosen should take heed to God’s Word and prepare for 7 years of famine.

Frontier Forest said...

Millions of hurting Americans are looking to President elect Obama for answers, thinking he will be the one to bring peace, security and some sense of stability to our nation’s bewildering troubles. These are trying times for all. What we need to ask for, more than a “stimulus” package or a “boon-doggle bailout” is calm patient wisdom, keeping our eyes focused on Jesus, “the author and prefector of our faith!” For HE is sovereign, He is always in control and we can all rest in this didactic fact; this financial crisis causes Our Creator no panic. Standing in and on His sovereignty, is the only secure foundation we can rest in.

Jim said...

Joseph nationalized the means of production -- Gn 47.20 -- isn't that what the government is doing now?

Anonymous said...

A Savior? Change?
Obama voted man of the year by Time magazine. Those who voted for Obama was sucked in on Change and seeing Obama as a savior of this country.
Our government is out of control on spending. When our government goes bankrupt who will foreclose on the USA?
My only comfort is that our Heavenly father is in control and promises He will take care of His childern. Pray Brothers and Sisters, and keep your focus on Jesus our only savior.