Friday, October 21, 2011

Stimulus Not Selling

I got an email from informing me of the defeat of more stimulus legislation in the Senate.

Last night, Democrats in the Senate tried to pass a simple piece of President Obama's jobs plan that shouldn't be controversial: provide money to prevent further layoffs of teachers, cops, and firefighters at the local level, and pay for it by taxing the income of millionaires an extra 0.5%.

This morning a lot of media outlets reported that the Senate "rejected" or "voted down" this proposal.

But that's not what happened. The measure didn't come to an actual vote.

That's because every single Republican senator filibustered the bill -- meaning they wouldn't even let an up-or-down vote happen. Republicans have unilaterally decided not to allow even that simple majority vote on anything that might help the economy before the next election.

To be clear: This bill would have created jobs, and both parties have supported similar measures in the past.
Note the demagoguery of going after millionaires to pay for temporary spending in an area that is not even the federal government's responsibility. I applaud the Republicans for not getting sucked into this. Since this is temporary spending, it only postpones the day of reckoning for states in dealing with budget problems associated with pensions of teachers, cops and firefighters. Better to allow these tough times to force state governments into action now.

Further, all of this stimulus spending is doing squat to increase private sector employment. At a time when we need to expand the tax basis by increasing private sector employment, employing more government workers isn't going to help the economy, because their pensions become a long term liability on the public purse.

The next gambit will be spending on "infrastructure" like roads and bridges. To some extent, this is a federal responsibility at least, but it should be adequately funded in ongoing budgets. Further, the same stupidity of taxing millionaires will be used.

Wonder why stimulus spending isn't helping the economy? The main reason is the temporary nature of the spending. Second, it is put to uses that primarily benefit various levels of government. Finally, the various program tend to be poorly administered. Consider, how the small business stimulus of $30 billion worked out. The Treasury actually only disbursed $4 billion. They only started approving applications in July, 2010, three months before the program ended. And consider this little gem.
More troubling, the $4 billion in loans the government did make might not really help small businesses anyway. A Wall Street Journal analysis of Treasury data found that about half of the banks that took cash from the fund used some of it to pay back the Troubled Asset Relief Program. Rather than giving money to the restaurant around the corner or the startup in your neighbor’s garage, the banks gave it right back to Uncle Sam, bettering their balance sheets but doing little to spur business expansion or job growth. The Chamber of Commerce howled, branding the program little better than a bailout for small banks.
TARP has been defended as a success because the loans are being repaid. But if GM and small businesses are just using government dollars to repay TARP, how is that a success?

The economy would recover on its own if the government would just get consistent tax and regulatory policies in place and start to deal with long term liabilities and debt. But perpetual short-sightedness seems to prevent that.

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