Republicans Find Voice in Opposing Stimulus: 'Oh, My God'

[Dan J 277]

House Minority Leader John Boehner needed only three words to serve notice that President-elect Barack Obama is nowhere close to achieving the big bipartisan vote on the stimulus package he wants so badly.

"There was no Republican input at all involved in what House Democrats outlined today," Boehner, R-Ohio, said at a news conference at the Capitol. "I just took a moment to look over the draft from Chairman [David] Obey and the draft or outline from Chairman [Charlie] Rangel. Oh, my God.

"I just can't tell you how shocked I am at what we're seeing. You know it's clear that they're moving on this path along the flawed notion that we can borrow and spend our way back to prosperity."

http://blogs.abcnews.com/thenote/2009/01/r...licans-fin.html

So borrowing money just to blow it on non-economically productive endeavors is OK.

It really makes no difference what the money is spent on, and I think that's the main misunderstanding that the Democrats have regarding our economy.

If 800 Billion dollars worth of real wealth and resources is diverted from the private sector, it really doesn't matter where it goes. No matter how worthy or noble the cause.

It's apparent that with the major infrastructure plan, the steel and construction industries will be the main beneficiaries of the stimulus plan. But what about the other industries that don't benefit from said stimulus? They are not even considered. Even the steel and construction industries, while benefitting, are clearly diverted from the private sector. The cost of steel materials and construction will undoubtedly be bid up by the influx of fresh paper, so what happens to the prospective business owner requiring the goods and services of these bid-up industries? He either pays the additional premium associated with the rising costs, or in most cases, cannot afford to use those industries. He is essentially forced to not exist.

Those hurt by the redirection of wealth and resources are not even considered by modern economists, nor are the long term effects even debated.

Money and wealth are no longer synonymous. When the government spends money, it is really taking wealth and resources from money-earning Americans.

Like any investment, you put money up front for a greater return later. Investing in infrastructure has benefits that can definitely benefit private industry in the future. Lets break it down.

Short term benefit:

More people employed (more people to buy goods and services)

More people employed also means higher tax collection (from both the employee and company) and fewer people using public services

Long term benefit:

Improved infrastructure will make trade/communication more efficient.

Improved schools will provide more knowledgeable and productive workers.

Eventually the economy will have to pay for it. But for the most part, the efficiencies gained from making the investment will be worth whatever the long term cost.

If $800 stayed in private industry hands, would they be able to use it efficiently to create an economic recovery, where everyone can benefit? Probably not, since creating jobs is not really what the economy does efficiently. It can certainly use it to create more wealth for the people that already have a lot, but that's not a braod economic recovery, only a narrow one.

[mawilson 2,133]

Like any investment, you put money up front for a greater return later. Investing in infrastructure has benefits that can definitely benefit private industry in the future. Lets break it down.

Investing in infrastructure is a good idea, but if you want to see what kind of "returns"

we got on our $350bn "investment" in the banking system, take a look at the new

Nasdaq OMX Government Relief Index (QGRI) which tracks 24 companies that have

received at least $1 billion from the Troubled Asset Relief Program. It's a mixed

basket of downtrodden companies in which the government is "investing," including

Citigroup, General Motors, and AIG.

Here's how the index "performed" in the last 5 days (it started at 1,000):

[mRx 16]

House Minority Leader John Boehner needed only three words to serve notice that President-elect Barack Obama is nowhere close to achieving the big bipartisan vote on the stimulus package he wants so badly.

"There was no Republican input at all involved in what House Democrats outlined today," Boehner, R-Ohio, said at a news conference at the Capitol. "I just took a moment to look over the draft from Chairman [David] Obey and the draft or outline from Chairman [Charlie] Rangel. Oh, my God.

"I just can't tell you how shocked I am at what we're seeing. You know it's clear that they're moving on this path along the flawed notion that we can borrow and spend our way back to prosperity."

http://blogs.abcnews.com/thenote/2009/01/r...licans-fin.html

So borrowing money just to blow it on non-economically productive endeavors is OK.

It really makes no difference what the money is spent on, and I think that's the main misunderstanding that the Democrats have regarding our economy.

If 800 Billion dollars worth of real wealth and resources is diverted from the private sector, it really doesn't matter where it goes. No matter how worthy or noble the cause.

It's apparent that with the major infrastructure plan, the steel and construction industries will be the main beneficiaries of the stimulus plan. But what about the other industries that don't benefit from said stimulus? They are not even considered. Even the steel and construction industries, while benefitting, are clearly diverted from the private sector. The cost of steel materials and construction will undoubtedly be bid up by the influx of fresh paper, so what happens to the prospective business owner requiring the goods and services of these bid-up industries? He either pays the additional premium associated with the rising costs, or in most cases, cannot afford to use those industries. He is essentially forced to not exist.

Those hurt by the redirection of wealth and resources are not even considered by modern economists, nor are the long term effects even debated.

Money and wealth are no longer synonymous. When the government spends money, it is really taking wealth and resources from money-earning Americans.

Like any investment, you put money up front for a greater return later. Investing in infrastructure has benefits that can definitely benefit private industry in the future. Lets break it down.

Short term benefit:

More people employed (more people to buy goods and services)

More people employed also means higher tax collection (from both the employee and company) and fewer people using public services

800B is a ton of wealth and resources to divert for a small gain of temporary employment. And let's be honest, employment is the main objective of this stimulus.

Alarmingly high unemployment is due to the extremely inelastic wage rates that the Federal government and unions have imposed. If wages aren't allowed to fall to free, realistic market levels, then businesses are forced to cut jobs.

Directly taking resources and wealth from the private sector as a means to create employment is a fallacy, just as it was when FDR did it. 70 years hasn't changed a thing.

Long term benefit:

Improved infrastructure will make trade/communication more efficient.

Improved schools will provide more knowledgeable and productive workers.

Eventually the economy will have to pay for it. But for the most part, the efficiencies gained from making the investment will be worth whatever the long term cost.

Again, as I said, it doesn't matter how noble or just the cause is; the point is, those not directly benefitting from the wealth-transfer stimulus will suffer greatly and needlessly.

So, assuming you accept the fact that the wealth and resources are being directly diverted from the private sector, and even if you accept the fact that there will be people who will lose greatly but will be paid no attention to, then, surely you think that this 800 billion in diverted wealth will be used in the most efficient manner possible by our honest government officials?

Well, the answer is no, it wont.

From the Washington Post:

Obama said the massive government spending program he proposes to lift the country out of economic recession will include a renewed effort to make public buildings energy-efficient, rebuild the nation's highways, renovate aging schools and install computers in classrooms, extend high-speed Internet to underserved areas and modernize hospitals by giving them access to electronic medical records.

While putting energy-efficient light bulbs into public buildings may stimulate the loins of the Green crowd, what about the lights that are taken out of private homes through taxation so these public facilities can get new lights and heating systems? Granted that's an extreme, but it is precisely what is taking place. Why not shut down these inefficient ubiquitous buildings and save the private sector the money, instead of pouring private money into them?

If $800 stayed in private industry hands, would they be able to use it efficiently to create an economic recovery, where everyone can benefit? Probably not, since creating jobs is not really what the economy does efficiently. It can certainly use it to create more wealth for the people that already have a lot, but that's not a braod economic recovery, only a narrow one.

I would argue that the proposed stimulus is a narrow one, as I've clearly pointed out that it only benefits the few industries at the expense of the many.

The most sound way to end a recession is to let the market liquidate the artificial credit and adjust to attain an economic equalibrium. The downturn would be sharp, but short lived. This "lasseiz faire" approach is how every recession was handled pre-Hoover. The economy fell and then picked itself back up. But now, our government is trying to re-inflate the bursted economic bubble, just as FDR did, which will only ensure a painful, and lasting depression, no matter what that fool Paul Krugman says.

[Trumplestiltskin 5,791]

It's apparent that with the major infrastructure plan, the steel and construction industries will be the main beneficiaries of the stimulus plan. But what about the other industries that don't benefit from said stimulus? They are not even considered.

One of the projects that ready to go is the new trans-Hudson rail tunnel connecting NJ to NY. While the immediate stimulus effect of this project will be to the companies that build it, if you think this tunnel won't have a lasting impact on the entire region, you're not thinking it through. This will open up western NJ and the Poconos to more development and eventual absorption into the "NYC commutable" area. It will also eliminate existing transit bottlenecks in Manhattan and in the existing tunnels. It's a long term win-win.

That really does need to happen - especially as improving the throughways to the city will likely lead to road improvements in NJ. Someone might actually end up modernising that terrible Route 22.

[mawilson 2,133]

800B is a ton of wealth and resources to divert for a small gain of temporary employment. And let's be honest, employment is the main objective of this stimulus.

Matt, they are not "diverting" anything - without the government plan, the money wouldn't exist.

[Trumplestiltskin 5,791]

I think he made the point earlier that money and wealth are different things. So presumably if you print more money you devalue the currency, and everyone loses wealth as a result.

So it could certainly be viewed as a diversion/redistribution of relative wealth.

[mawilson 2,133]

I think he made the point earlier that money and wealth are different things. So presumably if you print more money you devalue the currency, and everyone loses wealth as a result.

So it could certainly be viewed as a diversion/redistribution of relative wealth.

But the devaluation will not be instantaneous; in fact, we've seen just the opposite

so far - when things are universally bad, the US dollar gets stronger. The trend

is only temporary, of course, but it can buy us some time until the economy recovers.

[mRx 16]

800B is a ton of wealth and resources to divert for a small gain of temporary employment. And let's be honest, employment is the main objective of this stimulus.

Matt, they are not "diverting" anything - without the government plan, the money wouldn't exist.

If the government were just to create money, and not put it into the economy, it would have no effect on our economy at all.

But once the government spends those newly created dollars, they act just as any dollar in the private sector, and thus pulling those resources from dollars that were actually earned by individuals in the private sector. So, the resources are actually diverted, from the private sector, and that is the ultimate result of government expenditures.

Although I do agree that nearly every dollar the government uses in expenditures comes directly from the printing press, therefore our tax revenue go mostly toward the debt, and to pay the current social security recipients, Medicare/Medicaid, and other government Ponzi scams.

[mRx 16]

I think he made the point earlier that money and wealth are different things. So presumably if you print more money you devalue the currency, and everyone loses wealth as a result.

So it could certainly be viewed as a diversion/redistribution of relative wealth.

But the devaluation will not be instantaneous; in fact, we've seen just the opposite

so far - when things are universally bad, the US dollar gets stronger. The trend

is only temporary, of course, but it can buy us some time until the economy recovers.

Exchange rates are easily manipulatable by the government.

In the late '20's, before the onset of the Great Depression, England had inflated heavily, and the pound was becoming weak, so Benjamin Strong, NY Federal Reserve Governor, decided to help his good buddy Montagu Norman, head of the central Bank of England, and increased the supply of dollars to offset the weakening of the British pound.

Perfect example of how governments collude to prop each other's currency up.

[mawilson 2,133]

But once the government spends those newly created dollars, they act just as any dollar in the private sector, and thus pulling those resources from dollars that were actually earned by individuals in the private sector. So, the resources are actually diverted, from the private sector, and that is the ultimate result of government expenditures.

I still don't see it. The government will spend those dollars presumably by hiring individuals

who are currently unemployed. What resources are they pulling from the private sector?

Although I do agree that nearly every dollar the government uses in expenditures comes directly from the printing press, therefore our tax revenue go mostly toward the debt, and to pay the current social security recipients, Medicare/Medicaid, and other government Ponzi scams.

Problems will come in the longer term. Right now, such aggressive printing of money

can actually help us by reducing the real price of the outstanding debt left by the credit

bubble.

[mRx 16]

But once the government spends those newly created dollars, they act just as any dollar in the private sector, and thus pulling those resources from dollars that were actually earned by individuals in the private sector. So, the resources are actually diverted, from the private sector, and that is the ultimate result of government expenditures.

I still don't see it. The government will spend those dollars presumably by hiring individuals

who are currently unemployed. What resources are they pulling from the private sector?

Labor, just as any other cost paid by an employee, is a resource. Even though labor is only a portion of the cost associated with a job, you must assume that the price being paid for labor will be high enough to encourage employment, because that is the ultimate goal of temporary government make-work schemes. Therefore, it will more than likely be higher than actual free market wages in the private sector, as are most governmental jobs, in order to encourage that labor.

So, this artificial wealth that is being used to stimulate the construction industries, steel industries, and all other beneficiaries of the newly created, massive amount of money, will create an artificial demand in those industries. It's artificial because the money is poured into these by the government, not by an actual real demand for these goods and services. Prospective employees, whether employed or not, will see this demand for labor, and the associated superior wages, and will gravitate towards it, especially if performing a similar job in construction, or a metal industry that is not benefitting from the stimulus, and not paying as well as the inflated wage the government is paying.

Since the government has virtually no control of who and where every dollar goes to once it enters the economy, there is no guarantee that a large portion of these jobs won't be filled by those already skilled in that craft, seeking the pay raise associated in the specific industries. So instead of creating jobs, the jobs are simply those diverted from the private sector. The private sector cannot counterfeit money to compete with the Federal government, and no matter how much the inflation bids up prices, the government can always inflate more, and stay one step ahead of rising costs, whereas the private sector cannot. This basically allows the government to outbid the private sector on resources. Since the government cannot create raw steel and construction labor out of thin air, as it can fiat money, these resources have to come from somewhere. And as I've said, the artificial demand resulting from the government dumping dollars into those industries, will inflate those prices above actual market levels, strongarming the private sector out, for the goods always go to the highest bidder.

That's how resources and labor get diverted from the private sector.

Although I do agree that nearly every dollar the government uses in expenditures comes directly from the printing press, therefore our tax revenue go mostly toward the debt, and to pay the current social security recipients, Medicare/Medicaid, and other government Ponzi scams.

Problems will come in the longer term. Right now, such aggressive printing of money

can actually help us by reducing the real price of the outstanding debt left by the credit

bubble.

But in essence, the agressive money printing is just re-inflating the bursted credit bubble. It will eventually, as you just pointed out, need to bust again, and why should we Americans have to suffer through a longer recession and more losses of wealth due to careless government spending?

The market needs to rid itself of the artificial credit pumped out by the Fed, and it does so by liquidating the credit-inflated prospects that were just too good to be true. These companies and corporations that were enticed to make such gross malinvestments by the artificial credit (example: AIG enticed into risky subprime MBS's by the Fed's stimulation of the housing market through Fannie and Freddie), need to liquidate these bad investments, and suffer the losses, and if the losses are great enough, they go out of business. Bad business is punished with losses and bankruptcy by the free market. Pumping more money into them will not bring them back to life, and only send the message that bad business is rewarded with subsidy and socialized bailout by the American taxpayer.

[mawilson 2,133]

Labor, just as any other cost paid by an employee, is a resource. Even though labor is only a portion of the cost associated with a job, you must assume that the price being paid for labor will be high enough to encourage employment, because that is the ultimate goal of temporary government make-work schemes. Therefore, it will more than likely be higher than actual free market wages in the private sector, as are most governmental jobs, in order to encourage that labor.

So, this artificial wealth that is being used to stimulate the construction industries, steel industries, and all other beneficiaries of the newly created, massive amount of money, will create an artificial demand in those industries. It's artificial because the money is poured into these by the government, not by an actual real demand for these goods and services. Prospective employees, whether employed or not, will see this demand for labor, and the associated superior wages, and will gravitate towards it, especially if performing a similar job in construction, or a metal industry that is not benefitting from the stimulus, and not paying as well as the inflated wage the government is paying.

Since the government has virtually no control of who and where every dollar goes to once it enters the economy, there is no guarantee that a large portion of these jobs won't be filled by those already skilled in that craft, seeking the pay raise associated in the specific industries. So instead of creating jobs, the jobs are simply those diverted from the private sector. The private sector cannot counterfeit money to compete with the Federal government, and no matter how much the inflation bids up prices, the government can always inflate more, and stay one step ahead of rising costs, whereas the private sector cannot. This basically allows the government to outbid the private sector on resources. Since the government cannot create raw steel and construction labor out of thin air, as it can fiat money, these resources have to come from somewhere. And as I've said, the artificial demand resulting from the government dumping dollars into those industries, will inflate those prices above actual market levels, strongarming the private sector out, for the goods always go to the highest bidder.

That's how resources and labor get diverted from the private sector.

Ok, that makes sense.

The market needs to rid itself of the artificial credit pumped out by the Fed, and it does so by liquidating the credit-inflated prospects that were just too good to be true. These companies and corporations that were enticed to make such gross malinvestments by the artificial credit (example: AIG enticed into risky subprime MBS's by the Fed's stimulation of the housing market through Fannie and Freddie), need to liquidate these bad investments, and suffer the losses, and if the losses are great enough, they go out of business. Bad business is punished with losses and bankruptcy by the free market. Pumping more money into them will not bring them back to life, and only send the message that bad business is rewarded with subsidy and socialized bailout by the American taxpayer.

Another solution is simply to nationalize all the banks. I know it sounds bad, but there's

a strong case for keeping banks in permanent public ownership, since they cannot exist

safely without a deposit guarantee that is ultimately underwritten by the taxpayer. If

the government is going to take the "bad assets" off their balance sheets, then I'd rather

they took the good assets along with them. We're half way there with Citi and BoA.

[DaveHanna 0]

More government intervention, what a joke.

Why do they always try to treat the symptoms and not the main causes big government and the fed.

[mox 298]

Another solution is simply to nationalize all the banks. I know it sounds bad, but there's

a strong case for keeping banks in permanent public ownership, since they cannot exist

safely without a deposit guarantee that is ultimately underwritten by the taxpayer. If

the government is going to take the "bad assets" off their balance sheets, then I'd rather

they took the good assets along with them. We're half way there with Citi and BoA.

If I were a right-winger, I'd pound my fists on the table and start railing about how this would be socialism and therefore evil and vile, and a slippery slope towards socialized medicine and pretty soon we'll all be speaking Russian.

I think of myself as more fiscally conservative (socially liberal), so I don't think this would be a good way for the banks to go. First and foremost just because I don't want the government controlling yet another aspect of my life. I think government does a great job at running some things (the post office, air traffic control, the military...) but they have demonstrated time and again how horrible they are at managing things like money. Of course the private sector just recently failed abysmally at managing money also, but only because we forgot the lessons we should have learned back in the '80's, which is that unregulated capitalism will spiral out of control. A tightly controlled financial industry would work much better and more efficiently than government could ever hope to do.

[HAL 9000 96]

It's apparent that with the major infrastructure plan, the steel and construction industries will be the main beneficiaries of the stimulus plan. But what about the other industries that don't benefit from said stimulus? They are not even considered.

One of the projects that ready to go is the new trans-Hudson rail tunnel connecting NJ to NY. While the immediate stimulus effect of this project will be to the companies that build it, if you think this tunnel won't have a lasting impact on the entire region, you're not thinking it through. This will open up western NJ and the Poconos to more development and eventual absorption into the "NYC commutable" area. It will also eliminate existing transit bottlenecks in Manhattan and in the existing tunnels. It's a long term win-win.

That really does need to happen - especially as improving the throughways to the city will likely lead to road improvements in NJ. Someone might actually end up modernising that terrible Route 22.

Then I could really consider relocating one day to that area.