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January 27, 2009

Republicans Take Tentative First Steps Towards Republicanism
Update: Read My Lips: No New Tax Cuts
Update: Obama the Hardcore Ideologue

Boehner has instructed the House Republican caucus to oppose the crap sandwich.

Allah agrees this is the right policy move, but questions if it's the right political move. After all, the economy probably (hopefully) will recover, without government intervention, by the 2010 midterms; and yet the media and Democrats will claim it's all due to the stimulus. Won't that be disastrous for the GOP?

I don't think so. The GOP is will offer the argument that they were, in fact, pro-stimulus, but they wanted to temporarily cut payroll taxes and so forth. This "stimulus" is, as Mike Pence says (and I said a while ago), nothing but a "wish-list of long-standing liberal spending priorities." Most members of the public like public spending when it's spent on them specifically; but they don't like such sending when it's spent on others. This Crap Sandwich obviously is being spent mostly on "others." Even if the economy recovers in 2010, I think the Democrats will have a difficult time claiming it was only due to their efforts, or that only their particular Crap Sandwich would have worked, or that their Crap Sandwich was best and no modifications were necessary.

Even if it's not all that difficult for them to claim that -- it wasn't terribly hard for Clinton to claim vindication on his budget/spending deal of the early nineties -- at some point Republicans do have to put some small amount of faith in 1) their ideas and 2) their ability to articulate them to the public. Simply abandoning principles in favor of me-tooism won't win elections, either.

Does "Stimulus" of Any Sort Even Work? Interesting piece (well, interesting for an economics piece) from a feller at the U. of Chicago School of Business.

Via a prof at the U. of Chicago's economics department [name withheld to protect the guilty], who calls it "brilliant." Frankly I got lost halfway through and need to read it again, but maybe you can follow it.

Great Post-Partisan Uniter Announces Unwillingness to Compromise: Read my lips: No New Tax Cuts.

Ten Things I Hate About Your Stimulus Plan: Solid reasons here.

Hardly have to go past Number One:

A 2005 study by Andrew Mountford and Harald Uhlig "analyzed three types of policy shocks: a deficit-financed spending increase, a balanced budget spending increase (financed with higher taxes) and a deficit-financed tax cut, in which revenues increase but government spending stays unchanged. We found that a deficit-spending shock stimulates the economy for the first 4 quarters but only weakly compared to that for a deficit-financed tax cut." In other words, FDR vs. Clinton vs. Reagan, Reagan wins.

But let's look at Number Four, too:

4) An initial CBO analysis found that a mere $26 billion out of $274 billion in infrastructure spending, just 7 percent, would be delivered into the economy by next fall. An update determined that just 64 percent of the stimulus would reach the economy by 2011.

Gee, if only there were some way to magically put money in people's hands immediately, without even the delay of identifying a payee and writing and sending a check.

But that's just dreaming. Why, to do that, we'd have to imagine that the government was taking huge amounts of people's wealth and could immediately inject a trillion dollars into the economy by merely taking less of it. With the stroke of a pen.

Obviously, that's "magical thinking." No such scenario exists in America today.

Just Considering... Think about what a hardcore ideologue Obama must be.

Usually Democrats oppose tax cuts on two grounds: 1) they just don't like them and 2) tax cuts mean, sometimes but not always, less revenue which means less government spending, and they are big in favor of more government spending.

Obviously reason 1 is an ideological response, and a kneejerk one at that.

Reason 2 is also ideological, but at least there is some reason given to oppose tax cuts. If you prioritize government spending above everything, then of course you prioritize it higher than tax cuts.

What is interesting in the current situation is that Obama does not have to choose between cutting taxes and increasing spending. Because we are told we are on the verge of a deflationary crisis, and need to get as much money into the economy as possible, deficits be damned, Obama is in a situation that no other Democrat has been in since FDR: He can pretty much do anything he likes, and blow up the deficit as much he dares, with public support.

That means that he could easily both spend a fair amount and also offer a lot of tax cuts to really stimulate the economy. Cut the payroll taxes temporarily: Stimulate consumption.. Cut the capital gains tax rates, even temporarily: Stimulate investment.

Any tax cuts he proposes do not have to come at the expense of new spending. We're already, apparently, on a pathway to historic, budget-busting spending no matter what we do. He could just ease off on some of this enormous spending to offer some useful tax cuts to immediately inject a huge quantity of money directly into the economy.

But he won't do it. He opposes real tax cuts (as opposed to the fake welfare "tax cuts" he claims are tax cuts, which is really just cutting checks for people who don't pay taxes and calling it a "tax credit") simply because he ideologically, reflexively does not like tax cuts.

Whoah, Missed a Major Point: Tax cuts are always popular. Always.

Obama ran on them (but won't deliver). Clinton ran on them (but won't deliver).

So Obama is giving up a chance to not only put real action behind his post-partisan posturing and to genuinely stimulate an ailing economy, but to also give his popularity numbers a big boost.

He's turning all that down.

Because he's precisely the rigid soft-Marxist ideologue we always thought.

Get Me Rewrite: The CBO put out a report that only a tiny fraction of the infrastructure spending would be spent before next fall -- just 7%. And not terribly much more over the following year.

Obviously this isn't what the Congress wanted to hear.

So, shocker of shockers, the Democrat controlled CBO has quickly put out a new report, and claims now that 65$ of the total spending of the "stimulus" will be out the door by 2010, and a significantly higher fraction of the infrastructure, too.

Wow. I'm so glad the Democrats don't politicize the agencies they control.



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posted by Ace at 02:07 PM

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