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1/30/2008
Republicans portrayed as hard-hearted ogres
If we must have a stimulus package (geez, must we?), it’s simply got to be one-time only stuff. That’s why you’ll hear most Republicans, President Bush included, say the package must stay the way it came from the House. And thank heavens (I suppose – take what you can get…) for the negotiators in the House who agreed tax rebates would go even to those who paid no taxes – in exchange for Dems dropping the demand for more food stamps and more unemployment insurance.
Why?
Washington math. When it comes time to reduce the food stamp benefits and unemployment benefits back to today’s levels, Republicans will be portrayed as hard-hearted ogres slashing the budget for poor people.
Also, if anyone needs the geeky answer – per the Heritage Foundation –Extending unemployment benefits …. reduces the incentive of workers to look for a new job. Studies are almost unanimous in concluding that extending UI leads to workers staying unemployed for longer periods of time. UI also encourages employers to wait longer to hire workers after temporary layoffs…. When workers get additional benefits, they do not spend their personal savings, and spousal earnings fall…. The UI system is designed to cushion the pain of losing a job, not to improve the economy. Studies find that it has, at best, a modest effect on economic growth.
Certainly much has been written about the stimulus package – the Heritage Foundation article referenced above is a good summary – of the Good and the Bad. The best piece of the package, per the article, is business tax cuts in the form of bonus depreciation. The author argues that extension of reduced taxation of capital gains and dividends would have been the best stimulator – but that much the Dems were not about to go for. The Wall Street Journal included an interesting piece on the capital gains tax yesterday – as the Tax that Paid for Itself. It’s a quick read demonstrating awesome results from reduced capital gains tax rates.
And lastly in this scattered blurb about the stimulus, who better than economist Tom Sowell to ask about the wisdom of a stimulus package? You can guess what this free market man from way back has to say. Some snippets… Unfortunately, there is a vast difference between what the government could do and what it is likely to do.
….Of course markets can fail. Everything human can fail. But if Alex Rodriguez strikes out, do the Yankees take him out of the game and send in a pinch hitter for him? …. Those on the left love to believe that the stock market crash of 1929 showed the failure of the free market and that the New Deal interventions in the 1930s saved the day.
But the stock market crash of 1987 was just as big and Ronald Reagan resisted loud calls for him to intervene. The result was not another Great Depression but the beginning of a decades-long period of prosperity.
Before Presidents Herbert Hoover and Franklin D. Roosevelt came along, there was no expectation that the federal government would intervene when the stock market crashed or when there was a downturn in the economy.
Previous stock market crashes and previous downturns in the economy worked themselves out faster and less painfully than the Great Depression of the 1930s, just as the 1987 crisis did.
The track record of government intervention is far less impressive than its rhetoric.
….More fundamentally, markets readjust themselves for a reason. That reason is that people pay a price for their misjudgments and mistakes.
Government interventions are usually based on trying to stop them from having to pay that price.
… Pumping money into the economy can help many problems, but do not be surprised if it also leads to inflationary pressures and financial repercussions around the world.
So look to Government Bush to say NO over and over to his pals in the Senate – and to every other lobby and interest group pawing to get their hands on this potential Christmas Tree bill. You’ll hear the GOP euphemism repeatedly - that loading up the bill will “delay it or derail it.” But you’ll know what the President and fiscal conservatives mean – we in the GOP aren’t willing to give you guys one more opportunity to complain about us ogres “cutting” benefits in the future.
COMMENTS
Jo, I would argue that anything that takes a long time to have an impact is not worth doing as part of a stimulus package. Bonus depreciation for example is nice to have but not something that will drive immediate spending or investment which is what we supposedly need now to avert or soften a recession. As far as the unemployment benefits go, I read that at most the difference in extended unemployment is one day per week of extended benefit. So, in my opinion denying the unemployed more benefits while fighting for bonus depreciation seems to me to be hard hearted and another example of corporate welfare from a moral point of view. From a stimulus point of view most studies do show that the lower the income level that gets benefits the more quickly it is spent, which is what we supposedly need--more spending.
dave allen (Wed Jan 30 07:04:16 2008)
I'm not sure what you mean by "one day a week per extended benefit" - but whatever your source, it's the frog dying in the slow-boiling water. How much unemployment is enough? (I don't know - but it's not always more, more, more.) Why is anyone that wants to draw a line - hard-hearted?
Jo E. (Wed Jan 30 07:38:11 2008)
Jo,
The source I read said that for every week of extended benefits there is a one day delay in the unemployed person becoming re-employed. Of course we're dealing in economics here so the data is likely not all that conclusive. As far as hard hearted my point is that the little guy gets squeezed and seen as a slacker when at the same time tax breaks for corporations (as far as this discussion goes) are somehow seen as more noble and not welfare. In fact they are welfare in the context of this stimulus package.
dave allen (Wed Jan 30 09:13:36 2008)
What is the multiplier effect of any corporate tax cut? I don't know the answer, but I'm guessing there surely is one. What is the multiplier effect of an extra week of unemployment insurance (and one less day of that same person working)?
Jo E. (Wed Jan 30 09:35:56 2008)
"(geez, must we?),"
My rebate is going right back to the government - as property taxes. So I'm kinda 'okay that's cool 'cuz I can get the local guys off my butt' but also 'geez if they'd just let me keep it in the first place I could have already paid that bill'.
If the idea is to 'stimulate' the economy wouldn't it be a lot easier for the government to just buy every taxpayer an IPod? More efficient that way, what with friction and so on.
Or a voucher for Wal-Mart. Shove that money directly to a large efficient corporation that has octopus connection to the rest of the economy ...
Brian (Wed Jan 30 10:16:56 2008)
I like bread and I like circuses.
If I lived in Roman times I'd have it most of the year since they wound up with one third of the year as holidays to go to the stadium. We have to make do with Superbowl.
The Heritage Foundation whining about those lazy unemployed misses one relevant fact which economists must view as a statistical irrelevance because it doesn't show up anywhere and that is:
What about those persons who already have used up their UC over the past years of market driven job exports? Maybe they went into the underground economy or to a homeless shelter. It's just statistically unknown what happens to those who are not counted as unemployed by the government.
Granting extra time on unemployment doesn't mean that so and so is being kept out of the workforce and to return like a union member after plant shut down. The analogy is closer to the benighted notion that tools get sharp by themselves when you put them away before
the next usage. At this point you can choose your own delusion that seems to fit.
The rebate package will come about as early as May but maybe closer to when the conventions are held for whatever feel-good effect that brings into play. I don't know.
Lastly there's the small matter of new war appropriations which we know, again statistically, could fund any number of wealth and health producing benefits for the poor and unemployed.
Who is the woman in the picture? Is she from the Heritage Foundation?
Oh Lon, you've wandered...
I'll leave well enough alone, but will tell you the picture is of the great economist, Thomas Sowell. JE
Lon Ponschock (Wed Jan 30 12:53:59 2008)
Brian,
Shove the money back to WalMart? Are you thinking clearly? They are one of the main reasons for many manufacturing jobs heading to China and the imbalance in trade. WalMart demands a certain price or it's find a different outlet for your product. They pay dirt wages and hand out Badger Care literature for their health benefits, which you and I fund. In addition, they destroy the fabric of the small local community and send profits to Arkansas. I believe it is unAmerican to shop there, and anyone who does gets what they deserve. Unfortunately, they bring the rest of us real Americans down with them. So take your measely $600 bribe (by the way, what is being cut to afford this giveaway) and go buy your cheap crap at WalMart. I hope you can live with yourself.
Dave (Wed Jan 30 18:34:55 2008)
Jo,
i would also be curious to know the multiplier effect of a certain dollar amount of unemployment compensation versus "bonus depreciation". I would suspect that to the extent it can be determined the unemployment compensation must have a higher multiplier effect since the probability that cash in hand today is more likely to spent today by someone out of work than the presumed tax avoidance on bonus depreciation. In fact how do you even count the positive effect of bonus depreciation? Is it that expenditures are made that otherwise would never be made? Is it that the tax savings are spent somewhere? If so, when? After April 15 the next year or when the business is estimating it's net after tax cash flow? I don't believe that the measurement of "bonus depreciation" positive impact to the economy has any chance of being an accurate measurement; there are too many scenarios. Unemployment insurance expenditures on the economy would likely be a lot easier to measure and the benefit to unemployed person easier to measure. I'll still go with the little guy, my neighbor, my relatives, my friends or but for the grace of God, me getting a benefit rather than a guess about some nebulous tax break.
Dave Allen (Wed Jan 30 19:21:02 2008)
"Shove the money back to WalMart? Are you thinking clearly?"
Yes I am.
If the goal is to stimulate the economy then Wal-Mart is the place to do it. They have a massive influence in nearly every area of the economy; as an example I recently heard that 20% of newstand magazine sales happen at .. Wal-Mart.
Give your money to Wal-Mart and it's going to go places.
"They pay dirt wages and hand out Badger Care literature for their health benefits,"
I can't speak for Wal-Mart in Wisconsin. When my wife worked for them in Texas six years ago the salary and benefits were competitive with their competition (Target, in our area).
Health insurance was offered, but you did have to wait 6 months to get on the plan. This is not unreasonable for a business in their industry.
"they destroy the fabric of the small local community and send profits to Arkansas."
Maybe I don't see what you do? The Wal-Mart in Neenah appears to have revitalized that entire side of town - since they opened up the store there, there are easily twenty more retail outlets and restaurants there .. where before there were none.
Those are jobs that flat-out didn't exist five years ago.
Downtown Neenah appears to be what it always has been - except it's better with new specialty shops and restaurants. The hardware store that should be going out of business isn't - they've expanded their line and offer stuff that Wal-Mart can't.
I'm not just talking out of my butt - my wife owned and operated a small shop specializing in Asian antiques and collectibles. After we opened we noted that the Wal-Mart was now carrying some of the same items we were; some incense, some pseudo asian looking items we hadn't seen before.
Except they weren't - ours were good and sold by people who knew the product. We didn't close because of competition from Wal-Mart - they weren't. We closed for other reasons (smile).
And sending the profits to Arkansas? What, is Arkansas a foreign country where retail shahs sit on piles of bullion?
Puh-lease. That stuff goes all over the place, comes back into the economy as lendable money from banks.
"I believe it is unAmerican to shop there, and anyone who does gets what they deserve."
Cheap goods at low price. Oh, throw me in that briar patch, Br'er Fox!
"So take your measely $600 bribe (by the way, what is being cut to afford this giveaway) and go buy your cheap crap at WalMart."
If you'll read what I wrote, you'll note that I'm spending my rebate to pay back property taxes.
Why are we behind on property taxes? Because five years ago we decided to open a store and make a difference - you know, create wealth, employ a few people - and not sit back on our haunches and spout ignorant Populist krep.
And indeed it worked out for a few years. Then it didn't so we had to close, and incurred some debt from that.
What have you done to make a difference, Dave?
"I hope you can live with yourself."
I sleep just fine, thanks. Plus I know that there are a lot more important things in life than fretting about krep like what a retailer is up to.
Brian (Thu Jan 31 09:48:28 2008)
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