American Elephants

An Exchange Between the Forces of Light and the Dark Side! by The Elephant's Child

Yesterday there was a priceless exchange between the hapless Obama administration press secretary Jay Carney, and Laura Meckler, correspondent for the Wall Street Journal.  It is a perfect illustration of the chasm between the two parties. Progressives firmly believe in Keynesian economics.  Franklin Delano Roosevelt believed in Keynesian economics, and, Democrats believe, saved the country with his extravagant spending during World War II. Well, no he didn’t.

This is a splendid example of “truthiness” (the word of the year a few years back).  It is defined as the quality of preferring concepts or facts one wishes to be true, rather than facts or concepts known to be true.

Here Mr. Carney accepts as truth the idea that putting money into the economy creates a “multiplier effect”due to the velocity of money moving through the economy.  It has been proven wrong over and over, for the past 2½ years, and for all the years between now and 1944, but remains an article of faith among progressives. Nancy Pelosi has made the same silly argument.  It defies common sense to assume that you can take a dollar out of a taxpayer’s pocket, pass it through the government adding costs along the way, and by giving it to an unemployed person who will spend it, that act somehow multiplies the dollar as it moves from  one hand to the next.

Carney is so sure of himself that he feels free to patronize Laura Meckler.  And goes on to demonstrate the truthiness of the administration’s economic policies.  So sure of themselves, so arrogant, so resistant to learning.

Meckler:    I understand why extending unemployment insurance provides relief to people who need it, but how does it create jobs?

MR. CARNEY:  Oh, it is by — I would expect a reporter from the Wall Street Journal would know this as part of the entrance exam just to get on the paper — (laughter.)  But the — no, seriously.  It is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren’t earning a paycheck are going to spend the money that they get.  They’re not going to save it; they’re going to spend it.  And unemployment insurance, that money goes directly back into the economy dollar for dollar virtually.  So it is — and when it goes back in the economy, it means that everywhere that those people — everyplace that that money is spent has added business.  And that creates growth and income for businesses that then lead them to making decisions about job — more hiring.

So there are few other ways that can more directly put money into the economy than providing unemployment insurance.

MecklerAnd why since it’s been extended have we seen unemployment not drop, in fact?

MR. CARNEY:  Well, look, this is “what would have happened” argument.  But we have seen is, what is it, 2.4 million private sector jobs created.  And this year there’s — I mean, again, this is not just — I encourage you, and I know that you all have good contacts in that world, but economic analysts wholly unaffiliated with this administration would tell you, and told you back late last year, that the combination of the payroll tax cut and extension of unemployment insurance would have a direct, measurable impact on job creation, so that of the jobs created this year, a certain number — however many tens or hundreds of thousands of jobs — can be attributed to those actions taken and pushed by the President last year, which is why he feels so strongly they ought to be done again as we continue to emerge from this recession.

So that’s why he believes very strongly we ought to extend the payroll tax and extend unemployment insurance.

  MecklerAnd is the best argument that you can put forward to people for these things that if we do this again, it won’t necessarily get any better, but it won’t get any worse —

MR. CARNEY:  Laura, you know that’s not how it works.  You know that we have to do a variety of things to grow the economy and create jobs.  This is one thing that economists of all stripes agree will directly affect growth, and a half percentage point, I believe, in growth is what economists estimate the payroll tax cut would provide.  Is it half?  Plus the UI?  Something like that.  Anyway, there’s — and up to a million jobs.  So we do that, and we have that positive impact next year.

That doesn’t mean that’s the only thing we do.  And obviously, there are other economic factors that, as we’ve seen this past year, some which we can control and some we can’t.  I mean, we can’t — we cannot estimate what a natural disaster that might happen next year, what impact it might have on the global economy.  But we can take action that does have a direct impact.

The Progressive wing of the Democrat party has become so partisan that any idea expressed by a Republican is assumed, automatically, to be a lie. This has been an enormous hurdle for President Obama, who clearly came into office hating President Bush and all his policies.  He was sure that the detainees at Gitmo were innocents, unjustly held by the Bush administration so they could torture them. The Bush people warned them that the detainees were the worst of the worst, and that Guantanamo was the best solution for keeping them out of circulation.

Obama believed that the ban on embryonic stem cell experimentation and therapy was some kind of religious nutcase ruling.  One of his very first executive orders was to lift that ban. He had, he claimed 22 people who were ready to be treated with embryonic stem cells immediately to be cured.  Never heard from them again.

Republicans are, of course partisan as well, but they go for real evidence.  Cutting taxes in a down economy is not, as progressives claim, a crazy religious belief held by Republicans, but proven by the evidence from the Coolidge administration, the Kennedy administration, the Reagan administration and the Bush administration.  Republicans are hardly perfect.  We are all human, but we must learn from experience and example, and from history.  And we have to learn from our mistakes.  Operating on the basis of what you wish to be true has a long history of failure and misery.


You Don’t Help a Spendaholic by Giving Him More Money! by The Elephant's Child

President Barack Obama was in New York on Thursday, addressing Democrat donors. According to CNS News, Obama said:

Deficits are not the only thing that could mortgage America’s future, President Barack Obama told Democratic donors in New York on Thursday. He stressed that if government does not spend money in certain areas, it would be mortgaging the country’s future.

“I’m not going to sacrifice investments in education. I’m not going to make scholarships harder to get and more expensive for young people,” Obama said to a cheering crowd. “I’m not going to sacrifice the safety of our highways or our airports. I’m not going to sacrifice clean air and clean water. I’m not going to sacrifice clean energy at a time when we need to free ourselves from dependence on foreign oil, and folks are getting killed at the pump.”

In other words, damn the torpedoes, full speed ahead.  Our Presidential spendaholic wants to keep right on spending on all the things that haven’t worked, aren’t working, and will not work.

— Austan Goolsbee, the chairman of the Council of Economic Advisers, said that a slowdown in government spending was mostly responsible for the only 1.8 percent growth in gross domestic product between January  and March, down from 3.1 in the fourth quarter of 2010. Goolsbee said in an interview on Bloomberg television:

It was an expected slowdown. The biggest driver was a reduction in government spending at the federal level, a big negative from defense spending.

Nobody likes a growth slowdown.  We’ve got to have faster growth, but 2011 and 2012 are still looking fairly positive.

Financial Times reports that “Doubts have been cast over the strength of the U.S. economic recovery after output grew at an annualized rate of only 1.8 percent in the first quarter. A surge in oil prices held back consumption growth while public spending fell at every tier of the U.S. government.”

At this stage of a recovery, growth often rebounds by between 4 and 5 per cent. Expansion of less than 2 per cent will not create enough jobs to keep up with population growth and cut the US unemployment rate of 8.8 per cent.

The dollar fell further on release of the growth numbers as investors judged that weak growth would cause US interest rates to stay lower for longer.

Initial claims for unemployment insurance climbed to 429,000.  Bad news all around.

The Wall Street Journal was unenthusiastic:

For three long years, the U.S. has been undertaking an experiment in economic policy. Could record levels of government spending, waves of new regulation and political credit allocation, and unprecedented monetary stimulus re-ignite growth? The results have been rolling in, and they represent what increasingly looks like an historic mistake that deserves to be called the Keynesian growth discount.The latest evidence is yesterday’s disappointing report of 1.8% in first quarter GDP. At this stage of recovery after a deep recession, the economy is typically growing by 4% or more as consumer confidence returns and businesses accelerate investment as their profits revive. Yet in this recovery consumers are still cautious and business investment remains weak.

Our spendaholic president has engaged in the greatest spending binge since World War II.  He did everything that the Keynesian rule book said politicians should dump into the economy: $168 billion in one-time tax rebates, then $814 billion in spending over 2009-2010, cash for clunkers, an $8,000 home buyer tax credit, the Detroit auto bailouts, billions for green jobs, a payroll tax cut for 2011, and near-zero interest rates for 28 months and Ben Bernanke’s ‘quantitative easing’. And growth is 1.8%.

Deficits this year are estimated to hit $1.65 trillion.  How many more trillions does the Keynesian rule book call for?

A Washington Post/Pew poll conducted April 21-25 asked respondents whether they think the federal budget deficit is a major problem that must be addressed now, when the economy improves, or not much of a problem.
A major problem that must be addressed now — 81%
When the economy improves —14%
Not much of a problem — 1%

Wondering Why the Federal Government Wants More of Your Money? by The Elephant's Child
December 11, 2010, 5:09 pm
Filed under: Capitalism, Democrat Corruption, Economy, Statism | Tags: ,

Earlier this week, economists John F. Cogan and John B. Taylor, both senior fellows at the Hoover Institution, wrote in the Wall Street Journal about their research on Obama’s $862 billion stimulus — the 2009 American Recovery and Reinvestment Act (ARRA). The impact of the stimulus on the economy?  Zero, zip, nada.  Liberals are still arguing that the federal spending stimulus wasn’t large enough.

In September 2009, the economists reported on their research showing that the temporary tax rebates and transfer payments in the Bush and Obama administration’s stimulus programs were ineffective.  This time, they studied new data on the impact of increases in government purchases, and found that in spite of the large size of the program, the dollar volume of additional government purchases that it generated was negligible. (Keynesian economics doesn’t work)

The AARA grants to states and local governments were similarly ineffective.  A 1979 study by a former Federal Reserve governor and professor at the University of Michigan determined that federal grants to state and local government had little effect on their purchases of goods and services. (Ditto)

I was chatting this morning with an insulation contractor.  A big effort to provide jobs for minorities and poorer workers was to provide them with “green” jobs, insulating homes. Classes were offered free to those who applied.  It seemed a little strange at the beginning to me, for we have an industry already supplying those services.  My contractor said that after graduating from the program, there just isn’t much, if any, work for these people,  for there was already plenty of competition in the industry.

Just before the midterm election, Congress appropriated $900 million to build part of a high speed rail line in California.  Instead of focusing on Los Angeles or San Francisco, they apparently appropriated the money for a mostly rural district that just happened to have a Democrat Congressman facing a difficult election.  The line runs from Borden to Corcoran — and this month the rail authority approved construction on the first 65-mile segment of a 500 mile bullet train.  The $4.5 billion segment will not begin operating until more of the line is completed, which could be never.

The rail authority told voters that for a one-way $55 ticket, the system would serve 94 million passengers between Los Angeles and San Francisco and create hundreds of thousands of “sustainable” jobs.  It assured voters that the bullet trains would operate at a surplus and without subsidies.  Welcome to Oz.  Only two segments of railways in the world have ever broken even, from Tokyo to Osaka, and one in France. A consulting firm, Infrastructure Management Group, told the authority that companies would not operate the railway without a revenue guarantee–a subsidy— because the ridership projections were so flaky.  Voters approved the $9.95 billion bond issue, but the authority has yet to come up with a credible economic plan.  Estimates run up to $623 billion, and federal seed money of $19 billion.

Enter the newly-elected  governors from Wisconsin and Ohio, Scott Walker and John Kasich who said they would follow through on their campaign promises not to waste their states’ money on high speed rail.

So Transportation Secretary Ray LaHood rescinded nearly $1.2 billion in stimulus funds.   Use the unneeded funds to balance the budget?  Pay for unemployment benefits?  No.  He’s going to spend it anyway.  It’s going to California’s “train to nowhere” boondoggle– at least another $624 million.

Included in the plan for the “train to nowhere” are tracks, station platforms, bridges and viaducts which would elevate the line through urban areas.  The initial section, however would not be equipped with maintenance facilities, locomotives, passenger cars or an electrical system necessary to power high-speed trains.

Putting the Cart Before the Horse. by The Elephant's Child
November 30, 2010, 9:21 pm
Filed under: Capitalism, Conservatism, Economy, Freedom | Tags: , ,

Consumer demand is a consequence, not a cause, of economic growth.

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