American Elephants

Why Things Aren’t Getting Better: by The Elephant's Child
November 12, 2012, 5:55 pm
Filed under: Capitalism, Economy, Statism, Taxes | Tags: , ,

President Obama managed to convince the people last Tuesday that government spending stimulates the economy, and that he cares about them. Perhaps he does care, but he’s way off on the government spending:

The Obama administration spent $5.60 for
every $1 of economic growth.

For the government to function, it needs to sell its debt at very low interest rates. The world has usually liked our debt, because they trust the United States to pay them back. If the world doesn’t want to buy our debt (our bonds), then bond prices will fall, interest rates will rise, and the government will be spending huge amounts of money just to pay the interest rates on our debt.

So who is buying our debt? It is our very own Federal Reserve which buys 70% of our debt. To get the money to buy the debt — they print money. But even if they are just printing money, that debt must be paid back, and interest rates can’t really get any lower. Which means that the government is running on fumes.

The Obama administration spent $5.60 for
every $1 of economic growth.

This means that the left hand of the government is borrowing money from the right hand of government. There is no one on the planet, whether it is the rich or the Chinese who can afford to continue bankrolling that rate of the return. And that’s why government spending not only doesn’t stimulate the economy, when a big chunk of the funds meant to stimulate the economy go into the pockets of cronies, it is not a hopeful solution.


Unique and Cutting-Edge Information from the Stimulus Bill. by The Elephant's Child

We have heard endless encomiums about the fabled Stimulus bill.  We have seen and heard the debates about whether it has accomplished anything at all. Information about where the money actually went and how it was spent seeps out very slowly.

$615,000 went as a National Leadership Grant to digitize the Grateful Dead Archive  at the University of California at Santa Cruz Library.

The grant will enable the UCSC Library to digitize materials from its Grateful Dead Archive and make them available in a unique and cutting-edge web site titled:  “The Virtual Terrapin Station.”

“Cash for Clunkers” Is Over, but The Memory Lingers On. by The Elephant's Child
August 26, 2009, 6:22 pm
Filed under: Capitalism, Economy, Environment, Taxes | Tags: , ,

The Obama administration’s Car Allowance Rebate System (CARS) better known as “Cash For Clunkers” has ended.  It was designed to provide benefits by reducing greenhouse gases, and stimulating the economy.  To encourage new automobile sales at the newly taxpayer, Fiat and Union-owned  companies, the government gave $3,500 or $4,500 to motorists when they brought in an older car to trade for a new vehicle.  The bill only rewarded those who owned gas guzzlers of  little value.

The EPA spent a month evaluating  30,000 models made between 1984 and 2004 and decided that only about 8,000 — that get 18 mpg or less — would qualify.  Oddly enough, it didn’t matter how big a difference there was between the old car and the new one.  You could get a subsidy if you traded an 18 mpg car for one that gets 22 mpg, but not if you traded a 19 mpg car for one that gets 42 mpg.

Of course this was just robbing Peter taxpayers to pay someone who could afford to buy a new car right now.  Used cars worth more than the subsidy were not eligible, which rewarded those who chose to buy a gas guzzler the last time.

Those who understand the details of CO2 emissions pointed out that any environmental benefit was simply too small to be measured, so claims for the benefits of the programs shifted to the economic benefits of stimulating new car sales. Or did this just push forward new car sales that would have been made soon anyway?

Then there were all the consequences that nobody thought of.  The subsidy was to be distributed only when the old car was destroyed.  Mechanics assigned to destroy the so-called clunkers have posted videos on YouTube, muttering in anger as they fill the engines of perfectly good Corvettes and Cadillacs with sodium silicate and run them until they self-destruct.

Today’s old cars are tomorrow’s valued classics.  Destroying old cars damages used car sales by eliminating inventory, and probably will  put some used car dealers out of business.  Used car prices will skyrocket.  This also harms the poor who need cheap transportation.  Those who make their living from selling used car parts complained loudly to the right people and got the law changed so just engines were to be destroyed. The program has undoubtedly been a net destroyer of wealth.

Many charities depend on donations of older cars which they are able to part out.  There has been a 12 percent decline in donations, devastating to the funds charities depend on to provide help for the needy.

The initial $1 billion was exhausted in a week, so Congress added another $2 billion, and the program that was expected to last through the fall, ended Monday.  The administration was unprepared to deal with all the applications for rebates.  250,000 cars were sold in the first four days.

Dealers were worried that they would not be able to be repaid before funds ran out.  The Transportation Dept. had processed only about 2 percent of applications.  Many were being turned down.  They hired people from the FAA and CitiGroup to process claims, asking them to come in over the weekend to attempt to catch up, and then notified them not to come in because the system was down until Monday.

Now, it turns out that the $4,500 rebate is fully taxable as regular income.

This was a small $3 billion program that demonstrated nothing so much as the incompetence of the federal government in administering a simple congressional appropriation.

These are the people who want to completely reform the best health care system on earth, which serves 330 million people, and which will add at least 2 trillion to the deficit.They assure us that they know just how to do it; that it will save money;  offer better care;  insure 47 million more people; insure all pre-existing conditions; and not only cost less but rescue the rest of the economy.  That sounds like a real clunker to me.

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