Thursday, February 05, 2009

SCARE TACTICS: THEY'RE NOT JUST FOR REPUBLICANS ANYMORE

I voted for Obama last November. Not really a hard decision either. I don't normally vote for Dems or GOPers, but with Johnnie "Four More Years" McCain & third-party frauds like Bob Barr and Cynthia McKinney presenting the alternative, it was easy to pull the lever for a likable, intelligent guy like Obama.

And so far it looks as though he'll do much of what I hoped and assumed he'd do: not be Bush in the foreign policy & civil liberties arenas. You know, basically not be a Constitution-destroying, executive-overreaching, gutter patriot. Conversely, I had little hope for him in the economic arena (nor did I with McCain) and so far he's lived up to that expectation as well.

What I did not expect, however, and what I'm very disappointed to see, is the sort of "Do This NOW Or The World Will End" demogoguery that marred the Bush administration and led us not only to the Iraq War, but last Autumn's abomination, the National Loot The Treasury Act Troubled Asset Relief Program, or TARP.

You know what I mean, as to both shameful episodes, as well as the passage of the so-called Patriot Act and other anti-democratic measures. A rush to ram through generally complex bits of legislation or executive action . . . without time for debate, analysis, national pulse-taking, or reasoned thought. No, just a barrage of "Do This NOW Or The World Will End" demogoguery.

Colin Powell at the U.N. telling the world that Saddam's WMDs were poised to burn civilization to chalk. Ashcroft explaining that without grossly expanded police powers "the terrorists" would bring down western civilization as we know it. Hank "Goldman Sachs Is My Middle Name" Paulson telling frightened Americans that if they didn't hand $700 billion of their hard-earned tax dollars to a cadre of rich, corrupt bankers the economy would collapse.

And now, with a president -- an intelligent, thoughtful, charismatic man from all I can tell -- who promised a return to reason, to courage, to democratic processes, we get this beauty as he excoriates America to pass a $900 billion "Stimulus Bill" that includes tax rebates for car buyers, research grants for NIH doctors, yet only $25 billion for the "infrastructure" rebuilding he's been promising since the election (from The Official White House Release):
A failure to act, and act now, will turn crisis into a catastrophe and guarantee a longer recession, a less robust recovery, and a more uncertain future. Millions more jobs will be lost. More businesses will be shuttered. More dreams will be deferred.
That's an appeal to fear. Pass this bill now. Not tomorrow, not next week, not following a debate, not after a two week recess to allow legislators to speak to the American people and discover what they think about the bill's particulars, but now.

Because if you don't pass it now, you will lose your job, your business will go under, and all your dreams of retirement, of college for your kids, of owning a house without a zero-down mortgage will die. You will have guaranteed the recession that will break you!

I have my own opinions about this stimulus plan as I'm sure you can tell. But that's not even what bothers me, and that's why I waited until today to write about it. I didn't vote for Obama's policies, I voted for a return to the American process, after Bush & Cheney derailed it for nearly a decade.

But this -- this "Do This NOW Or The World Will End" demogoguery -- is not what I voted for, and it pisses me off. And regardless of what you think of the substance of the stimulus bill or the modified version that will surely pass, this should piss you off too.

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26 Comments:

Blogger Toast said...

this should piss you off too

And yet it does not, because in order for the stimulus to stave off a bigger and even more awful recession/depression than the one we're already in, it needs to happen now, not six months from now or a year from now. Further, your reasoning "This is like Iraq!" is quite silly. "We were rushed into one thing when we didn't need to be, ergo any time someone urges us to act hastily they're wrong!" You're like the King of False Syllogisms lately.

7:49 AM  
Blogger Mike said...

in order for the stimulus to stave off a bigger and even more awful recession/depression than the one we're already in, it needs to happen now, not six months from now or a year from now.

Please explain how that will work economically. What is it, exactly, that threatens us in the immediate present? And what is it, exactly, that this stimulus bill will do to fix things? And, most importantly in terms of what this post is about, why exactly is it so important to pass it now, and not in one month or two months or six months?

your reasoning "This is like Iraq!" is quite silly. "We were rushed into one thing when we didn't need to be, ergo any time someone urges us to act hastily they're wrong!"

No, you've misunderstood what I'm saying. The correct syllogism is "We were rushed into one thing when we didn't need to be, and any time, short of imminent danger, that someone urges us to act hastily it is wrong to do so! Ergo, it is wrong this time as well."

And to avoid a long side-debate, let me make clear that by "imminent danger" I mean threat of invasion, threat of complete infrastructure collapse (i.e., complete breakdown in police, fire protection, health facilities, etc.). Neither WMDs 6,000 miles away or the threat of a really bad economic downturn count.

8:23 AM  
Blogger Mr Furious said...

I'm more with Mike than Toast on this one. I look at this bill and see nine pounds of bullshit in a ten-pound bag of "stimulus." If this thing was cut to the bone I'd feel more comfortable "rushing" it through—but would it have the votes?

Obama is NOT riding herd on those fucknuts in Congress like he needs to to get this shit done RIGHT. He's just pushing to get it done. That's an important distinction, and one I cannot support.

Do we have anything to show for the $400 (or was it the whole $700) Billion Bush and Paulsen blew through? Banks aren't lending, everything is still skidding into the ditch...it's been 4 months and the planet hasn't tumbled off it's axis...

I still see too much garbage in the bill and not enough oversight—and not NEARLY enough infrastructure spending. When this is over with, I at least want to see the modern day equivalent of the interstate system or Blue Ridge Parkway, Hoover Dam or something—just in the form of mass transit, a modern electrical grid, broadband, solar and wind farms...fuck, just pick up the tab to upgrade the (gov't owned) Tennessee Valley Authority coal plants to "clean" technology or something.

9:48 AM  
Blogger Mr Furious said...

I need to clarify something. I think Obama's sense of urgency is well-founded. I just don't think he or Congress have reached deep enough yet.

I'm all for hope and trust, but faith? Not so much. This plan ain't worth passing yet. Get back to work.

9:51 AM  
Blogger Smitty said...

Obama is NOT riding herd on those fucknuts in Congress like he needs to to get this shit done RIGHT. He's just pushing to get it done.

That's what troubles me the most as well. Cole over at Balloon Juice points out that in a package this size, there will be some bullshit programs and boondoggles that get some money. Can't be helped. So to delay the package because you're afraid some, I dunno, Plumber in Ohio will figure out how to play this system is wrong. But just as bad is to shove an ill-conceived package simply to infuse money.

That said, Michigan stands to make a mint if what our Guv says is coming actually comes. Now if I could just create myself a "Road-building clearinghouse investment group company" I could finally get that big huge house I've always wanted...

9:54 AM  
Blogger George said...

One of the biggest problems with the NOW NOW NOW approach is it calls for "shovel-ready" projects. And that means not enough longer range thinking. That's the part that troubles me.

And while it might not be as bad in NY, here in CA things are closer to a breakdown, btw--the state is already not paying money it's supposed to pay to people cause it has no money. That's a problem. Right here, right now--Feb. 5.

That doesn't mean this stimulus bill is the correct answer, of course.

12:39 PM  
Anonymous wfta said...

Whenever somebody says the “sky is falling” is it worth considering that it just might be? What if he’s right?

When major corporations are announcing tens of thousands of job cuts every day, I’m willing to accept that we have a problem and as people grow more and more worried about their jobs being next they will spend less and less inspiring more corporations to even greater lay-offs.

When it comes to TARP, I very much resent the socializing of risk and rewarding the “speculator class” with a great big do-over. Unfortunately, like everybody else in the reading-listening-watching news audience, I have no idea what the magnitude of “toxic assets” is nor whether allowing the institution that so badly mis-priced risk to fail will leave enough of a credit infrastructure to facilitate a viable Main Street economy. Secondary and tertiary debt markets are necessary things, but greed and hubris sent them out of control.

While the size of the “stimulus” should give anyone pause, my only real problem with it is that it tries to placate Republicans who have no intention of being placated. Tax policy, other than reverse income tax for the poorest citizen will do next to nothing in this environment. Middle and upper income households and businesses will either save or pay down existing debt with any money thrown at them. Trickle-down was horse shit in 1981 and it still is.

Spending on what we broadly define as infrastructure is a good thing—even that which is not immediately stimulative. It invests in our future social and economic wellbeing. Substandard bridges, roads, power grids, air traffic control, public transit, public buildings. Do you have any idea how many municipalities are looking down the barrel of EPA consent decrees over their sewer systems—and how hard it is to get a local tax issue passed for anything that doesn’t get you to the office any quicker. A trillion dollars probably won’t get done all the project that are truly worthwhile.

And it gets spent here. People get hired. People spend. More people get hired.

I’d like to avoid a depression if that is possible. My parents were born in 1919 and 1927 and their stories of the thirties convince me that we do not want to go through that with today’s thoroughly urbanized population.

My guess is TARP has stalled because the banks are past saving. Mitch McConnell says we can’t spend our way to prosperity. We better hope he is wrong.

I apologize for the length of this comment.

3:42 PM  
Blogger Weaseldog said...

Overspending money we didn't have, got us into this mess, so the logic goes that overspending even more money that we don't have will solve the problem.

Every addict will tell you that their problem is that they can't get enough drugs. Same here. The bankers and other entities have the capacity to absorb infinite quantities of money. It's just electronic bits in a computer, kept as virtual inventory.

And to add perspective, Argentina bailed out Bank of America and Citigroup in 2001, and they keep paying and paying. Because they gave away all their money, all of their assets, and now they borrow back from the banks, so the banks rule their government now.

Eight years later, they are still in a depression, thousands of people have starved to death, the infrastructure is falling apart, and still the banks demand more tribute.

This is the path we are traveling on.

4:08 PM  
Anonymous Applesaucer said...

Good post. And Weaseldog is exactly right.

Note that the Top Seven investment banks received $140 billion in TARP funds last year. They spent $85 billion on bonuses. That's right: over 60% of the funds went to bonuses.

And how much of the remaining $55 billion went to acquisitions?

Thank goodness we got that TARP package as quickly as we did.

Applesaucer

4:30 PM  
Blogger Mike said...

"shovel-ready" projects

Oh yeah, these projects are certainly "shovel-ready."

I apologize for the length of this comment.

No need. Now, as to the substance of your comment:

Whenever somebody says the “sky is falling” is it worth considering that it just might be?

I don't listen to what politicians and quasi-governmental types (read: Bernanke) say. I look at what they do, and I also look at available eveidence. The sky isn't falling. Things are bad, that's true. And Geithner, Bernanke, Larry Summers are looking to throw free money to bankers. To say nothing of Congress throwing money at whatever project they think will garner them votes.

And, of course, there's no reason not to debate and analyze the proposed measures, so long as the sky is not in imminent danger of falling.

Middle and upper income households and businesses will either save or pay down existing debt with any money thrown at them.

Assuming that's true, why is that a bad thing? Lack of saving and accumulation of runaway debt (on the national as well as personal level) is precisely what got us into this mess.

Spending on what we broadly define as infrastructure is a good thing

Again, assuming that's correct, then the bill as currently structures is a woeful disaster, with barely 3 percent of the total outlay going in this direction.

So it needs to be debated and tinkered with further. Not rushed to passage NOW.

6:46 AM  
Blogger Edwardo said...

This is now the third blog, including my own, to call Obama to the mat not just for his Bush like fear mongering, but for the general unworthiness of the "stimulus package." Well done.

8:38 AM  
Blogger Mike said...

What's the third you're thinking about?

Actually, I've seen a large, large number of variations on the "Obama's Recent Actions Have Disappointed Me" post lately, with this being one of the topics.

9:01 AM  
Anonymous wfta said...

No. Saving is a virtuous behavior, but not when you want to stimulate the economy. It makes no sense to take the nation deeper into debt to allow middle and upper income citizens to save.

And yes, I would prefer an infrastructure spending plan designed by J. K. Galbraith, but public money is inevitably spent by politicians. I would prefer to put most of it in the hands of mayors and county commissioners who I think are the best informed, most responsible and least partisan politicians available.

I don’t advocate no debate, but the need to spend quickly is real. Recession is a bunker mentality. Economic activity begets economic activity. One of my favorite anecdotes of the New Deal is when the WPA crew chief came to my grandfather’s country store and asked to buy ten shovels. When my grandfather told him he did not stock so many shovels at one time, the crew chief bought the two available shovels and eight shovel handles.

10:49 AM  
Blogger Smitty said...

but the need to spend quickly is real. Recession is a bunker mentality. Economic activity begets economic activity.

I am torn on this sentiment. On one hand, it seems perfectly intuitive. OTOH, it is too close to a justification of the republican mantra of tax cuts and more tax cuts: it will allow people to spend more and rescue the economy (even though it is proven to be false).

Point is, my own economic illiteracy is such that I guess I'll let Obama's package do its thing, if it ever passes, without comment until enolugh good or bad has happened that I can use my Super-Powered Hindsight Goggles.

1:06 PM  
Anonymous Anonymous said...

So some here are supremely confident that the original TARP plan wasn't a free money giveaway, even though they admit that they don't know anything about finance or economics and they don't care to know anything.

Yet, if they bothered to read something beyond the sports and op/ed pages, they might actually figure out just how much they've been bamboozled.

I mentioned before, that of the $140 billion paid out to the top seven investment banks, $85 billion was "bonused" to employees.

And now it turns out that the Treasury overpaid for what they got by $78 billion:

The U.S. Treasury looks to have overpaid financial institutions to the tune of $78 billion in carrying out capital injections last year, the head of a congressional oversight panel for the government's $700 billion bailout program told lawmakers on Thursday.

Elizabeth Warren, a Harvard law professor, said her group estimated the Treasury paid $254 billion in 2008 in return for stocks and warrants worth about $176 billion under the Troubled Asset Relief Program, or TARP.

Warren said the Treasury, under then-Secretary Henry Paulson, misled the public about how it would price them.

"Treasury simply did not do what it said it was doing ... They described the program one way, and they priced it another,"...

4:25 PM  
Blogger Mike said...

Saving is a virtuous behavior, but not when you want to stimulate the economy.

You make the assumption that it's a good thing to "stimulate" the economy. Other than monetary stimulus and deficit spending (both of which will exacerbate current problems and lead to massive inflation), how do you "stimulate" an economy that needs to unwind? To write-off bad debt?

It makes no sense to take the nation deeper into debt to allow middle and upper income citizens to save.

No, that's exactly what makes the most sense: so after the unwinding and writing off people have money to spend without needing to borrow like crazy.

One reason America has sprung from past depressions & recessions is that we had an excellent savings rate. Unlike the negative one we have now.

my own economic illiteracy is such that I guess I'll let Obama's package do its thing

I hate to say it Smitty, but that's a dangerous attitude. You should never trust anyone to do something unless you understand what he's doing. And understanding things (i.e. improving your economic literacy) is not only essential, it's not that hard to do.

Check out some of the follwoing websites and just start reading them:

http://www.nakedcapitalism.com/
http://jessescrossroadscafe.blogspot.com/
http://www.ritholtz.com/blog/
http://cunningrealist.blogspot.com/

I admit it may be a bit of a slog at first (though all four of these guys are EXCELLENT writers), but like anything else you get the hang of things the more you read.

7:53 PM  
Blogger Smitty said...

but that's a dangerous attitude. You should never trust anyone to do something unless you understand what he's doing

Somewhat sheepishly...I was a bit tongue-in-cheek. I do get some of the larger theories the various parties are arguing about, and I do know enough to know that "keep cutting taxes" doesn't work.

That said, my eyes do glaze over when NPR starts going wonkity-wonk about Keynesian blaggidy blah.

I will check out those sites. I also, just the other day, bought a book called "New Ideas From Dead Economists." Described to me as a intro to U.S. economic theory.

I will try my best to read all of this sober.

9:39 PM  
Blogger Mike said...

"keep cutting taxes" doesn't work.

Why?

I will try my best to read all of this sober.

Yeah, tough debate for a Friday night, that's for sure! I'm not exactly in "analysis mode" right now myself.

11:00 PM  
Anonymous Applesaucer said...

" They spent $85 billion on bonuses"

Those were for 2007. Not sure what 2008's bonuses were.

Applesaucer

11:08 PM  
Blogger steves said...

What is your address? I don't want my home invaded by Martians.

You make some really good points. Economists from various backgrounds seem to all agree that rushing into this is not the best idea and I tend to agree.

I’d like to avoid a depression if that is possible. My parents were born in 1919 and 1927 and their stories of the thirties convince me that we do not want to go through that with today’s thoroughly urbanized population.

There is decent evidence that some parts of the New Deal spending prolonged the Depression or otherwise made it worse.

12:00 PM  
Anonymous wfta said...

The US economy alone has lost over a million jobs since October. It will lose another million by the end of March. This at a time of extremely loose monetary policy and after eight years of the lowest income tax rates since WW II. And you don’t see the need for stimulus.? Do you recall from Economics 101the term “trying to push a string?”

Your are absolutely right that both consumers and speculators have indulged in stupendously irresponsible behavior, but does that mean the other 330 millions of us have to suffer a deep and prolonged recession to strike a blow fiscal rectitude? I hope not. Will it inflate the currency? Absolutely. And since I have zero debt, that is terrible for me, but I still prefer to have a stimulus. Being jobless sucks. Having 10-20% of the population jobless sucks more.

The current crisis is not so different from the one begun in 1929 and the only thing that prolonged that depressions was failure to spend enough fast enough.

I’d like to retire in 10-12 years and I’ve probably seen my net worth drop by 40%+ in the last year. Since I’ve always lived within (in fact beneath) my means, that is not an inconsiderable sum. If the children and grandchildren of the people who refinanced their homes to buy a new SUV and two jet-skis have to pay for the stimulus, so fucking be it.

5:13 PM  
Blogger steves said...

The current crisis is not so different from the one begun in 1929 and the only thing that prolonged that depressions was failure to spend enough fast enough.

I don't think this is true. Hoover reacted fairly quickly. He established the Reconstruction Finance Corporation, an agency that gave out billions in loans and aid to banks, businesses, state and local governments. He also signed the Smoot-Hawley Tariff Act and the Emergency Relief and Construction Act, which funded numerous public projects and improvements to infrastructure. Personally, I think Hoover got kind of a bad rap and plenty of undue blame for the Depression. Herbert Hoover: Forgotten Progressive is a good look at him and his policies.

This editorial from the WSJ looks at the idea that the New Deal may not have entirely been a good thing. A more detailed look can be found in this paper, New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis.

Another good econ blog is Truth on the Market.

6:47 PM  
Blogger Mike said...

WFTA - You make some serious points in terms of policy, in terms of what the world should be able to do to solve crises.

But as to the economics, I don't see how you can declare unemployment unacceptable, yet be so glib about massive debts and massive inflation. The former is terrible, no doubt. Yet it will pass.

But the huge debts and inflation will wipe us out for a generation. It will saddle future generations with the price tag for our profligacy. I just can't see it.

7:06 PM  
Anonymous wfta said...

I’m not glib about debt and inflation. We should have been concerned about them in the early 80’s and again in the early 00’s when the “cut tax and spend” philosophy resulted in doublings of the national debt. And we should be concerned about it in the future. But when the patient is in cardiac arrest you use the defibrillator not issue a sermon on cholesterol and exercise.

5:54 PM  
Blogger Mike said...

I guess we differ on our diagnosis.

You see cardiac arrest. I'll agree that I think it's more than just indigestion, but probably angina at worst.

7:01 PM  
Blogger Weaseldog said...

We're moving to a purely government based economy.

The problems that plagued the work programs of the depression will be worse this time around.

The reason is that available resources are now in decline, as is oil and energy production.

The government (and it's contractors) will be forced to outbid private industry for fuel, tools, machinery etc...

As it does, the price of food and necessities will climb higher in price. Private industry will have no choice but to attach itself to the government teat. If a business can't get the connections and pay the bribes to suck free money out of the government, it find it too difficult to turn a profit and stay in business. Shortages of goods needed to run the business will cause contract dates to lapse. The inability to price goods at government subsidy levels, will kill sales. Bankruptcy will be the only course left.

The government programs themselves will be rife with inefficiencies, disappearing materials, bribery, favoritism and lot's of cheating.

We're just a few years from seeing the government seize the 401ks and pension plans like Argentina did. So forget your retirement. You're not getting one. Even if you do get something out of it, you'll find your income won't support you well. The returns on investment will remain low and prices will keep rising.

Besides, the stock market need more people putting money in, than taking it out, to keep the value rising. So you folks can't all retire at once. If you do, you're going to crash the market.

The current plan counting on people who can barely pay their debts now, to borrow more so that they can default on even bigger debts. This kind of thinking is running rampant in Washington. People can't do this.

If Washington is going to keep it's favorite corporations growing, when there is not enough business to fuel them at the size they are now, it will have no choice but to print money and give it to them. This is the only way to keep them growing so that they could serve hundreds of billions of people, when those people don't exist. Their profit will have to come from the printing of fresh money.

And that's what we have to do if we're going to chase infinite growth on a finite planet. Without infinite growth, our system will crash on a regular basis, as it outgrows the planet's capacity to support it. The Fed worked hard over the years to prevent crashes and now the financial sector needs the economy of dozens of planet Earths, in order to maintain profits and keep growing.

So here we are, stimulating the economy to keep the banks growing so that they might be able to service and profit from hundreds of planet Earths, whenever those new Earths are discovered and conquered.

In the mean time, such gargantuan entities are going to take up a lot of resources, as they feed on world's economy. it won't be long before they gobble up your retirement fund as a snack.

11:19 AM  

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