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  • Morning Bell: There They Go Again

    Earlier this year the left in Congress and the White house pushed through a $152 billion economic stimulus package that they assured us what keep the economy out of recession. It didn’t work. In late July, when the White House sought the power to take over Fannie Mae and Freddie Mac, the left insisted on $5 billion in new spending for a ‘affordable housing trust fund‘ to help stabilize housing prices. That didn’t work. Just last month, the White House and Congress pushed through a $700 billion bailout of Wall Street assuring us it was the only option to keep the financial crisis for spiraling out of control. So far that hasn’t worked either. Now Speaker Nancy Pelosi has announced that Democratic leaders will hold a meeting with “a group of economists” next Monday to pressure Republicans to support another $150 billion in new deficit spending. As Ronald Reagan told Jimmy Carter in their 1980 debate, “There you go again.

    Details on Pelosi Plan 4.0 are not firm yet, but early indications are it calls for significant new government spending, particularly on infrastructure (Pelosi’s theory being that the new spending will create new jobs). Hopefully some of the economists will set her straight on Monday. As a 2000 Department of Transportation study showed, infrastructure spending only shifts jobs from one sector of the economy to another.  And even then, the government induced shifting of jobs from sector to sector comes at a steep cost. A 2004 Government Accountability Office study found that the Emergency Jobs Appropriations Act of 1983 did ‘create’ 35,000 new jobs but at a cost of $257,142 per job ($546,136 in 2007 dollars). Pelosi might as well just drop government money from a helicopter.

    Which, by the way, is what the rest of her plan basically does by extending unemployment and other welfare benefits. While this may serve some socialist redistribution of income goals, the economic literature is very clear that it does nothing to stimulate the economy. Government spending cannot significantly affect demand since it merely redistributes existing purchasing power, but it can alter supply by altering the productivity rates of people and businesses. Witness:

    • Public Finance Review: “[H]igher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product.”
    • The Quarterly Journal of Economics: “[T]he ratio of real government consumption expenditure to real GDP had a negative associa­tion with growth and investment,” and, “Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment.”
    • The Journal of Macroeconomics: “[T]he coefficient of the additive terms of the govern­ment-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%.”
    • Public Choice: “[A] one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unem­ployment rate by approximately 0.36 of one per­cent (from, say, 8 to 8.36 percent).”

    Economic growth is driven by individuals and entrepreneurs, not by Washington politicians. Massive Keynesian spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates. Yet in the 1980s and 1990s—when the federal government shrank by nearly 20 percent of gross domestic product (GDP)—the U.S. economy enjoyed its greatest expansion ever. Congress should learn from its previous mistakes, including the first stimulus bill, and not consider proposals that increase the debt and do lit­tle to boost the economy.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    18 Responses to Morning Bell: There They Go Again

    1. Michael J O'Bri says:

      It is disgraceful how little Pelosi, and her gang, Reid, Dodd, and B. Frank, know about economics. It is the Pelosi Democratic platform and policies that resulted in this economic melt down. The county elected these people to positions of power; we were reaping what we planted. An independent commission, outside of Congress, is needed to expose which elected officials benefited from the sub prime mortgage programs from Fannie and Freddie. The U.S treasury has limits, the taxpayer has limits and our deficit and national debt continue to balloon. We will be dealing with extreme inflation in the next 3 years with high unemployment. Welcome back Carter.

    2. Charles Ivie, Apple says:

      All of the so called "rescue" efforts have been various forms of socialism. Trying to stop the feeding frenzy on wall street by throwing money at them is like trying to convince a tiger to become a vegetarian by bribing it with raw meat.

    3. Perry Kluver, Oklaho says:

      But, is anybody that counts listening to what is going on. It appears that no one with the authority to do what is required to stop this insane spending has the common decency to do so. Why is it that small and large business have to lay off employees and stockholders take reduced share dividends while the Federal Government has NEVER had a layoff?

    4. charla edgar rockwal says:

      I called my House Rep. and they said she is not proposing

      another anything. Was is going on?

    5. Steve Heuston, Silic says:

      You would think a simple economic test would be required to hold public office! Why do these congressional 'leaders' feel the American Public is so gullible and where is our responsible citizen outcry to be heard? How dare they, Pelosi, Dodd, Frank, even George Soros, and the like, lecture us what needs to be done. It makes me sic to think they will not listen to the facts, but are only listening to their own egos while primping for the next press meeting to announce they are here again to 'rescue' us. From who? Themselves. Wishfull thinking.

    6. Victoria, Florida says:

      In my opinion the unfair business practice is the problem in this Country. This practice starts from the top on down and we as Americans must all take responsibility for the greed and corruption. It is high time we all look forward to resolve this problem and get this great country back on track. Crying over spilled milk doesn't solve the situation by any means. Fair business practice must be the key issue of the day. We need as a Nation to start learning to save more and spend less. Credit cards need to be paid in full at the end of the month and if you can't do this practical responsibility, don't get one. Make sure you learn to live with in your means like your for-father and mothers did, before the credit card mania. Buy your home with 10% or more down rather then with ties er loans of no percent down. Let this be a lesson learned from what we are all going through. There are too many Americans who did apply responsible spending and buying and this is unfair business practise to those who had no business in buying of homes with nothing down. Who ever said that every American should have their dream fulfilled at the expense of others? The poor will always be among us and have been for centuries. For them there are opportunities by the various programs available to them. there is no rhyme or reason for the poor to put the whole nation at risk. Those in Government and in churches and within our communities can do far more for the poor then they will admit, but when you have the attitude of some who do not have the feeling for the love and concern for their fellow neighbour, it is not surprising to me to see a nation fall on hard time. We are mendaded to be our brothers and sisters keepers from the top down. May the Lord Jesus Christ continue to be our guide in this tragic and major decline financially and morally.

    7. Pingback: Morning Bell: There They Go Again : $700 Billion Bailout Plan

    8. David Black, Sr. M says:

      We, The People, allow our elected representatives to, not only create policies and programs which create opportunities for potentially corrupt business entities to practice unscrupulously, but actually force them to do so in the name of public service. Then we complain and cry in outrage when the whole thing blows up and bottom falls out.

      The only accurate explanation I've heard to date is from conservative satellite radio show host Andrew Wilkow, when he explained that we are suffering the effects of a fallen "Fake lenders to finance bad loans, creating an entire market of "Sub-prime Lending", ultimately leading to the falsely inflated property values. These false values negatively affect the free trade market, as we did away with the "Gold Standard"; real property is the only solid base for which our economy stands. When Freddie and Fannie fell due to shoddy business practice inherent with the thoughtless, irresponsible risks taken with tax payers' money, all to increase bonuses and the ability to finance political agendas, our economy was bound to follow right into the tank.

      Approximately 5% of the homeowners in this country are in default of their mortgages, and due the corruption of policy and a $700 billion out to try and cover the tracks of those responsible for the disastrous mess, every tax payer in the country, homeowner or not, is now going to pay the price for generations to come.

      Recently, Senator John McCain has proposed $300 billion for some form of rescue package, in which the government assists in renegotiating the mortgage loans to a more realistic valuation of the properties. This seams a better place to start than the current $700 billion plan, but is only the beginning. We should possibly demand that the government convert some of their recent confiscation into a plan more along the lines of what Sen. McCain is offering, then top if off with dismantling of Fannie and Freddie, turning the properties represented there, along with the risks, back to the lenders of origin. Top it off with a full investigation of all parties involved in the fallacious activities, politically and financially, and prosecute the offenders.

      Though a harsh medicine, a plan of this magnitude would punish those who have profited from otherwise criminal actions, and set the tone for an eventual financial recovery for our economy. This is a tough lesson for America to learn. However, we should all understand that there is no room for government intervention in a free market society.

      Instead of the government trying to protect our economy by creating a constantly rising economy, which must at some point fall sharply, we should welcome the natural up and down cycles of a free market. This is what truly creates opportunities for all, not just the chosen, wealthy few.

      Ultimately, the government should only enact policies to protect the integrity of the free market, protecting America from unscrupulous activities. If we want to point fingers, and find someone to blame, we only need to look into the mirror. After all, we put the people, responsible for the mess we face, in office. We should begin by blaming our own complacency. The only way to correct the issue is to stand up and take responsibility in November by removing those we can from office. Those we cannot remove will definitely receive the message.

      America is the greatest nation in the history of the world. We will recover from this, as we have in the past. This time though, it would be a good idea to learn from it and tell the government we will no longer stand for their ineptitudes.

    9. Randy, Prescott, Ari says:

      Why don't we force the same standards on Congress that we have for ourselves? Namely, if you find yourself short, find ways to stimulate income that really work. Namely, stop spending. When you find yourself in a hole, stop digging.

      I hate to hammer the same old gong, but how many jobs could be stimulated right here in America if we opened up drilling for oil? Off shore oil could be started within months, not years, putting the people to work. What about a flat tax that would bring trillions of dollars back to this country (currently being held in off shore accounts)for investment into legitimate new business ventures (like alternative energy plants, not to mention all the small businesses that would spring up to support the new jobs created by these practices).

      Send a message to our politicans that we are tired of paying for their mistakes and corruption. Most of us can figure these things out on our own, what are they being paid for?

    10. Jack Kyle, Lubbock,T says:

      What’s The Difference?

      Let’s say I have a third cousin once removed that owns a hardware store and he has purchased too many power drills. A year ago he had an opportunity to purchase a large quantity of high quality drills at market value. He believed that because of the building boom, which had been on the rise most of his young life, there would be a great demand for these drills and he could easily double his money. He did not believe that the housing market would ever dry up. He woke up one morning with a room full of high-priced drills that nobody needed or wanted to buy. Even those that wanted to buy them could not get credit to do so.

      Because of the recent action by our federal government to buy many failed businesses and make huge loans to others, he believes they should do the same for him. He may have a point. If the government can take money out of his bank account, in the guise of taxes, to bail out others because of either bad business practices or down right criminal activities, why should they not bail him out as well?

      The government has said they have the right to take his money as well as yours and mine to keep “businesses of their choice” solvent. The key to being one of the “businesses of their choice” is to have contributed large sums of money to certain congressional leaders such as Barney Frank and Christopher Dodd, just to name a few.

      This cousin believes that the government should force you and me to either buy his drills or his business, the same as we are doing with these so called “Too Large to Let Fail Businesses”. He says his business may seem small to others but to him it is the biggest and only business in the universe.

      He says that either the government or you and I can forward his money to Las Vegas because he believes he can gamble with it as well as anyone else. Can you say “Suckers”?

      Jack Kyle

    11. Nasdaq7, South Afric says:

      Yes it is my view she started the world wide stock market collapse and possibly Greater Depression because of her bitter speech on the rescue package. The rescue package needed to go through to stabilize the markets. But the damage was done. The markets started to panic. Now everyone is poorer. Not only the CEOs she so hates.

    12. The voice of reason says:

      The condition of our fundamentality has to get back to

      values that we once held dear as a nation.

      The corruption and rape of are system Is treason.

      The our morals as A nation has declined and so has

      the economy . Foolish pride and false promises from

      so called leaders . The world Is watching and we can't fix

      our own broken government how can we fix others ?

      The money spent on the war should could have been used

      to strengthen our military and security here at home.

      We have to stop funding other countries for now freeze

      all the billions of dollars going out to the world except

      emergency relief aid and rebuild ourselves.

      charity begins at home ! Russia and china are poised

      and waiting to attack us and if you doubt it study history.

      All the tell tale signs are right under our noses.

      Common sense Is not very common these days !

      We don't even own our own country anymore we have sold

      the American dream and our so called leaders are sleep

      at the wheel wake up ! wake up ! (It's not what your country

      can do for you It's what can you do for your country).

      Our troops better get home fast and regroup or

      the next war could be fought on our soil.

    13. RickFromMichigan says:

      As far as Ohio[and many other states]Obama+Acorn,and its predecessor, =major voter fraud in swing states.FBI investigates.

    14. Laura from Miami says:

      As usual when it comes to the Democrats, they get away with all kinds of unlawful acts, yet nothing happens to them. I think that Nancy Pelosi, Harry Reid, Chris Dodd, Barney Frank, and all the other ding bats in the democratic congress need to be put on trial for what they have done to this country. All you voters who wanted "change" and elected these ding bats into office, want more of the same? elect Obama, then we can just pack our bags and move out of the country with Susan Sarandon. Wake up good citizens, wake up!!

    15. Michael J O'Bri says:

      Bravo to all.

      The spirit of good will and Adam Smith remain alive, his nemesis, Karl Marx, lives and reigns within our congress and country. Economic freedom has lost, and may never be the same. Keynes is here with Dodd and Frank, while McCain does not know who is serving dinner, or what is on the menu.

      Michael

    16. Pingback: AFNonline » Blog Archive » We Are All Socialists Now

    17. John Norris Seattle says:

      One year ago our brilliant leaders were saying that they were afraid that the housing industry was going to pull the rest of the economy into recession so they quickly put together the WAll mart Rescue Act. 106 billion in cash payments to people that don't pay very much in taxes. it took 6 months to mail out the money and it seems as though it helped China a lot, accept that China was not the problem. Now our leaders are worried that the housing industry might pull us into a depression. 160 billion stymulus would pay a 40,000 tax credit to anyone who buys a house in the next year, it could be immediate by the stroke of a pen. The government will get 35% of back in tax reciepts and very little of it goes out of the country.

    18. C B LAW, Sr. says:

      The "BAILOUT" was and is the worst of ideas. The American taxpayer should not get "stuck" with this terrible product of the financial industries wrong-doings, and its mistakes in judgement! I just can't BELIEVE how our leglislature got sold such a "bill-of-goods", where we the gov't, buy up all or most of those BAD Mortgages, thus covering up and rewarding the terrible errors of those overpaid bankers…. It really amounts to just more government "meddling" in the free enterprise system…supposedly "saving us from ourselves", once again. To me, this act by Congress and Bush is "locking-the-barn-after-the horse-is stolen" Too little; too late to accomplish anything, and basically VERY UNFAIR. It won't work, of course. It may be politically correct, but anyone with an ounce of sense, knows its a terrible mistake …. I say, let it ride, and see what happens: if there's a credit crunch for a while, SO BE IT; if businesses can't borrow at all or borrow as much as they want, SO BE IT; if home sales are slowed down for a while, SO BE IT; if there have to be big layoffs in the financial industry ,, SO BE IT; All those things probably got so overheated that the system needs a rest. I can't feel sorry for the industry (Wall Street) that paid $62 BILLION in bonuses in 2006. ( yes, thats Billion.!) Now, then, if big government just can't get along without some form of "BAILOUT", and if it's just got to happen, that they throw some of our money at it, How about doing it this way: U.S. Gov't buy large amounts of PREFERRED STOCK in those companies that are "too big to fail" ..preferred stock that gets priority over common stockholders, so when things DO come around ( and they will), the Gov't gets paid dividends first, and meantime no common stock dividends get paid until WE ( our good ole Gov't) gets paid dividends…That would work for me. Glory Be! Simple isn't it? The "BAILER-OUTERS" get paid first–the old stockowners, who basically got us in to this, get paid later. Why not?

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