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Spending money that we don’t have for projects that we don’t have to have

By: Dan Spencer (Diary)  |  January 8th, 2009 at 09:48 AM  | 

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Republicans push back against turning a stimulus package into a bloated boondoggle.

Republican Senators spent the day at a retreat at the Library of Congress with three distinguished economists–Martin Feldstein, Larry Lindsey, and Peter Wallison–talking about how to get the economy going.

At the conclusion of the retreat Senators McConnell and Alexander spoke about what an economic stimulus ought to contain:

Senator Alexander: We — as the leader said, we want to be full participants in any kind of stimulus package that actually helps our economy grow, helps create jobs, helps stabilize housing.

We’re not interested in just spending money that we don’t have for projects that we don’t have to have at a time of such high deficits.

Watch the video:

The “spending money that we don’t have for projects that we don’t have to have” line sounds much more reasonable than talking about as much as a $1.3 trillion boondoggle on top of what is already a $1.2 trillion deficit.

According to the Associated Press, Feldstein and Lindsey support a big bailout:

Feldstein recommended a $400 billion investment in one year, Obama aides said, and Lindsey said the package should be in the range of $800 billion to $1 trillion.

So why did not the Senators hear from an economist like Harvard’s Greg Mankiw, who served on Bush’s Council of Economic Advisers, and is reported to be skeptical about the need for an economic stimulus?

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COMMENTS

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  • USNJIMRET

    Nothing like a ‘reasonable’ range of estimates.
    Low of 400 BILLION, high of 1 TRILLION.
    And yet not one of these “leaders” is all but apoplectic over even trying to say such astronomical numbers.
    What the heck is going on?
    This is absolute insanity.

  • Praying

    … to write your senators and representatives, to tell them how important you think it is that congress takes the time to think this through fully, so as not to repeat the bungling embarrassment of rushing through another “TARP.” Urge them to stand firm on conservative principles, to promote tax cuts over bailouts, especially in the area of reducing corporate tax rates and promoting tax cuts for ALL individuals, not just those who don’t pay any taxes anyway. If we can get our elected GOP congressmen to stick to the script and stop acting like RINOs, it will do a lot to increase confidence and unity within our ranks. Encourage your senator and representative to fight the dems with all their heart, soul, and strength. I actually emailed my TN congressmen on Tuesday, and was pleased to hear Alexander’s words – but we need to make sure these people walk the walk, not just talk the talk. Make your thoughts and opinions heard – the squeaky wheel gets oiled and too many people in this country are sitting around all doom and gloom waiting for someone else to fix their problems. We are the best, the brightest, the hardest working, the most loyal people in the world. At least we used to be.

  • 10ksnooker

    Every Republican in Congress stand up on their hind legs and say “not one vote of support from us”.

    Or answer the question, what do we do when the misprinting presses break?

    All this spending is going to do is the same it did with failed FDR, produce hyperinflation and leave untenable debt. I guess the pull is strong to buy votes for the next 50 years.

    It’s not fooling anyone — Why work when the pies are free.

  • izoneguy

    …first – Obama needs to resign.

    Good – got that out of the way…

    LOL.

    The economy will not get going under Obama. Why do you think so many companies are shedding employees? One reason is the left’s insane idea of National Health Care. They put a price on every employees head with that talk. Last time I checked it was still a free country. A person can decide to work somewhere or not. If they don’t like the benefits they don’t have to work there. But when the government starts interfering with the way business’s make decisions based on social policy then that is not capitalism any longer. In a way – thank god the country’s economy is in trouble. Imagine what havoc Obama would wreak if we had a surplus and he gets the keys with a full gas tank. At least now he gets the “car” with the gas needle pointing to empty with the “change oil” light on.

    http://www.usnews.com/blogs/capital-commerce/2009/1/7/why-obama-will-own-the-recession.html

    This is part of a comment on this article:

    “The market anticipates what Obama brings and massive shedding of employees, shifting to protective modes and hording of cash are all a consequence of mere words and promises of economic radicalization by Obama to his base.”

    This is what I wrote:

    Recession causes are pure democratic policies
    Any business person with half a brain knew that Obama would be bad for the economy. As “HatlessHessian of NE” stated:

    “The market anticipates what Obama brings and massive shedding of employees, shifting to protective modes and hording of cash are all a consequence of mere words and promises of economic radicalization by Obama to his base.”

    This statement hits the head of the nail with a sledge hammer.

    As Obama loved to proclaim – just words just speeches. Well words & speeches can be the downfall of an economy or a society. The economy was doing great until the real estate bubble burst. It burst under the policies of a corrupt and inept democratic congress. And still to this day the MSM has done a great job in shielding the corruptocrats. Sure Bush had a hand in this. The problem was that Bush was to nice and “bi-partisian”. He did not do enough in stopping Dodd, Pelosi, Reid & Frank. “The four horsemen of the apocalypse.” Bail-outs will be the downfall of our present economy and that mind-set is now ingrained into Obama policy. Obama is the wrong person at the wrong time to lead anything. As evidenced by the last two weeks of his flip flopping flubs – again the MSM is providing Obama great cover. As this recession turns to depression a strong force against the democratic culture of corruption MUST step forward or it will be too late. How long will it be before the Feds post a .pdf file so we can start printing our own money? That is what it will come down too. America is starting to look like Argentina circa 1999.

    • Praying

      And the jobless report for December is out, and the MSM is shocked by the results – even more jobs lost in Dec. than Nov. Gee, I wonder why? Izoneguy rightly points out that the “shedding” of workers is a direct result of fear of what Obama’s policies will do to their bottom line – but the left doesn’t care – they have been anti-business from the beginning. Apparently, many people in this country don’t have a clue what exactly fuels our economy. Hint – it isn’t the government!

  • http://impudent.blognation.us/blog kyle8

    Yes it will, the government can create a temporary increase in economic activity, but then you have to pay for it.

    I believe we will have a small recovery this year, but within two years we will be in the crapper again no matter how much is spent.

    The reason? Because the Obama team have all the exactly wrong ideas on energy policy, so high energy prices will come down on us again an wreck any nascent recovery.

    • izoneguy

      America has the will & desire to produce more of it’s own resources.
      The next four years will see negative growth in this sector. The bad players will begin to show more bravado as the price of oil recovers and probably zooms past $200 per barrel by 2011. The only way we will break the grip of the left will be for the next (R) president to enact a war powers act to get every rig in America drilling at 110% capacity everywhere we can.

      Yes – it will get that bad.

  • exitsfunnel

    I’ve been wondering about that for some time. If we’re not going to be Zimbabwe, we’ve got to do one ore more of the following three: (1) raise taxes pretty drastically; (2) slash entitlements; (3) slash military spending. Right now, each of those seems like a political impossibility, but something has to give. It’ll be really interesting (and surely depressing) to see it all play out.

    -exits

    • http://www.hakubi.us/ Neil Stevens

      We can revolve it forever, or until we run out of credit.

      A government isn’t like a person. There’s no time limit.

      • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

        mathematics demands it. even a government can’t repeal mathematics.

        The economy might go putt putting along for a while, with increasingly severe booms and busts. But eventually, $54 trillion in unfunded social security and medicare/medicaid mandates will be the straw, more like a mountain, that breaks the camel’s back for good. I just hope we don’t have another, real revolution that installs a full-fledged socialist dictator some time in the next 20 years.

        • http://www.hakubi.us/ Neil Stevens

          I don’t know who Karl Denninger is but he should read up on how long we’ve been had a national debt.

          • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

            For most of the time we had a national debt we were on a gold standard. We only got off that in 1969 with Nixon. After we went off the gold standard the monetary rules changed. Also in the 1960s LBJ decided to spend the social security trust fund. Since then we’ve been putting gubmint IOUs into a giant Madoff-style Ponzi scheme that obligates every one of us to lose every dime we put into social security and medicare/medicaid. The combination of the two is a huge change in the game. It makes a hash of predictions based on the game under the original rules.

            It’s possible to fix the economic problems and steady the economic ship, but we need to accept being in a depression for a few years to do it, and that will not be politically viable.

          • bs

            The problem is the interest on it. The interest payments in 2008 were over $400B. You can’t ignore the interest – it HAS to be paid, or we default. Right now that’s about 17% of the federal budget. What happens if we double or triple the debt? What part of the budget takes a hit?

            I heard somewhere the other day that at the rate we’re going, entitlements of SS, Medicare, Prescription drugs will take the entire federal budget by 2050. I have no idea if that was just baloney or not, but based upon the demographics of the country, it wouldn’t surprise me in the least.

        • zuiko

          We are not anywhere near the point where it is difficult to borrow today. At this point, it is incredibly easy to borrow. People are willing to buy our debt at rates approaching 0% right now.

          We should exercise spending restraint and not run up the debt on stupid “stimulus” packages, but the argument that it just can’t be done because nobody will want to buy our debt doesn’t hold any water. We aren’t anywhere near that point.

          • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

            Mostly because the rest of the world is in even worse economic shape. But eventually the piper will be paid.

          • zuiko

            We can always reduce the deficit later without doing a thing about the principle we owe. That debt never needs to be paid off. A default is not a necessary conclusion.

            As for entitlements specifically, we don’t owe people a dime in entitlement benefits. That’s the big difference between those programs and your typical Ponzi scheme. We can just tell them… sorry, we know you paid into SS your whole life expecting to get all of it back, but now we are only gonna pay you 25 cents on the dollar and you are going to like it. Nobody goes to jail, nobody defaults on anything, because those payments were never obligations. They’ve already done some of that, with increasing the retirement age and subjecting SS to the income tax. There will be much more of that to come in the future.

          • http://www.hakubi.us/ Neil Stevens

            We carried debt from the Revolution and the War of 1812 all the way to 1835 when the national debt was just about erased.

            We then ran the debt back up again into the tens of millions. That’s where it stayed until the civil war when we ran it up to about 2 billion.

            We carried that debt until WWI which we came out of with about 25 billion in debt.

            We dropped that to 16 billion by the end of the Hoover administration, but then the New Deal* ran that back up to 48 billion by 1941.

            WWII ran that up to 258 billion.

            We’ve run that up steadily ever since to the current 10 trillion.

            We haven’t paid off a war since before the Civil War. What’s going to change that will stop us now from revolving our debt?

            * And FDR ran in a balanced budget in 1932…

          • izoneguy

            Look at the debate in 1940

            http://newdeal.feri.org/survey/40b14.htm

          • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

            We’re now in the great society, where we are always deficit spending like we’re at war. Even in times of peace and prosperity we are deficit spending. When we have a real war it balloons like mad.

          • http://www.hakubi.us/ Neil Stevens

            The financing of our debt’s been there for about 150 years. Why will we only now have to ‘pay the piper?’

          • birdmojo

            Period.

            If I had to pinpoint why sometime soon will be “when”, I’d point to the boomers retiring.

            At the time of the Boomers retiring, one of the things they’ll start to do is empty out their 401ks.

            There will be more Boomers selling stock than there will be younguns buying it. This will result in the price not being worth as much.

            This will result in a panic because, hey, if I want this money, I have to sell it today because it will be worth even less tomorrow!!!

            And the younguns will not want to buy stock because the price keeps going down… not that there are enough of them to make much of a difference even if every single one of them were enrolled in some Government Mandated 401k program (look for Obama to suggest such a thing in the future… “even people who wash dishes or wait tables should have a 401k!”).

            After there is a re-assessment of what stuff is *REALLY* worth, the economy will start working again.

            By the way, this *WILL* happen. Maybe not today, and maybe not tomorrow… but it’s coming and in your lifetime.

            The Gods of the Copybook Headings talk about this.

          • http://www.hakubi.us/ Neil Stevens
          • Streiff

            look at the title of the post. There it is.

          • birdmojo

            Pharmaceuticals will probably keep going strong, yes.

            At least until people explain that even Pfizer needs to be nationalized for The Children (what, are you opposed to The Children having medication???) at which point I suspect that new R&D will die off.

            The Gods of the Copybook Headings talk about this too.

          • Aaron Gardner

            You get on Bird’s case when he brings up sodomy and you get on his case when he doesn’t bring up sodomy.

            Quit being an ass man.

            Bird says something serious and you write him off, then you get on his case when he replies with sarcasm…think maybe you might just have a personal issue with Bird, rather than a simple political disagreement.

            Seriously, it gets tiresome.

          • http://www.hakubi.us/ Neil Stevens

            The last few times I engaged him seriously, he spited me with nasty sarcasm. In fact he’d take my words and echo them sarcastically over, and over, and over.

            So I’m boycotting any serious debate with him.

          • birdmojo

            I would hope that the sound of them with a Democratic Majority in the House and the Senate, a Democrat in the White House, and the next two or three Supreme Court Justices picked by the aforementioned groups would have you see the statements in a whole new light.

            If you don’t see it yet, you will.

            2009 is barely getting started.

          • http://www.hakubi.us/ Neil Stevens
          • birdmojo

            My 12 Step diary was a serious attempt to tell the Republicans what they need to do to start winning elections again, rather than merely reap the fruits of the electorate throwing the bums out. Rather than say “here’s what I think they ought to be doing!”, I laid out a plan for what they need to do if they are going to win.

            Unsurprisingly, it didn’t do anywhere near as well as my “libertarian theory” diary that said that what they need to do to win and what I think they ought to be doing are two different things and went to talk about the wacky stuff Libertarians (Libertines!) like me believe.

            My distinction is that when I see “The Right” (an overbroad term, I know) argue that the government should have the right to pass laws far-reaching to the point where they involve sodomy, they will soon find themselves with Democrats in power and the government all the way up their behinds.

            Don’t take my word for it though, just keep your eyes open.

          • http://www.hakubi.us/ Neil Stevens

            See what I mean Aaron? Not a good faith poster.

          • birdmojo

            If, for example, I ask someone a question like “Is there *ANYTHING* that could change your mind about the bailout being necessary?” and the answer comes “there’s no way you can prove that it didn’t avert a disaster”, at that point the only tools you have are the tools you use against Al Gore Global Warming types.

            When even they admit that there is no evidence that would change their minds…

            Well, the amount of faith already in the conversation isn’t “good”.

          • Aaron Gardner

            with a defense. I think that his response was fine. I read both of his diaries and recommended both, as they were good diaries.

            And Bird is correct in the sense that if the FEDERAL Government has the power to step in and stop anal sex from occurring under one administration that under another administration it could indded have the power to madate that you can’t smoke a cigarette, or that you must purchase this insurance plan or this care, or only use this many squares of toilet paper.

            Birds consistent point in all of his posts is that he is for limiting the power and jurisdiction of the FEDERAL government, as intended by the founders.

            If this now equates to a bad faith troll on a Conservative/Republican site, well I guess we will be endorsing Dukakis for President in 2012.

            Stranger things have occurred I suppose.

          • Aaron Gardner

            BTW, I miss very little context on this site…I am a constant reader, much to the dismay of my Wife.

            My point is that if you want to boycott serious discussion that is fine, but I don’t see any point in poking him if you don’t want to deal with the sarcasm that it will inevitably produce. If you don’t like his style, ignore it rather than encouraging it by opening the door.

          • http://www.hakubi.us/ Neil Stevens
          • Vegas_Rick

            When the entire hedge fund industry has to liquidate to meet obligations you see what happened in the markets this fall.

            Boomers may well be the tipping point, I just don’t think it will show up as such in the stock market. Besides, most people close to retirement (if they’re smart) have moved most of their money out stocks and into bonds, cash and other less volatile instruments.

          • birdmojo

            Haven’t been selling in order to begin enjoying the fruits of their retirement.

            There’s been a small group doing so, of course… but more and more folks have been buying (Dow 36,000, baby!!!) and a good chunk of those have been folks who want to cash out early… many of whom are not as smart as your second paragraph implies that they ought to be.

          • Vegas_Rick

            When they do start to sell, market watchers may not even know it.

          • zuiko

            They are expecting the government to take care of them.

          • Achance

            but most of my Boomer peers have pretty nice retirements set up. I went to my 40th HS Class Reunion last year and most of them seemed pretty well set, and that was a bunch of people who went to HS in a rural Georgia farm town. Sure there were some that lacked either skill or ambition, but even they had houses and such and had worked their whole life.

            It is definitely a bad time if your wealth is your house since virtually all houses in the Country are worth precisely nothing if you can’t sell them, but at least you can live in them and even if all you have is a house and SS, you can get by. You won’t be gallavanting around the world as a stylish retiree, but you won’t go hungry or sick.

            Now, the government IS going to take care of me for the rest of my life, but I paid in seven or more percent of my income to that retirement for twenty-odd years and I also worked some pretty good private sector jobs and have SS. And, wonder of wonders, we even have some savings, some property, and some of that archaic net worth stuff.

          • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

            and our GDP is only growing by 2-3% at best. After a few years our deficit triples and our GDP goes up by 6%. Rinse and repeat. It cannot continue forever.

          • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

            I was actually thinking about the national debt going up by 16% in 2008, thanks to Paulson and Bernanke and George W. Bush’s betrayal of free market principles. But the point is the same. We have (multi) trillion dollar deficits as far as the president elect’s eye can see. Is the GDP going to grow by a trillion every year to keep up with it? If not, then the ratio of debt to income will keep on going up. You can afford a house that costs 2.5 times your income. But can you afford a house that costs 5, 10, or 20 times your income? Eventually the ratio will kill you.

            So if GDP goes up by 1% annually, after COLA and other inflation are counted out, and the debt goes up by 5% a year, then with compound interest being what it is, things get very bad very quickly. Check out this table. At the end of 30 years, a compounded 1% increase in GDP raises GDP by 35%. At the end of 30 years, a compounded 16% increase in the debt raises GDP by 8,585%. That’s 85 times as big as it was at the beginning.

            Year
            		 1.00% 5.00% 10.00% 16.00%
            1 1.01 1.05 1.10 1.16
            2 1.02 1.10 1.21 1.35
            3 1.03 1.16 1.33 1.56
            4 1.04 1.22 1.46 1.81
            5 1.05 1.28 1.61 2.10
            6 1.06 1.34 1.77 2.44
            7 1.07 1.41 1.95 2.83
            8 1.08 1.48 2.14 3.28
            9 1.09 1.55 2.36 3.80
            10 1.10 1.63 2.59 4.41
            15 1.16 2.08 4.18 9.27
            20 1.22 2.65 6.73 19.46
            25 1.28 3.39 10.83 40.87
            30 1.35 4.32 17.45 85.85
          • http://beaglescout.wordpress.com LJ “Beaglescout” Miller

            argh, that is a compounded increase of 16% in the debt raises total debt, not the GDP.

            And the point I didn’t make is that at the end of 10 years, the debt/GDP ratio is 1.47:1. At the end of 20 years it’s 2.17:1. At the end of 30 years it’s 3.21:1. In other words, even if the spread is only 4% it still gets to a point where the government cannot pay even the interest on the debt, even if the government taxman seizes every single dime that America produces.

            And the GDP is not going to grow any faster than 1% until the government repeals a lot of the anti-business regulations that have been strangling the economy since Nixon brought the EPA into existence.

    • http://impudent.blognation.us/blog kyle8

      they will change the way that COLA (cost of living allowance) is calculated and then they will inflate the economy.

      At the same time, if you have some economic growth, coupled with some spending restraint (probably from the military). Then under the influence of those three things the debt begins to shrink relative to the size of the economy.

      Of course it means going back to the polices of the 1970′s but lets be realistic.

      If they DON’T go back to the old failed policies then Republicans can never get back into power.

      I am not hoping for bad things but the truth is that if the Democrats actually pull off some sort of economic growth with no huge problems like runaway inflation then we have NO CHANCE of getting back into power.

      • OccamsRazor

        Is ALWAYS ALWAYS based off of _PRODUCTION_and yesterdays/todays..mayhaps…perception.

        Period.

      • OccamsRazor

        [Is backed by all the land in the United States]

  • zuiko

    So why did not the Senators hear from an economist like Harvard?s Greg Mankiw, who served on Bush?s Council of Economic Advisers, and is reported to be skeptical about the need for an economic stimulus?

    Because they went into it knowing what they wanted to hear. Funny how the economists are right in line with Obama on this. $400 bln a year is $800 bln over 2 years… which is exactly what Obama wants. An $800 bln to $1T 2 year package is also exactly what Obama has proposed. Just a coincidence, I am sure.

  • $peciallist

    sorry Dan….

    We need a Groundhog day open thread…didn’t Barry make this speech already….

    sorry Dan….

    We need a Groundhog day open thread…didn’t Bar……….

  • izoneguy

    Actually I think it is more like re-building the economy. The problem is: Obama ran on the democratic idea that “big business” is the problem and that “profits are evil”. I am sure about at least 40,000,000 people who voted for Obama have jobs? Maybe that estimate is too generous – but you get my point.

    Obama cannot come out now and sound like a Republican. He will have to at least have the appearance of looking like a democrat that will “give” to the people. In reality only our business’s who create jobs for people that pay the taxes & fees that fund the government will be what gets us out of this mess. Wall Street will make that job much harder as many believe that it is the evil corporate empire that has dragged down America.

    Let’s see how Obama’s performance of Robin Hood goes in the first few months. It might feel good to get a $500 check but it will do nothing to spur growth. Until American business has the confidence that the government won’t tax & regulate them out of business then it will be a long four years until America regains it’s sanity.

  • davo119

    Pretty soon you’re talking real money.