John Bolton

John Bolton

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Thursday, October 08, 2009

Democrats Pushing Another Stimulus Spending Spree

The first one $trillion bill didn't create many jobs and the second won't either!

Albert Einstein once said "the definition of insanity is doing the same thing over and over again and expecting different results." Clearly Democrats are insane! There is yet another round of talk (here, here, here) in the Capital of a second stimulus bill. Though you might hear them call it something else as it's clear they promised too much and delivered too little with the first one.

Obama is suggesting that this second round would “explore additional options to promote job creation.” Yet, what was the first bill about? It was supposed to keep unemployment below 8%. It's now 9/8%. Obama's National Economic Director Larry Summers said: "You'll see the effects begin almost immediately."

Instead of creating jobs, we saw multiple examples of typical Democrat spending gone mad. There were the grants from the National Endowment for the Arts which used stimulus money to promote pornography in San Francisco. Billions went to states to help shore up budgets without one job being created. The biggest chunks of cash went to areas that voted heavily for Obama.

In state after state, billions in new spending yielded few jobs. In Oregon, where unemployment is over 12% 4,600 stimulus jobs for transportation projects are supposed to be created by the end of the year. One billion in stimulus spending has gone to Oregon thus far with 75% of it being sucked up to pay state expenses.

In New Hampshire, 400 million in stimulus spending by mid July had created only 34 full time jobs. The same is true in Minnesota where $1 billion out of $4.7 billion has been spent but Minnesota can't even say with certainty how many jobs were created.

Worse than Doing Nothing!

In the face of the thundering criticism that the stimulus was a waste and a political boondoggle Democrats are reduced to the lame and unprovable suggestion that things would have been worse if we had not passed it. However, readers may recall that the Congressional Budget Office, which Democrats loved to hate until the CBO whitewashed the cost of the Senate Finance Committee health bill, warned that passing this spending spree into law was "worse than doing nothing." Who was right?

Study Shows Countries with Smaller Stimulus Have Better Recovery

Now more than one year after the financial meltdown in September 2008 it's a good time to compare U.S. recovery efforts to those of our leading economic competitors worldwide. Richard Rahn of the Institute for Global Economic Growth asks the question: "How has the United States fared compared to other nations that had smaller or no stimulus programs?"

One might argue that the stimulus had worked if the results in the United States were better than in other countries that had smaller or no stimulus packages. The recession has been global, and every country has been affected negatively. Only Great Britain attempted to put in a stimulus package that was relatively as large as the U.S. package. A crude measure of economic stimulus is the size of the deficit relative to gross domestic product. During recessions, tax revenues decline in all countries, so most will run a deficit whether they intend to or not. A stimulus package normally contains a mix of government spending increases and tax cuts, resulting in a deliberately larger deficit.

As you can see in the accompanying chart, the United States and Britain have by far and away run the largest deficits as a percentage of GDP (i.e. the most stimulus), yet the U.S. and Britain, along with Italy and Russia, had not bottomed out in second-quarter 2009, while the rest of the 10 largest economies were showing real growth in the second quarter. Russia's poor performance is largely a function of relying very heavily on the export of raw materials rather than developing a broad-based economy as all the others in the Big 10 have done.

The three countries with the smallest deficits (the least stimulus) - Brazil, China and Germany - have all turned the corner rather quickly and are growing. German Chancellor Angela Merkel has just announced she is going to push tax cuts, which should give the German economy an additional shot in the arm.

While the data set is too small with the top 10 countries (which collectively account for a large majority of the world's GDP) to draw definitive conclusions, the existing evidence indicates that a big stimulus package seems to delay recovery, while little stimulus leads to a quick return to economic growth.
Rahn's conclusion?

The only things one can say for sure about stimulus money is that it will add to the deficit, ultimately driving up interest rates and taxes; and much of it will be wasted and/or stolen, neither of which benefits the unemployed. By any objective measure, the stimulus program has been and will continue to be a failure - but don't expect the Washington politicos ever to admit it.
Republicans Offer Real Stimulus Alternative

House Republicans have written to President Obama offering a series of well thought out ideas that would help make any new legislation truly a bipartisan effort. Since Obama hasn't listened to them up to now and since Nancy Pelosi won't even let them in the room when negotiations are underway I don't expect Dems will embrace these common sense alternatives:

• Allow small businesses to take a tax deduction equal to 20 percent of their income. This will immediately free up funds for small businesses to retain and hire new employees.

• Let small businesses join together to purchase health insurance for their workers the way large businesses and labor unions do.

• Enact genuine legal reform and policies that incentivize wellness to reduce health care costs for small businesses.

• Lower taxes for all taxpayers by reducing the current 15 percent rate to 10 percent and reducing the current 10 percent rate to 5 percent. This will provide an immediate increase in income to every taxpaying family in America and free up capital to help small businesses hire more workers.

• Expand health savings accounts (HSAs) to provide additional flexibility to small businesses in providing health care to their employees.

• Increase the net operating loss carry back from 2 to 5 years to provide struggling employers with additional resources to keep their doors open.
Most likely there will be a Democrat campaign contributor objecting to each GOP solution while demanding further gimmees from Obama.

The forecast: Hold onto your hats. More waste, fraud and silly spending is on the way! The only jobs that will be created are for more bureaucrats to pass the money around to Obama's friends.

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