Obama's Economic Stimulus Plan - Opinions & Analysis

Obama hasn't been sworn into office yet and he's basically laid an egg on his economic stimulus plan. That said, opinions are like censored and let's look at some analysis.

Firstly we have Christina Romer & Jared Bernstein analysis.

Frankly, I find this this report odious simply going off of the principle that a 1% increase in GDP equates to 1 million jobs. Well, that's all great if the U.S. were an isolated economy, but it's not and today's GDP does not equate directly to U.S. domestic job growth, as a 1:1 correlation. Rebate checks end up buying goods from other nations. Tax cuts not dealing with global labor arbitrage and offshore outsourcing won't create jobs.

Paul Krugman is much more polite on their analysis but also implies the stimulus is much too weak.

Here is a CBO chart overviewing the past stimulus proposals and their effectiveness. Oh how wrong they were! Claiming a lump sum rebate would have a large effect obviously had little effect on stimulating the economy. One thing to note is they claim tax cuts, from individuals to corporations has little effect.

Just for further credibility purposes, obviously take the CBO with a grain of salt for in their manufacturing analysis they do not even mention biased and bad trade agreements or global labor arbitrage as a major cause in the decline of U.S. manufacturing. Discounting bad trade policy, offshore outsourcing, or use of guest worker Visas in the United States domestic labor markets is an obvious calculation buster for accurate analysis.

In terms of taxes, Tax Policy Center, Not Much Bang for the Buck really calls it on more tax cuts:

The research on the last three rebates suggests that people spent between one-third and one-half of the money within nine months of the time it got into their pockets. If Obama pumped $150 billion into these tax cuts and 40 percent, or $60 billion, got spent, the impact on the U.S.’s $14 trillion economy would be real, though modest.

and further

Bonus depreciation in its many incarnations has been tried a half-dozen times over the past four decades and its benefits are, shall we say, hard to find. It won't help companies with losses (most of them, these days), or non-profits. A year ago, while both were at The Brookings Institution and TPC, Obama advisor Jason Furman and CBO director-designate Doug Elmendorf wrote of the 2001-2003 versions, “bonus depreciation for business investment did not seem to be very effective in spurring economic activity.”

Even Congressional Democrats critized this plan but note what is missing from the dialog, offshore outsourcing, trade and guest worker Visas.

Fortunately one voice was more clear. Former Democrat Senator Fritz Hollings wrote a piece connecting offshore outsourcing, trade to our current economic crisis:

We suffer not from a lack of confidence in the economy, but from a lack of confidence in a government that continues to cut taxes, borrow and spend, increases the debt and waste of interest cost, offshores the nation's production and jobs, refuses to protect our standard of living and refuses to engage in the trade war or globalization. Instead of calling for sacrifice, President-elect Obama calls for the same old, same old -- no change.

Hollings is also calling for a VAT tax scheme to create a more balanced trade policy for the United States.

Economist Pat Choate also is making no bones on what kind of policy change is really needed:

Simply put, the U.S. cannot kick start its economy while it has to finance the purchase of more than $700 billion of imports annually than it exports. We do not have the savings, and our credit is short. What Obama and his advisors fail to grasp is that by ignoring the trade deficit, they risk turning a deep recession into a long, deep Depression.

If they want to create jobs then an obvious answer is to cancel all Federal and State offshore outsourcing contracts and hire U.S. citizens, working in the United States. It makes no sense to funnel even more U.S. taxpayer funds overseas while claiming one is trying to create jobs in the United States.

Congressional Representative Rosa DeLauro gives state offshore outsourced contract estimates from 2 years ago, which assuredly have more than doubled since this time:

Last year, state governments across the country spent $3.8 billion of taxpayer funds on offshore outsourced work—an amount expected to double this year. With reports that approximately 3.3 million jobs and $136 billion per year in wages are expected to move abroad over the next 15 years, the need to address the problem is urgent. Taxpayer money should be used to create jobs right here at home, not to send them overseas. The privatization of federal work, federal procurement of goods and services, and state government procurement using federal funds should not take work done in the United States offshore; and state governments should not be eligible to receive federal funds unless they certify each year that such funds will not be spent offshore. That is why I have reintroduced "The United States Worker Protection Act," which would prohibit taxpayer dollars from being used to outsource or take offshore work presently done in the United States.

United Professionals has posted charts and is almost screaming that job creation requires balanced trade policy.

While the funding of infastructure jobs will have a direct efect (see Romer, Bernstein, pp. 7-8), if they do not ensure those jobs are going to U.S. citizens, in the United States, as their top priority, well, how can they guarantee job growth for our nations members?

Bottom line the Obama economic team is simply ignoring the devastating effects of globalization, global labor arbitrage, wage arbitrage, worker displacement, bad trade agreements and the corporate controlled migration of workers, illegal workers for the purposes of labor arbitrage which have eroded the middle class, working America throughout the United States and brought us to this point.

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What else could we expect

from the Clinton cabinet? They are going to spend all that money when all they have to do is bring our jobs home.

They're asking for another four years -- in a just world, they'd get 10 to 20 ~~ Dennis Kucinich

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Christina Romer

Even worse, I caught a blurb on FAUX news claiming Christina Romer, the chief of Obama's economic advisers, believes that stimulus packages do not create jobs and only monetary/fed policy does!

So, that ignores all Keynesian results from the 1930-1960s!

We have a "Milton Friedman" believer running the economic council?? I have not read previous research, papers, studies from her but that was incredible disturbing for that philosophy is straight from the privatization/"free" markets/trickle upon/Hayek mentality.

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Stirling Newberry pegged Obama as Reagan-Lite

a number of times last year, long before the election. Not many wanted to listen.

From February 11, 2008

However it was Reagan who governed by cult of personality in America, and since then to be President was to have a cult of personality to stand by a leader regardless of failings and foibles. In the end impeachment of Bill Clinton was about destroying his cult of personality, more than even his Presidency. . . .

Obama is as much a creature of the representative plutocracy, if not more so, as Hillary Clinton. . . Obama is an old politics creature: he creates public approval, and sells this to those who need public approval to get what they want.

 

From January 14, 2008

Barak Obama continues to prove that he is the farthest to the right of all of the remaining Democratic Candidates.

From May 20, 2008

Obama is, by all of his promises, a neo-liberal and neo-classical president. He's going to make you, the poor, pay for the problems. That's what neo-classical economic prescriptions say, if there is inflation, then something is either regulated, allowing little people to buy too much of it, and that means the solution is to deregulate, privatize, desubsidize, or pass a regressive tax, that will force the small people to make hard choices.

 

From September 17, 2008

Everyone is eager to get back to the game of knocking down trees to put up houses. Both parties have promised another round of subsides for this process. In fact, Obama's campaign is publishing articles and op-eds crowing about how their plan is more Reaganite than McCain's plans.

From September 5, 2008

Barak Obama, for his part, is proposing that we do less of the same: TAX CUTS! TAX CUTS! TAX CUTS!

Which, let me translate it for you from the econospeak:

"Reaganomics, now with more smoke and mirrors!"

The Obama economic plan is the product of the same Chicago School failures as Bush, merely not amped up as far. The falling into line of Democratic congressional candidates indicates that we will get yet more national debt, in a world that is already soaking up huge amounts of dollars, and is cluttered with central banks that have no more flexibility to take on bad paper. Barak Obama's economics, are George W. Bush's economics, minus the give aways to the very wealthy, which have already happened, and will largely continue on his watch.

Can you hear me now?

Demoralizing, I know - and I could find more. But then, I publicly called for Newberry to be Treasury Secretary, which gave some withered old prick from the LSE a good case of the hoots. Anyway, if you have not read Newberry regularly, it is worth the time to find his blogs and read it. He's mostly on firedoglake now, but many of his briliant expositions of the financial crises being fundamentally the collapse of the paper for oil carbon economy are on Agonist.org.

 

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so was I

but focused in on economic policy, advisers, agenda, money behind the scenes You can see in the Vox Populi column a couple of these posts are there. Vox Populi is the blog posts with the top number of reads of all time.

When Durbin had sponsored a major bill, S.1035 to reform the H-1B, L-1 Visa program and Obama literally insulted his constituents in the response to the stories of being displaced that they wrote to him about and he refused to co-sponsor S.1035. Many groups, grassroots lobbyists and even Durbin himself tried to get him to support the reforms. If the powerful Durbin cannot get his junior state colleague to support a common sense, labor endorsed bill, you know something isn't right.

You mentioned why I wasn't on DK so much. Well, #1 is I'm the site designer, admin, plus a blogger so I really want to see EP grow and am working a lot of that. (putting a cross link helps, so do blog rolls and outright invites to anyone with a brain who is obviously focused heavily on all things econ/trade/labor).

I think we're doing ok on that score, we haven't been around for even a year yet and some of our writers are now getting picked up by some fairly "big boys" in economics. CNN and CBS News have picked up some posts on EP as well.

But the other reason I'm not on DK so much is that herd behavior which blasted anyone, especially during the primaries and I was saying people needed to hold out and demand actual policy positions.

I mean if Hillary Clinton has more Progressive policy positions that Obama, you know something is wrong with this picture and in my view the Netroots should use their power to demand real policy change instead of just electing "Democrats" per say.

Good for Newberry, he was dead on and glad someone is looking at the facts, votes, money, policy, machine behind the man.

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More, and my own

PEBO Wants AEI Libertarian Opposed to Product Bans Deciding OMB’s Health and Enviro Rules By: Kirk James Murphy, M.D. Saturday January 10, 2009 6:00 p. Obama wants co-chair of the American Enterprise Institute Center for Regulatory and Market Studies advisory board, Cass Sunstei, to head the OMB's review of FDA. 

 

As for me, on Janaury 7, 2008, I reviewed the economics advisers of the major candidates in a piece I entitled, Who will tell Wall Street to shove it? 

The big problem with Obama is the same problem Hillary has: his economic advisers are Democratic versions of "neo-liberal" radical free marketeers, so it is going to be the major intellectual breakthrough of their lives to have to admit that most of what they know and believe about economics is wrong. Obama’s most notable economic adviser is Austan Goolsbee, from the University of Chicago – which by itself should be setting off alarm bells since that is the bastion of Milton Friedman’s radical free market economics. In fact, Goolsbee wrote a little homage to Friedman in the New York Times when the latter finally relieved the world of his mortal presence in November 2006.

More recently, Goolsbee told George Will that the threat of free trade and globalization is overblown, because 60 to 70 percent of the economy -- auto mechanics, dentists, doctors, lawyers – do not have to contend with international competition. So, obviously, Goolsbee is overlooking the massive downward pressure on American’s aggregate demand generation (buying power), which is rather surprising, because he has made something of a specialty in studying the distribution of income, especially at the very top. Just take a look through the list of reports and studies he has made available online. Even more surprising, given his research, Goolsbee believes that most of the income inequality results from "radically increased returns to skill" which is the standard movement conservatism excuse for widening income inequality. This completely ignores the unbelievable distribution you find when you focus on just the top ten percent of income earners, which is almost as badly skewed as the national picture – most of the gains have gone to the top one tenth of one percent.

In one of his papers, "What Happens When You Tax the Rich? Evidence from Executive Compensation,"in Journal of Political Economy, April 2000, Goolsbee is worried about "the amount of deadweight loss created by a progressive tax code."

By the way, Newberry abandoned blogging on DailyKos nearly two years ago (except for one or two posts he did the week Wall Street collapsed in September), observing as he parted that DailyKos had become "the screamocracy." I do not disagree with him, but I have always felt that much of what is wrong with the country would not have been permitted if citizens knew real economics, not merely monetary, financial, and price behavior theory, which is what passes for economics these past few decades. And given the huge number of readers at DailyKos, well, that's the place to change and shape minds. As I've written at least twice before, I view blogging as a form of insurrection aganst the corporatist state.

 

 

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Where is Newberry now?

I thought he had his own blog but didn't see it.

Why I'm here, resurrection against the Corportist state but more blogs are really self-publishing and to bring attention to better economists, studies, papers, stories and yes, increase economic literacy.

I'm sure you got a lot of crap for pointing to these facts and one of the reasons EP exists is to avoid the screamocracy, to reach out to more people and have sane discussion and #1 is to have a community blog, devoted exclusively to all things $$. We're the only one out there of the economics blogs. All other blogs are either one author or a group of people, but do not allow anyone to just write a blog post on their sites.

As far as reach, sure post on DK, but post in a lot of places as well. DK is just one site, and in terms of trade, economic policy, federal reserve, global labor issues and so on, well, if you get these things on the front page, there too a "select" group only has access to the front page.

DK also generates a lot of hits from the "Kossacks" who spend hours and hours commenting, reading everything, think TR status is something important in their lives and so on.
That doesn't necessarily mean you are reaching to other people who can truly enact change or influence policy.

Because of the fast moving nature of DK, a lot of great posts get buried, roll off into oblivion.

On EP, literally if you want to revise an older post, update it, get so more reads, you can change the time stamp.

Cross link, invite over, cross post (see the cross posting link in the user guide) for the truth is the blogosphere is not DK or even the Netroots and each site has it's own readers.

I'm always looking for more ways to improve the cross connections to other blogs to increase cross traffic, cross readers, cross participation. I could add open ID but it really hasn't taken off from what I can see and most blogs don't use it.

I can see from who picks up the posts on EP, the links, we have a diverse group of readers that probably do not read DK much. A lot more pure economics readers, finance people and we're clearly read by reporters.

Also, sites like the Huffington Post have linked over here extensively and that's also good because they have way more readers than DK. So, it appears we're getting a mix of political, economics and finance readers as well as a mix of political persuasions.

You can tell from the paleo-conservatives they were outraged by Republicans as badly as we're outraged by DLC Democrats and they are also reading this site.

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wonderful explanation

and now I have a much better idea of what you're about.

But, please, I'm too tired to browse for it right now: explain what a "paleo-conservative" is.

Also, does the readership of EP regularly read the Instapopulist section also?

And you're correct about getting some gruff - there are some times I despair of how much influence the Chicago School still has among so-called progressives.

Newberry still bligs occasionally on The Agonist, but it appears he has settled in at FireDogLake for now. I just read his blistering critique of the Obama stimulus plan, which I will post below.

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yes, yes

Paleoconservatives are more the original conservatives, before the religious radical right took over the party. So, Barry Goldwater, the John Birch Society, Pat Buchanan (minus the religious radicalism), etc. Unfortunately the religious radicalism is now mixed together but originally Goldwater for example, was Pro Choice and it makes more sense because it would be separation of church and state as well as personal freedom of choice.

Probably Ross Perot is also around this category.

So, they were outraged over bad trade deals, not really supply-siders either, huge on national security, national sovereignty and severe budget hawks. Also want those more classic things like smaller, limited government but well, the trade agreements are not in the national interest, so one can believe in free trade theory yet know the trade agreements are not as such.

They kind of got their party taken over between the radical religious right plus corporatism. I'd say Andrew Sullivan is more of a paleo-conservative and that makes more sense as well because a true conservative/libertarian would never try to impose a social/religious moral view on gay rights and see that as social engineering, an obtrusion of government.

So, it's kind of interesting and there are a host of economic areas where both sides, both views actually agree, like Pat Buchanan and Ralph Nader on trade as an example.

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Instapopulist

They do read it. Problem is (and this is true of many blogs) they are readers and they do not even register.

I was thinking of maybe doing another series blog post that lists the best comments of the week in it, along with links summaries of outstanding writings out on the "Internets" thinking that may encourage more to register and write comments.

This is true about most blogs, unlike the "Netroots" blogs. On the established netroots blogs people will sign up and use the comments to have a discussion whereas the regular blogs people are more lurkers and then believe this or not, a lot of people don't understand how to write a comment at all.

I check our rankings periodically and we're now about 82k in Technorati and about 30 to 20 or so of the economics blog rankings.

So, it's a matter of inviting people, getting the world out, we're really still getting established, less than 1 year old but at least the readership, rankings, etc. is overall increasing! ;)

For less than 1 year old we're doing good. We're typically ranked even with RGE monitor (Dr. Doom Roubini) and Bonddad right now.

So, yes and if you cross link, eventually people start checking out a blog more. They won't if the writings are not updated daily though.

As an example, Technorati ranks about 8 million or more blogs so it shows you just how many blogs are out there and go unread and unloved.

I wish more people would use this feature, but if you see an Instapopulist where it's either good writing or a truly shocking quick story or whatever, just click the up arrow on the bottom left.

I have it set at just two to promote an Instapopulist to the front page and if I see someone wants to promote one, I'll probably give the second click.

I don't think people realize those little arrow buttons are way beyond voting for a post, they literally control the content on the site, move it around. It's the promotion/demotion system I mention so registered users control the site content.

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BALANCED Trade Policy

I am glad to see the change in the wording for TRADE POLICIES. What we need is BALANCED trade, not FREE, not FAIR but rather BALANCED. The unbalanced trade policies we have allowed to occur has brought down the US economy. By balancing our Trade Policies, Americans will be back to work, doing what they do best, innovate and create. Balancing will NOT require obscene spending. Nor, should it overburden the overburdened taxpayer.

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Global labor arbitrage

The rallying cry against the power elites for 21st century America will be:

You want us to beg for a job, we'll make you beg for your lives.

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Economist View has new details

It's a good overview post on the latest criticisms and analysis on Obama's plan is here

At least he has Romer on video admitting the creating jobs, like infrastructure jobs.....uh, creates jobs and helps stimulates the economy.

They still are not dealing with globalization of course, which actually does give more credibility to a corporate tax cut for creating a job. the problem with that is are they creating a job in the United States and hiring a U.S. citizen/perm resident? One could easily import more guest workers and claim one "created jobs" when those jobs will not go to Americans.

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Stirling Newberry's crtique of the Obama stimulus plan

Obama’s Economic Plan Starts from the Right

From 1974-1982 the Western world experienced a series of economic contractions which were the most severe since the Great Depression. . .  Looking back, it can be seen that workers in the developed world never really recovered their previous position. Real wages swooned during the 1980-1982 recessionary period, and have remained flat since then. . . .

The present economic crisis threatens, as many of us have predicted, to be, like 1975, a severe recession which downshifts the level of economic activity for a generation. Economists will talk about "persistent output gaps" and "a productivity depression." People on the street will feel that in not being able to get their lives going again. There is a combination of concrete shock to the real economy, collapse of financial and political arrangements, and existential angst. How things are supposed to work has changed, how to deal with problems doesn't seem to work, and there seems to be no map forward.

In Washington, the "Reagan Paradigm" of crisis management is still fully in force: have a moment of national unity, put aside ordinary squabbles over smaller issues, pass whatever package will address the moment of crisis, and "stand tall.". . . .

The solution to falling real wages, and a virtual end to the upward escalator of the Post-War era, was to bolster consumption by a reverse robin-hood dynamic of cutting progressive income taxes, and then raising regressive taxes, such as payroll taxes and flat state income taxes, to pay for this. Those who had, got, those who did not, fell farther behind. But they didn't see this as much in their material standard of living, but in the amount of risk that they lived under. The losses were losses of things they didn't have yet: universal health care never materialized, pensions were no longer offered. Instead, people were expected to play the casino of stocks and houses. Opportunities disappeared, because old manufacturing jobs were sent overseas, and new ones simply were not created. America manufactures more than ever before, but less of a percentage of the total.

[Obama] is also a believer in Reaganism: that old liberalism "failed" and that the solution is the one Reagan outlined: cut taxes, spend money, and stand tall. This is what is in his economic program: spend money, cut taxes, repeat two mantras: there is a crisis that requires action, and that we will make it through with his actions. However, like a Reaganite, facts and numbers mean nothing, except their place in the power discourse. Obama's report this morning means that he has lost his "cooking the books" virginity. Initially billed as 2.5 million jobs, then 3.5 million, and then jiggered by smoke and mirrors and faulty assumptions to 3.75 million jobs, and rounded up from there to 4 million jobs - it is a sorry example of a species that runs back to Pericles lying to the Athenians about the costs of his civic improvements. . . .

Over at 538, Nate Silver is convinced that Obama wants liberals to march forward and push for more spending. This isn't what the report says, because Obama has already taken off the table many of the things that liberals would want to spend on. Most specifically he has taken health care off the table, and he has taken demobilization from Iraq and Afghanistan off the table. Since these are two projects which will shave as much as 7% of GDP off of misdirected effort, Obama is basically asking anyone who has any good ideas for more fat to come forward, because the food value has been limited.

This is exactly the strategy he employed with the TARP bail out: first make a deal with the right, then find out how much opposition he has from the left, and offer up small concessions to get the left, not the right, to get on board. The right has gotten a tax cut package which is far larger than they could have proposed on their own. Obama will get his 80 votes. And liberals? Some rural clinics, small projects and pork. It's Deep Dish Chicago style politics: what does it take to buy off the people who you need.

 

 

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wow

well, you can see the poll I put over on the right hand corner but well, I agree with Newberry on this one. That's some excellent writing. I could never understand how it was managed to spin Reagan into a great President. Economically he really started the disaster rolling and the real accomplishment I feel he did was destroy the Soviet Union/stop the cold war.

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Here comes the stimulus mess

Obama trashes $3k for job business tax credit.

With Larry Summers doing the negotiating, how can this be good?

Now they are talking about increasing unemployment benefits.

Since state websites are crashing due to all of the applications and states are running out of money, that sounds like a good idea but ya know, were is the job creation and where is dealing with outsourcing?

I'm hearing layoff after layoff but what no one is mentioning is many of these layoffs are really jobs being offshore outsourced!

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