economic stimulus package

Expensive Jobs

by Ryan Young on August 27, 2010

in Deregulate to Stimulate, Economy, Stimulus to Nowhere

Through June, the government spent about $620 billion of stimulus money. The Obama administration claims that the spending has saved or created 2.3 to 2.8 million jobs.

For the sake of argument, let’s assume those job creation numbers are true. In fact, let’s pick the rosiest number — 2.8 million jobs.

At a price of $620 billion, that comes out to $221,428.57 per job. Startlingly inefficient.

Now consider that that $620 billion had to come from somewhere else. Some of that money came from taxes. That leaves less money left over for consumers and businesses to spend. Some of the stimulus money was borrowed. That leaves less capital for private companies borrow.

The private sector tends to spend less than the government to create a job. Since stimulus spending is spending more money to create fewer jobs than the private sector, it is actually causing net harm to the job market.

In place of the spending stimulus, I humbly offer a deregulatory stimulus. CEI VP Wayne Crews and I offer some specific proposals here.

The Economic Way of Thinking about Stimulus Packages, Part II

by Ryan Young on November 19, 2009

in Economy, Stimulus to Nowhere

In light of the news about stimulus job creation statistics not being as advertised — complete with made-up Congressional districts — I offer another surprisingly relevant insight from Mises’ Human Action. Turns out there is a reason stimulus advocates are resorting to trickery:

“If government spending for public works is financed by taxing the citizens or borrowing from them, the citizens’ power to spend and invest is curtailed to the same extent as that of the public treasury expands. No additional jobs are created.”

-Ludwig von Mises, Human Action, 4th ed., (Irvington-on-Hudson New York: Foundation for Economic Education, 1996 [1949], p. 776.

The Economic Way of Thinking about Stimulus Packages

by Ryan Young on November 18, 2009

in Economy, Stimulus to Nowhere

“[A] government can spend or invest only what it takes away from its citizens… its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity.”

-Ludwig von Mises, Human Action, 4th ed., (Irvington-on-Hudson New York: Foundation for Economic Education, 1996 [1949], p. 744.

Kiss Off to Consumers

by Jonathan Tolman on January 27, 2009 · 8 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Energy, Odds & Ends, Politics as Usual, Stimulus to Nowhere, Zeitgeist

The appropriations portion of the House stimulus bill is not the only legislation with bad ideas.  The House Energy and Commerce Committee has also marked up their portion of the stimulus package.  During the Committee markup, Chairman Henry Waxman (D-CA) inserted a provision that would “decouple” utility rates from the amount of electricity or natural gas that the utilities sell.  According to the “decoupling” provision, states that accept federal energy efficiency grants from the economic stimulus package will have to ensure that utilities recover the revenue lost when consumers use less energy.

In other words, in states that accept the energy efficiency grants, utilities that use the grants to help consumers lower the energy consumption will be able to raise their rates to compensation for the loss in revenue.  Consumers who participate in the programs may see their energy use go down, but may not see any change in the size of their utility bills.  This is the legislative equivalent of a giant wet kiss to utility and environmental lobbyists but a giant kiss off to consumers.

Stimulus Bill Lacks Bold Ideas for Reform

by Cord Blomquist on January 20, 2009 · 1 comment

in Deregulate to Stimulate, Economy, Stimulus to Nowhere

USATODAY.com reports that the stimulus plan has swelled to $850 billion but lacks the bold ideas that are needed for the economy to truly recover.  As USA Today reports:

Obama had proposed an economic stimulus package that aides, including adviser David Axelrod, estimated at $775 billion, nearly 40% of which would be taken up by tax cuts, including a $3,000 job-creation tax credit.

The tax cuts are a good start, but that leaves 60% of the proposal composed of spending programs.  The spending programs are a mixed bag, but many of the suggested programs set a high price on job creation.  A program to modernize Social Security sets the price of job creation at $1 million per job.  Other programs attack the employment issue by hundreds of thousands of dollars to create just one job.  These aren’t the kinds of “shovel-ready” programs that we heard were designed to help the middle class.

When you compare these high-dollar program to other proposed expenditures, like highway projects, you see that the bill isn’t really focused on getting the most bang for our buck.   The highway projects included in the bill would create jobs at roughly $35,000 a piece.  If Mr. Obama and Democratic leaders in Congress want to achieve their goal of job creation, they ought to be focusing on creating the most jobs per dollar and cut the fat from this proposal.

Meanwhile, Republicans on the Hill are proposing that the tax cut portion of the bill be expanded.  As USA Today’s coverage also reports:

The Republican Study Committee, a group of fiscally conservative GOP House members, released a proposal Wednesday that includes trimming individual tax rates by 5% and cutting the top corporate tax rate from 35% to 25%.

While this is a better proposal than a multi-billion-dollar spending spree, it lacks the boldness needed during this crisis.

Granted, politicians are comprise-seeking creatures, but this proposal seems particularly meek when the US is staring at the worst financial crisis since Herbert Hoover was in office.  Someone needs to let the economy out of the chains that Washington has put on it and let America start working again.

Cutting the corporate tax rate to 0% would be the ideal as it would usher in an era of jobs flooding into America, rather than crossing our border to the south and fleeing toward cheaper labor in Asia.  This is likely to be politically untenable, but perhaps a cut down to 15% would be possible now.  It would put the United States on equal ground with Ireland, Europe’s fastest growing economy, and still reverse the trend of job flight.

Perhaps the most overlooked and most important thing we could do to help the economy would be to engage in a systematic program of deregulation.  Mr. Obama could defy political expectations by creating a BRAC Commission for regulations.

BRAC, Base Closure and Realignment Commission was designed to take the politics out of closing military bases.  Because local economies grow around military bases, it became political suicide for Congressmen to vote for base closings in their district or State.  This stalled progress in shutting down any bases, creating incredible headaches for our nation’s military, which needs to be able to shift its resources when needed.  BRAC was created to decided what bases would be closed and then to present the bill to Congress, which it would then have to vote either up or down, with no amendments.

The same local interests are often involved in regulations.  One state might benefit from a regulation on steel makers because it produces aluminum.  Similarly, mountains of compliance paperwork can often benefit large companies because it prevents small competitors from ever getting started—the little guys don’t have the lawyers and accountants needed to comply with Washington’s regulatory nightmares.  Representatives and Senators know that businesses benefit from regulations, and they’ll work to see that other regulation get repealed before those that help their constituents.

We can get around this political reality  by creating a deregulatory commission that would pour through the federal register and would then recommend large slates of regulations to be cut.  Just like BRAC, this comission could  force Congress to vote Yes or No.

Deregulation wouldn’t result in income loss for the federal government, it would clear the books of many dead-weight, no-gain rules, and would get the economy chugging along more efficiently.  This is exactly what America needs.  This, combined with lower income taxes and a much lower corporate tax rates, would be a far greater stimulus—and less open to corruption and playing favorites—than the spending boondoggle now before law makers in Washington.