Attacking the idea of a Balanced Budget Amendment, “Congressman Jerrold Nadler (D-NY), the top Democrat on the House Judiciary Subcommittee on the Constitution,” issued a press release on October 4 promoting the falsehood that Herbert Hoover cut spending during the Great Depression, when in reality, Hoover more than doubled government spending as a percentage of GDP:
“Did Herbert Hoover win the last election?” asked Nadler. “If, in the middle of a recession, when tax revenues are down, and unemployment is up, we begin to slash the budget in ways my Republican colleagues are now suggesting, much less the far more draconian measures that this amendment would require, we will go from the Great Recession, right into another Great Depression. It’s been tried before, and if we want the Constitution to enshrine Hooverism for all time, we will get what we deserve.”
Nadler is wrong about the facts here, as he so often is. As I recently noted in the Edmonton Journal:
Former U.S. president Herbert Hoover did not practice austerity, so it is incorrect for politicians to claim that he “helped plunge his country into the Great Depression through austerity measures.”
Hoover’s administration increased federal government spending from three per cent of the U.S. economy in 1929, the year he took office, to eight per cent in 1933, the year he left office.
The U.S. budget deficit became so large as a result that by 1932, the country’s government was spending more than $2 for every dollar it took in.
It was not austerity that caused the Great Depression, but misguided government meddling in the economy, such as the Smoot-Hawley Tariff of 1930.
That increased tariff backed by Hoover ignited devastating trade wars between the U.S. and other countries that wiped out countless jobs.
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In the The Wall Street Journal, two researchers call Obama’s proposed “jobs” bill, the $450 billion “American Jobs Act,” a “blue-state bailout in disguise,” noting that his proposal would dump “$200 billion in taxpayer money” onto state government employees and projects, and would provide a “special benefit” to the most fiscally-irresponsible “states in the blue regions of the country where the president’s most fervent supporters reside.”
But it would harm most states over the long run by increasing their borrowing costs, driving up interest rates on bonds used to pay for useful transportation projects. As the researchers, Paul Peterson and Daniel Nadler, point out, “States will face even higher interest rates if the president’s proposed limit on the deductibility of state and municipal bond interest income (to help pay for the jobs plan) is enacted. If the interest is no longer deductible, investors will demand a higher rate of return for buying bonds, and state calls for more federal aid will intensify.”
Obama’s so-called “jobs” bill would fail to create private-sector jobs, and increase the size of the national debt, while wasting billions on failed federal “jobs” training programs that backfire by spreading bad work habits and welfare dependency. It would also introduce discriminatory provisions into the tax code, provide disincentives to work, subsidize pork and boondoggles, impractical green-jobs schemes, and educational bloat, and pay off special interests. Obama’s proposals simply disregard experts’ suggestions about how to stimulate the economy, such as adopting common-sense regulatory reforms.
In a vain effort to try to stimulate the economy, the Obama administration reportedly wants to dump more money into school construction, even though “K-12 facilities spending” is “up 150 percent in two decades,” including monumentally wasteful spending such as the $578 million spent on L.A.’s RFK high school. Obama also wants to dump more money into “K-12 employment” that “has been growing 10 times faster than enrollment for forty years.” In so doing, President Obama has turned a deaf ear to experts who say it makes no sense to increase education spending further. (Much federal education spending is wasted, like the $130,000 in stimulus money spent on a book that demonized white people and promoted racial stereotypes.)
Most education spending does not qualify as a “stimulus,” since it has no short-term economic payoff, and thus can’t jump-start the economy. During the Great Depression, President Roosevelt, a pioneer of “stimulus” spending, actually cut federal education spending, as historian Gordon Lloyd has noted. (See Gordon Lloyd, The Two Faces of Liberalism: How the Hoover-Roosevelt Debate Shapes the 21st Century (2006).) While Roosevelt spent lots of money on other things, and spent more than any other President before him, even the big-spending Roosevelt realized that education spending does nothing to end recessions, and does not jump-start the economy, even if it might be helpful to the economy in the long-run. The Obama administration does not have a clue about how to revive the economy. It claimed that Obama’s $800 billion stimulus package would deliver a short-run “jolt” that would quickly lift the economy, but unemployment rose very rapidly after its passage, and it destroyed thousands of jobs in America’s export sector and elsewhere while outsourcing thousands of energy jobs to foreign countries like China.
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In the Daily Caller, Chris Edwards has an interesting article about why government spending doesn’t “stimulate” the economy over the short-run or the long-run. Rather than growing the economy, stimulus packages are typically wasteful wealth transfers akin to a “leaky bucket,” which harm the economy in the long run, whether or not there are any short-run stimulus effects.
As Edwards notes, “Despite ongoing federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to ‘create jobs.’” But if government spending creates jobs, it’s hard to understand why unemployment has soared, even as government spending has exploded in recent years: “Federal spending has soared over the past decade. As a share of gross domestic product, spending grew from 18 percent in 2001 to 24 percent in 2011.” As he notes, “government spending and taxing creates ‘deadweight losses,’ which result from distortions to working, investment and other activities. The CBO says that deadweight loss estimates ‘range from 20 cents to 60 cents over and above the revenue raised.’ Harvard University’s Martin Feldstein thinks that deadweight losses ‘may exceed one dollar per dollar of revenue raised.’” Due partly to this “leaky-bucket” effect, Texas A&M economist Edgar Browning concluded that “It costs taxpayers $3 to provide a benefit worth $1 to recipients,” and that “today’s welfare state reduces GDP — or average U.S. incomes — by about 25 percent.”
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Mounting evidence shows that the auto bailouts weren’t worth it. They have been far more costly, and less successful, than claimed, as even liberal commentators now have admitted. The Washington Post fact-checker criticizes President Obama’s phony accounting on the auto industry bailout: “What we found is one of the most misleading collections of assertions we have seen in a short presidential speech. Virtually every claim by the president regarding the auto industry needs an asterisk, just like the fine print in that too-good-to-be-true car loan.”
Obama cites various figures of jobs allegedly saved through the bailout. But he’s playing deceptive numbers games that take credit for jobs actually created by foreign car manufacturers that didn’t participate in the bailout. As the Washington Post’s Charles Lane earlier noted, Obama’s jobs figures cite jobs created by the foreign competitors of GM and Chrysler, and their competitors’ auto dealers, including “not only the Detroit 3, but also all of the plants operated by foreign car makers in the U.S., the entire supply chain and all car dealerships around the country!”
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The Congressional Budget Office says the stimulus package will cost $43 billion more than estimated. The stimulus package is full of waste, fraud, and abuse. As Michelle Malkin notes:
Last week, the Treasury Department inspector general found that the tax police have failed to prevent fraud in the stimulus law’s energy tax credit program. Some $6 billion in stimulus energy credits for homeowners have been claimed — but the inspector general’s audit found that 30 percent of credit-claimers had no record of homeownership. The recipients included prisoners and minors. “I am troubled by the IRS’s continued failure to develop appropriate verification methods for distributing Recovery Act credits,” the Treasury Inspector watchdog said. Moreover, when the IRS wasn’t falling down on its job policing outside fraud, its own workers were committing their own stimulus fraud — by cheating the system and claiming a first-time homebuyer tax credit included in the 2008 and 2009 economic stimulus packages. At least 128 IRS employees claimed the credit, according to a recent Treasury Department audit, yet weren’t first-time buyers or violated other basic eligibility criteria.
Moreover, the stimulus package has also “redistributed wealth to prison inmates, flaky researchers, social justice boondoggles, infrastructure to nowhere, foreign companies, dead people and ghost congressional districts — not to mention $20 million in chump change to pay for campaign-style stimulus-hyping road signs across the country emblazoned with the shovel-ready logo.”
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The economy may be slowly recovering, but that’s in spite of — not because of — the recent orgy of federal spending. Two economics professors, Tim Conley and Bill Dupor, concluded this month that the $800 billion stimulus package wiped out a million private-sector jobs, destroying a net 550,000 jobs. (The American Recovery and Reinvestment Act, also known as the stimulus package, created 450,000 government jobs, partly offsetting the million private-sector jobs it wiped out.) “The majority of destroyed/forestalled jobs were in growth industries,” they say.
The stimulus package was earlier criticized by many leading economics professors, like Harvard’s Jeffrey Miron, Robert Barro, and Martin Feldstein. Professor Barro called it “the worst bill that has been put forward since the 1930s.” Nobel laureates Gary Becker and Vernon Smith have also criticized it. 200 economists signed a statement publicly opposing the stimulus package.
While pushing the stimulus package through Congress, Obama cited claims by the Congressional Budget Office (CBO) that it would save jobs in the short run, while ignoring the CBO’s own conclusion that the stimulus package will actually shrink the economy over the long run, by increasing the national debt and thus crowding out private investment. Contrary to the CBO’s findings, Obama claimed that “irreversible decline” would occur if the stimulus was not enacted into law.
Obama has run up the largest budget deficits in history, running monthly deficits that are bigger than Bush’s entire annual deficit for 2007, after the economy started to go south.
In his 2008 campaign, Obama demagogued about “outsourcing,” but his own policies have outsourced thousands of American jobs, at taxpayer expense, as I explain today at The Washington Examiner.
As ABC News notes, “Nearly $2 billion in money from” the stimulus package has “been spent on wind power,” but “nearly 80 percent of that money” — $1.6 billion — “has gone to foreign manufacturers of wind turbines.” Indeed, “a recent report by American Wind Energy Association showed a drop in U.S. wind manufacturing jobs last year.” These subsidies effectively outsource American jobs, driving up America’s trade deficit.
Weirdly enough, Obama supports this taxpayer-subsidized outsourcing, which wipes out American jobs, even while opposing non-subsidized (free-market-based) outsourcing, which can actually save American jobs by reducing the cost of finished goods that are produced mostly — but not entirely — in America. (How can firms’ decisions to outsource save American jobs? Here’s how: An American manufacturer of a finished product, facing stiff cost competition from overseas manufacturers, can reduce its overall costs, and thus avoid going out of business, by outsourcing low-skill jobs producing crude components of the finished product to low-wage overseas workers, thus enabling the more valuable finished product designed or assembled by skilled American workers to be cost-competitive with finished goods produced entirely overseas.)
Wintery Knight has an interesting commentary on additional ways that stimulus money and taxpayer money are being wasted on foreign companies and liberal interest groups. I earlier discussed how GE was using “green jobs” welfare to fatten its profits while paying no taxes (unlike most American companies, which pay some of the world’s highest taxes) and getting a special bailout at preferential terms from the taxpayers.
Liberal economist Peter Diamond is likely to be confirmed to a powerful position, despite issues far more severe than those that blocked the confirmations of highly-respected conservatives. It smacks of a big double standard.
Diamond was nominated to one of the most powerful positions in the land — the Federal Reserve’s Board of Governors, which sets monetary policy. (The Fed is now printing hundreds of billions of dollars to buy up government debt and inflate the money supply, in a controversial policy known as “quantitative easing” or QE2, which some economists have predicted will lead to substantial inflation.)
By law, the Board is supposed to be balanced regionally, but it isn’t: its members come almost entirely from the East and West Coast. So does Diamond, a professor at the Massachusetts Institute of Technology (MIT). He has lived in Massachusetts since 1960.
The Obama administration nominated Diamond for a seat on the Board representing a district in the Midwest, claiming he is from Chicago because he has lectured at Northwestern University. But as economist Mark Calabria notes, Diamond is really from Massachusetts, which already has a representative on the Fed (Fed Board member Dan Tarullo). That violates Section 10-1 of the Federal Reserve Act, which says a new Fed member may not come from a district that already has a representative. If Diamond is confirmed, every single member of the Fed’s Board will come from a coastal state, and none from America’s heartland.
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