stimulus package

Big Company With Ties to White House Paid No Taxes; GE Also Got Corporate Welfare and Bailout on Special Terms

by Hans Bader on March 27, 2011

in Bailout Watch, Economy, Energy, Environment, Stimulus to Nowhere

“The top corporate tax rate in the United States is 35 percent, one of the highest in the world,” but General Electric, whose CEO was recently tapped to lead President Obama’s Council on Jobs and Competitiveness, pays no taxes at all, reported the New York Times.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.  Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

This negative tax rate is the product of lobbying aimed mostly at liberal lawmakers. “G.E. has spent tens of millions of dollars to push for changes in tax law,” such as “‘green energy’ credits for its wind turbines.” “Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment.”

In his State of the Union address, President Obama called for even more spending on forms of energy that benefit GE.  Government energy spending and tax credits disproportionately benefit GE, which recently spent  $65.7 million on lobbying to get government subsidies.

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Obama Administration Understated Deficits by $2.3 Trillion; Resists Spending Cuts Needed to Stem Deficits

by Hans Bader on March 25, 2011

in Economy, Employment, Energy, Environment, Stimulus to Nowhere

The Congressional Budget Office reported last week that the Obama administration understated budget deficits “by more than $2.3 trillion over the upcoming decade,” and that “if Obama’s February budget submission is enacted into law it would produce deficits totaling $9.5 trillion over 10 years — an average of almost $1 trillion a year.” President Obama objects to even a tiny two percent cut in the federal budget, submitting a self-indulgent, smoke-and-mirrors budget that would actually increase spending even faster than previously proposed for 2012.

Obama’s record deficit spending is based on the notion — contrary to all evidence — that if the government increases spending, that spending will more than pay for itself through increased economic growth. (Never mind that Canada’s economy boomed after it slashed government spending in the 1990’s, and America experienced an “economic boom” after our government slashed spending in 1946.)

For example, even though “federal education spending has gone through the roof” in recent years, Obama has called for big increases in education spending, saying that “the best economic policy is one that produces more college graduates.” But dumping more money on colleges won’t spur economic growth.

Jacking up college attendance rates further just results in the presence of bored, unmotivated students who are not interested in learning, and only go to college to get a diploma, while spawning an economically-destructive “arms race” over who can acquire the most unnecessary credentials. Already, “36%” of “the nation’s undergraduates” learn “little” or nothing after four years of college, according to a study cited by USA Today. Many of their professors didn’t even try to teach them much: “32% never took a course in a typical semester where they read more than 40 pages per week.”

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The End of the Imaginary Age of Civility

by Hans Bader on February 7, 2011 · 1 comment

in Politics as Usual, Sanctimony, Zeitgeist

After the Tucson shooting, liberals lectured America, and especially conservatives, on the alleged need for more civility (even though there was no evidence that the shooter was influenced by any uncivil political rhetoric, and the shooter was not a conservative).

But the new era of civility didn’t last long, if it ever existed at all.  Some of the very people who loudly demanded civility from others quickly returned to their own deeply-ingrained habit of trash talk and hate-filled vitriol.

Liberal actor and activist Richard Dreyfuss set up a project to promote “civility in political discourse” after the shootings.  When he was asked about a liberal radio host’s yearning for the death of the “dirtbag” Dick Cheney, he praised it as “beautifully phrased,” endorsing an intemperate diatribe that also branded Cheney as an “enemy of the country,” and a “freakin’ loser.”

The liberal lobbying group Common Cause, which had hectored America about the need for civility, helped organize a demonstration outside a conference in California where participants called for the lynching of Supreme Court Justice Clarence Thomas.

Liberal Congressman Steve Cohen (D-Tenn.) helped usher in the new Age of Civility by likening Republicans to Nazis like Joseph Goebbels.

The Washington Post and New York Times enlisted two prominent practitioners of trash talk to lecture America about the need for civility. Al Sharpton preached about the “dangers of inflammatory rhetoric” in the Washington Post, despite his own past history of helping incite a deadly race riot, and a court judgment against him for defamation arising out of the Tawana Brawley hate-crime hoax.   Ex-congressman Paul Kanjorski (D) lectured about the need for “civility” in the Times, despite his October 2010 statement that Florida governor Rick Scott (R) should be shot.

The Post op-ed writers who endorsed the calls for civility then paved the way for yet more civility, both by branding conservatives as spiteful lobotomy patients, and by insinuating that opponents of gun control are collectively guilty of subversion and nativism, writing that “the descriptions of President Obama as a ‘tyrant,’ the intimations that he is ‘alien’ and the suggestions that his presidency is illegitimate are essential to the core rationale for resisting any restrictions on firearms.”

Even as it prattled about the need for civility, the New York Times editorial board directed readers to its earlier diatribe that baselessly accused Republicans, the Tea Party, and conservative media of creating a climate of “division” and “anger” that made the Tucson shootings possible. The Times did so even though a column by its own David Brooks had earlier pointed out that there was “no evidence” that the shooter was influenced in any way by conservatives.

While the Post and the Times don’t seem at all concerned about the death threats recently made by liberal activists against Republican lawmakers in Florida and in Wisconsin, they are very up in arms about factual references to the health care law as being “job-killing”  (a claim based partly on Congressional Budget Office findings that Obamacare would reduce the size of the American labor force by perhaps 800,000 people). The Post‘s Dana Milbank seems to think that criticizing the killing of an inanimate object (like a job) is violent rhetoric, and he recently wrote a long, sanctimonious editorial devoted almost entirely to the alleged incivility of referring to Obamacare as “job-killing,” which he regards as rhetorical “poison.”

Since the big-government policies they favor typically wipe out jobs  (like the $800 billion stimulus package, which wiped out jobs in America’s export sector, while subsidizing foreign green jobs, and which the CBO admitted would shrink the size of the U.S. economy in “the long run“), it’s not surprising that liberal journalists like Milbank would want to squelch discussion of “job-killing” policies.

Andrew Sullivan Blames Tea Party for Budget-Busting Deal That He, Not It, Supported

by Hans Bader on January 21, 2011

in Deregulate to Stimulate, Economy, Employment, Politics as Usual, Sanctimony

The deficit is largely the result of “feel-good” bipartisan policies supported by the political establishment. But rather than taking credit for the deficit it helped to create, the liberal establishment blames it on political outsiders like the Tea Party who have little influence over public policy. Sometimes, the Tea Party is accused of supporting policies it had nothing to do with.

Writing at his blog at The Atlantic, liberal journalist Andrew Sullivan recently faulted the “Tea Party” for the recent budget-busting deal between Obama and congressional leaders that exploded the deficit by extending tax cuts, unemployment benefits, and government handouts: “immediately after the election, moreover, they did a deal borrowing a huge amount more and adding $700 billion to the debt.”

The irony is that Sullivan, one of Obama’s biggest cheerleaders, had earlier endorsed that very deal, a deal also endorsed by other liberal media like the Washington Post because of the government handouts it contained. In an explanation that was hard to follow, Sullivan said that this new “stimulus package financed by borrowing” would somehow create “the best context for serious reform” of the nation’s finances, providing a “big new stimulus” that would help Obama “as he moves toward re-election.”

By contrast, some Tea Partiers publicly opposed the deal. A Wall Street Journal article quotes a Tea Party activist and Senate candidate saying that “she decided to run after watching Congress pass legislation during this month’s lame duck session, including a package of tax cuts, that added to the national debt.”

Most Tea Party bloggers took no position on the deal. The few that did either opposed it or reluctantly supported it as the best one could expect from a government that would still be dominated by liberals in the next Congress (with Democrats controlling both the White House and the Senate).

I criticized the deal in a blog post that was reproduced at a blog called “Freedom Action“” that includes many Tea Party members. It drew no objections from any blogger or reader at that site (which has more than 300 members). I noted that the billions it will spend on extending unemployment benefits won’t stimulate the economy, but will financially burden states. 30-40 state unemployment funds are already insolvent or teetering on the edge, thanks to past federal extensions of unemployment benefits. Giving people unemployment benefits for years on end discourages people from taking lower-paying jobs, and results in some recipients gaming the system. It encourages people not to relocate in search of work, and not to take productive jobs that they think are beneath them, even if those jobs are the only jobs that they will realistically find once their jobless benefits come to an end, because of the disappearance of the type of job they once performed.

As the Heritage Foundation notes, “The consequences of extended unemployment benefits are some of the most conclusively established results in labor economic research. Extending either the amount or the duration of UI benefits increases the length of time that workers remain unemployed. UI benefits subsidize unemployment. They reduce the incentive unemployed workers have to search for new work and to make difficult choices–such as moving or switching industries–to begin a new job.” (The deal also contains other disincentives to work.)

Admittedly, the deal is not as economically-destructive as some of the measures that Obama previously pushed through Congress on party-line votes, such as the $800 billion stimulus package, which actually shrank the economy in several ways. (The stimulus used “green-jobs” subsidies to send American jobs overseas. 79 percent of those subsidies went to foreign firms, such as an Australian firm that imported Japanese wind turbines, effectively outsourcing American jobs. It also wiped out jobs in America’s export sector.)

Unemployment Benefits Keep People from Working

by Hans Bader on December 14, 2010 · 1 comment

in Economy, Employment, Stimulus to Nowhere

Wintery Knight has an interesting discussion of how unemployment benefits keep people from working, drawing on coverage from The New York Times and academic studies. As he notes, this undermines the methodology used by the Congressional Budget Office (CBO) in concluding that the stimulus package would increase the size of the economy in the short run. (Even the CBO admitted that the stimulus would shrink the economy in the long run.)

We recently discussed other ways that the stimulus package discourages work and cuts the size of the economy. The recent deal between Obama and Congressional leaders will extend these harmful provisions, as well as the unemployment benefits that discourage work. (The job-destroying $800 billion stimulus package also gutted welfare reform.)

Earlier, we discussed how the stimulus wiped out American jobs, and Harvard economist Jeffrey Miron’s conclusion that the stimulus was not only a failure at creating jobs, but also was intended to push left-wing ideological goals, rather than to revive the economy.

More Disincentives to Work, Thanks to the Federal Government and the Stimulus Package

by Hans Bader on December 12, 2010 · 3 comments

in Employment, Stimulus to Nowhere

Thanks to food stamps, Medicaid, and housing subsidies, and other welfare benefits, many “poor” people have far more disposable income than self-supporting households earning $40,000 to $60,000 a year.  Veronique de Rugy points to a finding that “a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year” — even excluding benefits from Supplemental Security Income.  “America is now a country which punishes those middle-class people who not only try to work hard, but avoid scamming the system.”

These disincentives to work were expanded in the job-killing $800 billion stimulus package, which largely repealed welfare reform and increased the refundable tax-credits given to non-taxpaying “poor” households.  These refundable credits are being perpetuated in the costly $900 billion deal recently reached between Obama and congressional leaders.

The analysis de Rugy cites actually understates the disincentives to work, because it ignored the fact that many households that are “poor” in terms of taxable income are not poor at all once you factor in tax-free income from non-governmental sources.  For example, child support is tax-free to the recipient family, no matter how huge the payments they receive (for example, a billionaire may pay several million dollars a year in child support to each of his ex-girlfriends with kids, leaving them in tax-free luxury, and under New York’s child support guidelines, everyone is supposed to pay at least 17 percent of their gross income in child support for just one child, regardless of how high that income is.  In Massachusetts, middle-income households pay 25 percent of gross income for just one kid — which is around a third of their after-tax income — under that state’s child support guidelines).

The stimulus package contained provisions encouraging states to temporarily ratchet up their child support guidelines to reap more federal matching funds.  Maryland recently increased its child support guidelines to excessive levels, permanently.  Ohio is now weighing a massive proposed child-support increase, also apparently based on erroneous reasoning.  However, these increases probably will not provide a net benefit to state budgets, because increased federal funding is offset by incarceration and other direct and indirect costs associated with enforcement of excessive child-support guidelines).

Federal matching funds are having a negative effect on child welfare in other contexts, such as unwarranted CPS seizures.  (The federal government is increasingly using matching funds to meddle in areas of tort, criminal, family and domestic violence law traditionally handled by the states, sometimes in ways that actually increase domestic-violence-related deaths and injuries.) Financial obligations imposed by divorce courts are also harming soldiers and small businesses.

Federal food stamp allotments are so generous that they clearly exceed the amount needed to actually feed a family on a bare-bones budget.

Stimulus Impact: Zero, or Less Than Zero?

by Hans Bader on December 9, 2010

in Economy, Employment, Energy, Stimulus to Nowhere, Trade

In The Wall Street Journal, economists John F. Cogan and John B. Taylor argue that the impact of the $800 billion “Obama stimulus” was “zero” in terms of increasing economic growth.

I think its impact was less than zero — that it actually shrank the economy in several ways. One way was its use of “green jobs” subsidies to send American jobs overseas: 79 percent of the subsidies went to foreign firms, such as an Australian firm that imported Japanese wind turbines. Another was how it wiped out jobs in America’s export sector.

But it’s good to see more economists demonstrating that Obama was wrong when he claimed that economists support his stimulus package. In 2009, 200 economists signed a statement publicly opposing the stimulus package in an ad published in The Washington Post and New York Times. The “‘stimulus’ is not the road to economic recovery. It’s the problem, not the solution, wrote Nobel laureate economist Vernon L. Smith.”

Even the Congressional Budget Office admitted that the stimulus package would shrink the economy in the “long run” by driving up the national debt and thus crowding out private investment through increased debt-service costs.

Unemployment Jumps to 9.8 Percent; Stimulus and New Regulations Wipe Out Jobs

by Hans Bader on December 3, 2010

in Deregulate to Stimulate, Economy, Employment, Stimulus to Nowhere

Unemployment has jumped to 9.8 percent. The population has grown recently, but the number of jobs has remained virtually flat. The White House seems to have learned nothing from this, and there is talk of yet more wasteful stimulus spending.

The stimulus package’s costly “green jobs” subsidies sent American jobs overseas. Their biggest recipient was a bankrupt Australian company that imported Japanese turbines for a windmill farm.  79 percent of the subsidies went to foreign firms.  Spain’s “green jobs” program, which Obama cited 8 times as a model for his own green jobs and global warming programs,  completely failed, destroying jobs and driving up Spain’s skyrocketing government deficit. Each new green job “created” in Spain wiped out 2.2 existing jobs and cost $800,000.   New EPA rules dealing with global warming are expected to wipe out more than 800,000 jobs, while proposed EPA ozone rules could wipe out millions more.

48 out of 50 states have lost jobs since passage of the $800 billion stimulus package.  The Obama administration falsely claimed that passing the stimulus package would keep unemployment under 8 percent, but now it’s close to 10 percent.  The stimulus also contained other provisions that wiped out jobs in America’s export sector, and it encouraged states to impose new job-killing burdens on business through changes to their statutory unemployment-compensation schemes.

Obama’s EEOC appointees are unprecedently hostile to employers, making the Carter-era EEOC look friendly to business by comparison.  New laws backed by Obama, and Obama administration regulations governing employers, have discouraged employers from hiring new employees.

High-Speed Rail in China: On Track for Failure

by Marc Scribner on November 23, 2010 · 6 comments

in International, Mobility, Stimulus to Nowhere

In recent years, Western media reports have been filled with fawning descriptions of China’s investment in high-speed bullet trains: “China Leads World In High-Speed Rail Tracks” says NPR; “China is pulling ahead in worldwide race for high-speed rail transportation” warns The Washington Post; “China’s amazing new bullet train” marvels Fortune Magazine.

As an unwavering opponent of high-speed passenger rail in the United States, the line — besides the “air travel is annoying because of the intrusive practices of government monopoly TSA, therefore we need another government monopoly in the form of high-speed rail to solve this problem” argument — that because China is pumping tons of money into the construction of these high-speed rail projects, the United States federal government must also spend tons of money is perhaps the most obnoxious. Besides the fact that China’s domestic intercity passenger mobility has no bearing on U.S.-China competition (even if you’re the most ardent nationalist), this argument absurdly assumes that China’s investments are wise ones.

I’m sorry (not really) if this bursts anybody’s bubble, but China’s massive investments in high-speed rail and infrastructure in general are starting to worry the communist country’s national think tank, the China Academy of Science to the State Council. The Academy issued a report that found, at current investment and estimated ridership, the trains will never collect enough in fares to repay the initial construction loans:

One of the concerns expressed in the report is the unsustainable level of debt that has propelled rail building projects across the country, particularly since the government launched its stimulus package in late 2008 to combat the effects of the global economic crisis.

The report found that the acceleration of infrastructure investment triggered by the stimulus package had caused a lack of integration between transport services across the country, leaving highways, subways, train stations and airports not properly connected.

Wen Jiabao, China’s premier, has seen the report and asked for further discussion of current high-speed rail plans, say people familiar with the matter.

The review — and possible scaling back — comes as provincial officials appear to have caught bullet train fever.

Local governments have between them asked for Beijing’s permission to expand the high-speed rail network by as much as 80 per cent above the already ambitious approved targets, according to analysts and Chinese media reports.

So, while the national Chinese government is cooling to expensive, inefficient bullet trains, the provincial leaders are clamoring for more largess. In the United States, the situation is reversed — with state-level officials opposing Obama’s magical trains of the future — but this is largely due to the fact that government financing is much more centralized in China, where provincial governments are off the hook for paying for both initial and future capital costs and operating costs. If U.S. states weren’t anticipating to foot any sort of a bill on these not-so-high-speed rail projects in the future, you can be sure that they’d be behaving just like their Red China counterparts.

H/T Harrison @ Capitol Commentary.

Harvard’s Jeffrey Miron Explains Why the Stimulus Package Failed

by Hans Bader on October 31, 2010 · 12 comments

in Economy, Stimulus to Nowhere

Harvard economist Jeffrey Miron explains why the $800 billion stimulus package failed in a recent article.

What’s interesting about Dr. Miron’s critique is that he shows how the stimulus was a failure even if you take for granted liberal assumptions about economic policy (such as Keynesian economic theory), since it was so badly designed and executed that it failed to achieve its goals, spending wastefully while failing to revive the economy.  Indeed, the stimulus was so poorly tailored to the economy (and the goal of reducing unemployment) that Miron concludes that it was designed to reward politically connected “constituencies” and special-interest groups, like public-employee unions, rather than being focused on ”economic stimulus.”

Other Harvard economics professors like Robert Barro have also criticized the stimulus package. Barro called it “the worst bill that has been put forward since the 1930s.”  Former Obama economic advisor Martin Feldstein, a Harvard professor who is a big believer in stimulus packages in principle, said that the stimulus designed by Obama and congressional Democrats was “poorly done”

Much stimulus money has been wasted.  It has gone to prisoners and dead people, wasteful welfare spending, abandoned bridges to nowhere, and unnecessary government buildings.  The stimulus subsidized foreign green jobs and wiped out jobs in America’s export sector.

The “’stimulus’ is not the road to economic recovery. It’s the problem, not the solution, writes Nobel Prize winning economist Vernon L. Smith.” Other Nobel Laureates like Gary Becker have also criticized the stimulus package.  200 economists signed a statement publicly opposing the stimulus package in an ad published in the Washington Post and New York Times.

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