United Liberty
Why a Spending Bill Won’t Work
Mon, 02/09/2009 - 8:13am | posted by Katy Delay
The other night, I had to chuckle and cry at the same time as I watched Rachel Maddow’s “Bull Puckey” speech.
Rachel’s declarations about the job-creating values of spending are about as insightful as Janeane Garofalo’s outburst on the radio in 2005, paraphrased thus: “… those free-market wackos with their ‘invisible hand’ mumbo jumbo.”
Both ladies’ understanding of the workings of the market typify the overconfidence of those who jump to conclusions without looking at the whole story.
Rachel claims that spending in and of itself is sufficient to create jobs and get the country out of a recession. Obama has embarrassed himself by making the same point. They have both overlooked that the statistical link between government spending and long-term job creation doesn’t exist. To illustrate:
Spending:
Let’s take an extreme and therefore abstract example. We can hire 15 million workers (10% workforce unemployed) to dig holes and fill them up. Cost: $800,000,000,000. 100% job creation. After the job is done, they go back on unemployment. Job creation for one year: 15 million. Job creation after one year and a half: Zero. Capital available for permanent job creation: X minus $800 billion. And don’t give me the argument that the government intends to do more than just dig holes and fill them up. Building bridges and roads that we can’t pay for is just as bad.
Permanent Job creation:
At the other extreme, let’s say we do nothing, and therefore the government does not sap the marketplace of $800 billion. Cost: Zero. The money is thus available to businesses, small and large, to rev up their engines as this recession starts its uptick. Jobs created during one year: Admittedly, perhaps zero. Jobs created after one year and a half, or sometime thereafter: 7 million, year after year, as unemployment falls back to around 4% or less. These jobs are permanent.
The lenders of the $800 billion know this, as we will soon find out when the US government finds it harder and harder to finance its debt. Why isn’t this difference clear to the President and to his supportive progressives? Because these people are short-sighted, and they grasp at whatever supports their political culture instead of looking at all the facts.
Rachel quotes Moody’s statistics. Example: “Most Stimulative Spending: Non-refundable tax rebates: $1.00 = $1.02/economic activity. Infrastructure: $1.00 = $1.59/economic activity.” These stats make no mention of the duration of job creation in each instance, what kind of jobs are created, and what money is used to do it. Statistics can be the best liars when you don’t tell the whole story.
More twisted logic:
- Who will be employed on the construction sites of the Spending Package’s bridges, railroads, and roads? Will the government try to pick and choose among the unemployed? Can legislators get the most expensive unemployed (Wall Street workers, lawyers, and others like them) onto the dirt? Does the construction industry worker deserve a job more than an investment banker or lawyer?
- Rachel says that people on unemployment don’t spend. Isn’t she forgetting that they receive unemployment benefits that are paid out of future income from existing tax structures and not borrowed 100% from the world’s capital pool? Then she turns around and almost makes the argument that we should all go on Food Stamps. This is strange thinking.
- We are all (including me) complaining about the big bonuses and the Las Vegas junkets, but isn’t this also spending a la Rachel? Aren’t we forgetting that jets are made by American workers, that pilots fly those jets, and that lots of people work in Las Vegas? We are also forgetting that the rich spend a portion of those bonuses and invest the rest in things like the stock market, i.e. in the very same instruments that are in all of our 401(k)’s, which could use a little help right now. (Don’t get me wrong, those bonuses give me goose bumps; but I believe their size was determined by excessive money and credit supply and by the competitive marketplace, not only by individual greed. See this post, for example.)
- We want to put American manufacturing back on track by recommending we all “buy American.” Aren’t we forgetting that if we refuse to buy foreign products, foreigners will refuse to buy ours? And that this type of thinking is what ultimately repressed the world economy in the 1930s?
- We want China to allow their currency to rise in value, but aren’t we forgetting that for this to happen, China has to stop buying our debt? Do we really want that?
Much illogic should be examined here.
Katy,
I defiantly agree with you.
A spending bill can’t work, There are many reasons why.
It wouldn’t have worked in 1929, And it certainly won’t work now.
Our economy has been knocked down by all of the outsourcing of jobs to China and India.
We need change, But Obama isn’t going to do it.
The only reason he got into office was because of the younger voting crowd.
I am proud to say I voted all Republican.
It’s always been on the Democrats to make the Republican party look bad so they can get into office.
Shawn
You say we need change, then say you voted all Republican. Why didn’t you vote for change?
The infrastructure of our country has long been ignored. The states don’t have the money to do the upkeep, so how is it bad to put people to work fixing these things? Things such as roads, the electrical grid, bridges, and retrofitting aging buildings.
It’s nice that you believe big business will rescue our country, maybe the tooth fairy can help and leave a quarter under everyone’s pillow. As these businesses have grown into the behemoths they are the American public has been placed in the precarious position of being their guardian, if they fail they take many jobs with them. Please don’t give me the tired Ayn Rand story of allowing business to go where it may. The people who trashed Wall Street knew what they were doing.
We aren’t dealing with Ward and June anymore, these people only want to line their own pockets. Imbeciles such as yourself who probably believe in less regulation and no anti-trust laws would allow corporate giants to set us all up for this same thing to happen again in a few years.
Part of what got us here was the Republitard sponsored GLBA that was put into place during Bill Clinton’s run, bad concession to the right wingnutz. Removing the restrictions from the banks and from Wall Street, which was fine for a brief run, was something I feel factored heavily in this last upheaval.
Say what you will, but allowing business to do as it will in an age when the men running these businesses have little or no ethical or moral compass is just asking for more trouble.
The infrastructure of our country has long been ignored. The states don’t have the money to do the upkeep, so how is it bad to put people to work fixing these things? Things such as roads, the electrical grid, bridges, and retrofitting aging buildings.
It’s nice that you believe big business will rescue our country, maybe the tooth fairy can help and leave a quarter under everyone’s pillow. As these businesses have grown into the behemoths they are the American public has been placed in the precarious position of being their guardian, if they fail they take many jobs with them. Please don’t give me the tired Ayn Rand story of allowing business to go where it may. The people who trashed Wall Street knew what they were doing.
We aren’t dealing with Ward and June anymore, these people only want to line their own pockets. Imbeciles such as yourself who probably believe in less regulation and no anti-trust laws would allow corporate giants to set us all up for this same thing to happen again in a few years.
Part of what got us here was the Republitard sponsored GLBA that was put into place during Bill Clinton’s run, bad concession to the right wingnutz. Removing the restrictions from the banks and from Wall Street, which was fine for a brief run, was something I feel factored heavily in this last upheaval.
Say what you will, but allowing business to do as it will in an age when the men running these businesses have little or no ethical or moral compass is just asking for more trouble.
I’m not sure I would call this a spending bill. Maybe a printing bill is more like it. You have to posess money in order to spend it.
This bill is nothing but a scheme to punish people who have saved money and made smart descions. Tax those who made smart descions and destroy with inflation the savings of those who saved.
If you have no savings you are dependant on big brother. Trade your federal reserve notes for gold while you can.
Politically connected contractors will land huge government contracts pushing their non connected competition out of business. The less competition the closer we get to a totalitarian state.
the bankers already got their bailout, what jobs cameout of that?
I think I agree more with Rachel’s logic than yours. You outline the choices A) do nothing and let millions of people join the ranks of the unemployed every month, assuming (in your cartoonist’s opinion) that all will pass and be fine in 18 months or so; or B) invest in our badly neglected infrastructure, put people to work, even if temporary, while allowing those in the construction industry, steel industry, etc. get a badly needed boost (which could get investments rolling again).
In option A, we get more and more people unemployed - thereby requiring government assistance (increased spending). In option B, people get jobs, which will lead to more personal spending, and we get revamped infrastructure.
In the 30s, government spending on public works projects, like TVA, provided much needed jobs at the time. Yes some of those jobs were temporary construction jobs, but TVA still employs people today. And TVA provides flood control and clean hydro-electric power to a large region (and has for decades). These public works projects can have positive long term effect for the good of the country - and provide long-term jobs.
If in the 30s, the government chose to do nothing - sure we would have eventually pulled out of the depression, but the people in the Tennessee Valley would have suffered more hardships, and we would not have the system of dams controlling the Tennessee River today.
I guess unemployment is just a statistic, until you’re the one that loses your job.
Now, the spending bill may not work, but infrastructure investment will not be the reason it fails. It’s actually one of the few things I like about the bill, and I wish more was allocated for it.
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