Where We Were, Where We Are

The blogfather routinely publishes this chart for obvious reasons.

Click for the original.

I've heard the obvious rejoinder..."well they didn't know how bad Bush had made things"....far too many times.  Bullshit.

If they didn't know how bad it was, then they were obviously not competent to take the job.

I can clearly recall the CBO saying that the recession would only last to the end of 2009 at the worst if we did NOT pass the stimulus bill.  The economy would work things out and we would recover, just as we always have.

Instead, we got an orgy of spending and debt, followed by an expensive national health care bill driving us further into debt, followed by further threats to regulate and tax the very people with the means to create much needed jobs which retarded investment.  There are good reasons to understand why our recovery has been so anemic.  Mr. Obama and the Democrats have done everything in their power to undermine it.

There were some productive elements of the stimulus bill.  The highway construction and repair elements have been very productive.  Obviously the unemployment extensions were worthwhile.  But the rest was just a waste of time and money.

This is why Mr. Obama needs to go.  He has no idea how to create wealth.  He only knows how to consume it.

It Didn't Work Then

Periodically, I have moments where I enjoy my online reading preferences.  One of those was a couple of days ago when Mr. Obama's campaign began pushing the idea that Mr. Romney favored fewer firemen, teachers, etc.

The Blogfather had the perfect quick take on the subject.

As my father-in-law once said, when they talk about taxes it’s always for teachers, firemen, and police — but when they spend your taxes, it always seems to go to some guy in a leather chair downtown you never heard of.

As Reason noted, a lot of the stimulus money was advertised as going to help local government jobs like teachers, cops, and firemen, but on those few occasions when the money actually supported those jobs, those people got laid off anyway after the gravy train ran empty.  Not exactly the sort of jobs program that was advertised up front.

From Mr. Romney's campaign:

“President Obama fundamentally believes in raising taxes to grow government. He believes that we must hire more government workers to fix the economy. Every day, we learn why President Obama has not been the leader to take us out of this economic crisis. President Obama wants to stimulate government, Mitt Romney wants to stimulate the real world economy.” 

It's good to understand the talking points before they come out so I can just bypass the conversation altogether later on.

A Reminder For Scale

Mr. Obama's "stimulus" and other spending is much more than was spent on the Iraq war.

Just in case anyone has forgotten.

Where Did All The Jobs Go?

The NYTimes was recently holding forth on the "missing jobs" that are no longer in the economy.  Glenn Reynolds links to a few reasonable explanations.

The best explanation is that governments do not run economies efficiently.  Government policies distort the economy.  Sometimes those distortions work out well. [Think EPA air and water pollution regulations.]  Sometimes they do not. [The Depression Era restrictions on working hours in the National Recovery Act come to mind.]

We have had a bit of both recently.  The 2009 stimulus bill included up to $8,000 for new, first time home owners.  The purpose of that money was to help sop up the newly created surplus in homes created by the housing bubble.

Quite frankly, I thought this was one of the few occasions of masterful law-making by Mr. Obama.  New home owners buy a lot of things; lawn mowers, refrigerators, stoves, washers, dryers, etc.  Getting those homes out of the market helped slow the fall in home prices while at the same time created demand for other goods.

Another example of positive legislation is the spending of money on road projects.  If we are going to throw money at the labor market, we may as well do so in a way that results in real improvements to our infrastructure.

A negative example would be the "cash for clunkers" program that took a lot of very serviceable vehicles off the market and then junked their motors.  Essentially, it was a subsidy for people with enough money to be able to confidently afford a new car purchase.  Their used cars might have served as good upgrades for second tier car owners that cannot afford to buy a new car.  [Like me!!]

So where did the jobs go?  Health Care Reform and Banking Reform.

Those two laws have created a great amount of uncertainty among employers.  They simply do not know how much these laws are going to cost.  We are already seeing even greater increases in health care insurance costs due to government action.  We have no idea how much the banking reforms are going to cost our banks....and in turn cost us.

I talk to business owners and managers everyday as a part of my usual employment.  Whenever the subject of the economy comes up....and it does....the insecurity of the current regulatory and tax environment is almost always identified as being the prime cause for companies to not hire new workers.  I have had business owners tell me that they have more work to be done, but they won't hire any new workers because they don't know how much it is going to cost in the long run to hire them.

Governments don't run economies.  They ruin them.  It is a hard lesson that we are going to have to re-learn.

Unfortunately.

Where Were The Protests?

One of the current criticisms of the Tea Party folks that drives me nuts is when people ask why the Tea Party folks didn't protest George W. Bush when he was creating the initial round of bailouts.

Who knew?

At the time we were treated to all sorts of economic horror stories.  Free market economies experience recessions.  The are an unpleasant but necessary part of any healthy, growing economy.  The only way to experience the boom is to have the bust.  It is hard to defend free markets in the middle of a deep recession.  You get called all sorts of ugly names.

Who knew that the problems at AIG might have been addressed some other way?

Who knew that healthy banks would snap up the bankrupt ones right away?

Who knew that Morgan Stanley Goldman Sachs and many European banks would benefit from Congressional largess?

Who knew that part of the problem was federal regulators with the authority to stop the worst abuses were actually spending their time downloading porn?  On Mr. Bush's watch, in case you weren't paying attention.

We were faced with "do this and do it now or else".  Who knew that there were other options?


The ugly fact of the matter is that recessions come and go.  And while some small portion of the money spent in the early days of the recession might have been defensible, the larger part of that money has been summarily wasted.  We would have a healthier economy now if we had simply let the contraction continue until the markets really stabilized.  At least then we would know where we were.

As of right now, we sit with a hole of unknown depth below us as we wait for the next over inflated market to collapse to its true value.

This Is Stimulating

Megan McArdle has a brief piece on administration claims regarding the efficacy of last year's stimulus bill that is worth a read.  Her take on the question of whether or not the stimulus helped?  Sure.  Some.

But nearly as much as the administration is claiming.

I was never a big fan of the stimulus bill for a couple of reasons.  The first reason is that the Congressional Budget Office was predicting a recovery in the second half of 2009 without spending a dime of stimulus money.

The second reason is that it seemed that someone had calculated a dollar value to be spent to cause a certain amount of recovery.  After that, the administration and Congress were hell bent to spend that amount of money regardless of what it was actually purchasing.  Some of the things the stimulus purchased....like the spiffy new main road that I use to get to and from my neighborhood....created jobs and resulted in something of value.  Some of the other things the stimulus purchased.....not so much.  They should have spent more time focusing on what was being bought and less time worrying about how much was being spent.  If there were only $300billion in worthwhile projects, then that is all they should have spent.

The third reason for my skepticism over the stimulus is that I don't think a real economic recovery was ever going to be caused by government spending.  I have the good fortune to speak with business owners and managers during the regular course of my employment.  These people almost uniformly say that there is business out there to be done.  They need to hire more people.  They need new equipment.  There is money to be made and they want to make it.

What is keeping them from doing so?

A Congress and an administration that demonizes corporations and denigrates profit.  A Congress and an administration that continue to promote increasing income taxes for those same business owners and managers.  A Congress and an administration that continues to push for health care reforms that these same business owners cannot afford.  A Congress and an administration that continues deficit spending at rates unseen in 70 years.

These business owners and managers know that such spending isn't sustainable.  If it isn't checked soon, then interest rates are going to climb.  Inflation will return.  And as a result, they will lose whatever they have invested to expand their operations.

The government has spent $287 billion of the $787 billion in stimulus money.  The modest good that it has done is well and good.

But if the administration wants to truly set the country back on the course of economic progress and prosperity, then they would be well advised to cancel the unspent funds, forswear tax increases, and get serious about cutting the federal budget until it is balanced.

How 'Bout Dat Stimulus Pussy?

There's a brief animated GIF over at Stacy McCain's place that should be of interest to cat lovers.

Read or ignore the commentary as you will.