The right-wing National Review on September 7, 2009 – Why the Stimulus Failed
Conservatives have correctly declared President Obama’s $787 billion “stimulus” a flop. In a January report, White House economists predicted the bill would create (not merely save) 3.3 million jobs. Since then, 2.8 million jobs have been lost, pushing unemployment toward 10 percent. (emphasis mine)
Looking at recorded spending to date as well as estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies on the economy and using various mathematical models that represent the workings of the economy. On that basis, CBO estimates that in the first quarter of calendar year 2010, ARRA’s policies:
* Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.2 percent,
* Lowered the unemployment rate by between 0.7 percentage points and 1.5 percentage points,
* Increased the number of people employed by between 1.2 million and 2.8 million, and
* Increased the number of full-time-equivalent (FTE) jobs by 1.8 million to 4.1 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)
Gosh, how could that happen. Conservatives are always right? Even in 2009 Matt Yglesias noted the financial wizards at The National Propagandist Review were both wrong in their math and their reasoning, Is Stimulus Impossible
The Heritage Foundation’s Brian Reidl explains in National Review that it’s not possible for stimulus to work:
The idea that government spending creates jobs makes sense only if you never ask where the government got the money. It didn’t fall from the sky. The only way Congress can inject spending into the economy is by first taxing or borrowing it out of the economy. No new demand is created; it’s a zero-sum transfer of existing demand.
So suppose this engineer Henry Ford wants to build a car factory, but he doesn’t have the money it costs to build a car factory, so he borrows the money from a coal dealer named Alexander Malcomson—is that a zero-sum transfer that doesn’t create jobs?
We can probably all agree in good times – ordinary times – it is best not to spend this kind of money to create jobs, but these are not ordinary times. There is an element of the mystical in right-wing thinking when it comes to the economy and job creation via government spending. One they fail to acknowledge that a school teacher or construction worker that kept their job or got a job because of the Recovery Act, spends their pay check on rent, groceries and assorted goods which helps other people keep their jobs. Two, people with jobs pay taxes in some form – sales, income etc. Investing in people is as old as Adam Smith and the whole concept of a capitalist economy. Conservatives tend toward the view that your average American is a lazy bum that does not deserve a helping hand – different from a handout – even in the worse of times. One gets the impression they read A Christmas Carol and thought Scrooge and his partner were heroes.
It is a little frustrating posting on the GOP meeting on Capital Hill at which President Obama made an appearance. So far all we have are accounts filtered through Republicans in attendance. Obama, Republicans Clash In Private Meeting
It was billed as a high-noon cease-fire between President Obama and Senate Republicans, but the rare, private Capitol Hill meeting instead turned into a heated shootout at the notion that anyone in the room has bipartisan intentions this election year.
When Obama appealed for bipartisanship on legislation in the six months remaining before Election Day, freshman Sen. Bob Corker (R-TN) confronted him, the senator later told reporters.
“I told him I thought there was a degree of audacity in him even showing up today after what happened with financial regulation,” Corker said after the meeting. “I asked him how he was able to reconcile that duplicity, coming in today to see us.”
I’m not sure how Corker could justify the term ‘duplicity’ in the context of the president being either deceitful or misleading about financial reform. There were sound bites from other senators, but Corker stands out above what was largely whining and the usual right-wing spin on the facts. Bob was in on the financial reform negotiations. In a march 31st report – GOP on bank reform: Weak bill not weak enough. Will consumer protection go the way of the public option? Sen. Corker says he can’t support Dodd bill
Then contemplate Wednesday’s news: Republican Senator Bob Corker, reports the Wall Street Journal, says “I have no plans to support the current legislation. I hope we’ll get back to the negotiating table.”
Corker did not specific exactly why he would not support the Dodd bill in its current form, but it’s a good bet that his reasons don’t align with the weaknesses pointed out by Konczal and others. For example, Corker has long been on record opposing a strong and independent consumer financial protection agency. In general, the Republicans are worried that regulatory reform will be too restrictive.
The White House, reports the Journal, doesn’t want to budge. Their political judgment is that Republicans are making a big mistake aligning themselves with the financial sector.
Mr. Gibbs said the principles for new rules outlined by President Barak Obama were “nonnegotiable with the president” and “nonnegotiable with the American people.”
We’ll see how long this hard line stands. In the Times, David Leonhardt suggests that the consumer financial protection agency is banking reform’s equivalent to the public option sought by health reformers. If that’s the case, then the agency would seem to be a prime candidate for sacrifice in order to garner one or two precious Republican votes.
Almost two months ago Corker signaled he would not vote for Wall St reform and a consumer protection provision was one of the points he went out of his way to make. He tried to weaken the bill’s protections, which many of us think do not go far enough in regulating credit default swaps, and when Dodd would not weaken it further, Corker publicly said it was too weak. All this during the time President Obama was on public record as opposing weakening the Senate bill. Only a Republican like Corker can stake out two opposing positions on a bill, know the president’s stance, and then accuse the president as being duplicitous more here – Bob Corker Wins GOP Hypocrite Award for Opposing the Same Financial Reform he Helped to Weaken Because Suddenly it’s too Weak. With Corker’s public opposition to the consumer protection part of the Senate bill we’re supposed to believe Corker wanted these stronger provisions as proposed by the Roosevelt Institute,
* Hard limits related to both size caps relative to GDP and leverage ratio must be specified in the bill. This will put a floor to the difficulty of resolution and the damage to the economy.
* The Volcker Rule should be accepted outright, rather than through the decision of the Financial Stability Oversight Council.
* The Bureau of Consumer Financial Protection must have full rule-making authority over non-bank lenders, including auto lenders.
* The Bureau of Consumer Financial Protection must keep its lack of preemption over state regulation.
* The derivatives section should be included to require all standardized derivatives to trade on an exchange with clearing, keeping with the original financial regulatory reform language introduced by President Obama in June of 2009.
* The Financial Stability Oversight Council should not have the ability to alter the derivatives rules, override the Bureau of Consumer Financial Protection or change other regulations by a vote.
* Early remediation requirements should be defined as to intervene earlier than the event of financial decline for a large systemically risky financial firm with a rule written by Congress.
* There should be more focus on investing in high end, internationally focused position monitoring for large systemically risky financial firms.
* In the light of recent scandals, there should be extra language included that targets fraud in accountancy and directly addresses issues of off-balance sheet reform.
So all the all the Senate banking Committee has to do is include these stronger provisions and Corker and Republicans will be on board. Right? If not we can all look forward to Bob Corker’s re-election campaign commercials where he says financial reform was not liberal enough for him to vote for.
In researching Corker’s positions on WallStReg he has been back and forth on the Volcker rule and on consumer protection, together with some equally murky statements on his expectations of what good WallStReg look like. As Republican doublespeak goes , I will concede he is better than average.