No excuses if Obama can't fix 'his' recession

So Obama has his stimulus bill, but he has paid a very high price. He now owns the recession

By economist Irwin Stelzer

If, like John Maynard Keynes, you believe that spending, any spending, will revive a flagging economy, the freshly minted, 1,000-page American Recovery and Reinvestment Act of 2009, calling for $504 billion in deficit-financed spending, is for you. Well, not quite. It seems that most of the money will not be spent very soon. About 30% won't hit the economy until 2011, and the balance is likely to be tied up in the procurement processes of the federal and state governments until well into 2010, and beyond. Besides, much of the spending will end up boosting other economies - subsidies for wind machines will benefit workers in the other countries in which such machines are manufactured, not our very own horny-handed toilers. And much of the spending will not create jobs for the unemployed: laid-off car workers do not have the skills to design the software to manage the "smart grid" that is the apple of the greens' eye.

If you have not jumped onto the new Keynesian spending bandwagon, but believe with Christina Romer, chairman of Barack Obama's Council of Economic Advisers, that tax cuts are more certain than spending to turn the economy round, you should love this bill, with its $286 billion in tax cuts and credits. Well, not quite. True, individuals earning less than $75,000 a year and families earning less than $150,000 will receive credits of $400 and $800, the earned income-tax credit for working families with three or more children is increased, and there is something for pensioners, disabled veterans, families of college students and a host of others.

Reflection suggests, however, the tax-cut contingent is doomed to disappointment. Much of the money will be saved or used to pay down credit-card balances, not bad things, but not very stimulative. Much will be spent in Wal-Mart, earning Congress the applause of Chinese trainer and t-shirt manufacturers. And much will never be claimed: the specific subsidies for college education are simply too small to have much effect on college enrolments.

If you are a supply-side enthusiast, a reading of this bill will add your personal depression to the national recession. Reforms that might increase employment in the oil and gas industries by removing restrictions on drilling are nowhere to be found. Environmental restrictions on the sorts of cars that Americans want to buy remain in place, consistent with Congress's drive to have the begging-bowls-in-hand car companies produce Schumermobiles, named after the New York senator whose passion is electric vehicles and cars too tiny to need much petrol or to survive in a serious crash. A change in rules that would permit the construction of needed transmission lines without lengthy court reviews initiated by environmental groups remains off the Obama agenda and out of the bill. Most important is the absence of steps to encourage the flow of private capital into toll roads, an alternative to government-financed highways, and into schools free to compete for vouchers, rather than schools built by governments in towns that already have too many classrooms.

The explanation for these omissions was simply stated by the president, responding to those who want even more tax cuts and some supply-side stimulus, "We won." Not very satisfying intellectually, but who needs intellectually satisfying arguments when his party controls the White House, the Senate, and the House of Representatives?

Enough quibbles, though. If, like any sensible person, you're not sure spending will work, but not sure it won't; not sure that the bulk of tax cuts will be spent on US manufacturers, but not sure they won't; and not sure that doing nothing is a good, though tempting idea, this bill is about the best that can be extracted from a Democratic Congress.

So Obama has his stimulus bill, but he has paid a very high price. He now owns the recession. He has asked to be judged by whether this bill and other measures he will propose create or "save" 3.5m-4m jobs, the number lost so far since unemployment turned up. Forget "save" - if unemployment keeps rising, voters are not likely to rally round the slogan "It would be still worse if I hadn't spent your trillions". What the president has done is to promise what he certainly can't deliver in time for the congressional elections next year - a reversal of job destruction, and millions of new jobs. If the voters prove patient in 2010, they are unlikely to remain as forgiving when the presidential election rolls round in 2012. Since employment is what economists call a lagging indicator - employers are not confident enough to start hiring until economic recovery is well under way - Obama will have a lot of explaining to do. Unless, of course, the Republicans find a candidate so inept the president can once again rely on his very attractive persona to see off challengers.

Finally, there is what is now being called the Tim Geithner no-plan. The president used a nationally televised press conference to announce that his Treasury secretary would the very next day reveal to the nation, and indeed to the world, a plan to save the banks and provide relief for troubled homeowners. But Geithner's speech was so lacking in detail the stock market plunged by about 400 points. The administration's economists have not solved the problem of valuing the toxic assets on the banks' balance sheets - pay too much for those assets and the taxpayer gets the bill; pay too little and the banks have to take bankruptcy-producing writedowns.

By the time you read this, Geithner will have met with his G7 colleagues in Rome. Unless he has worked out some effective way of spending the $2 trillion that Washington rumour says new bailouts will cost, a gaggle of finance ministers will head home disappointed. For in between their public attacks on America, they privately say that only America can lead the world out of its current difficulties.

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Obama's new deal is the same old blunder

By Dominic Lawson

Here's something new: instead of the customary attempts to put an optimistic gloss on the state of the economy, our governments are doing exactly the opposite. Over here Ed Balls tells us, more or less, that this is the worst recession since dinosaurs roamed the primordial swamps. Meanwhile President Barack Obama declared last week that "if we don't act immediately, our nation will sink into a crisis that at some point we may be unable to reverse". As The Economist commented, with some alarm: "The notion that [America] might never recover was previously entertained only by bearded survivalists stockpiling beans and ammunition in remote log cabins."

Obama's dire assessment was on the surface the more surprising - wasn't he supposed to be the great uplifter of the national mood, in the spirit of Franklin D Roosevelt's "The only thing we have to fear is fear itself"? It seems all the odder because Obama has explicitly drawn on folk memories of FDR's New Deal, telling television viewers to "keep in mind that in 1932, 1933 the unemployment rate was 25%".

Obama is probably right to assume that those same memories have it that the massive state interventionism of the New Deal triumphantly restored America to full employment. That's why he felt comfortable in asserting, on the eve of the launch of a $2 trillion (or so) injection of taxpayers' money, "There is no disagreement that we need . . . a recovery plan that will help to jump-start the economy."

He might, therefore, have been surprised to see an advertisement in the national papers, signed by more than 200 eminent economists, which declared: "With all due respect, Mr President, that is not true. Notwithstanding reports that all economists are now Keynesians . . . we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s." The sorry facts bear this out. The unemployment rate in the US was still 19% in 1939. Over the following four years the number of unemployed workers declined dramatically, by more than 7m. This had a very particular reason: the number of men in military service rose by 8.6m.

More here

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ELSEWHERE

A good man, once a clergyman, needs help to care for his seriously ill sister. See here

There is now online a complete transcription of a classic expose on John Maynard Keynes entitled Keynes At Harvard: Economic Deception as a Political Credo. It's been out of print for 40 years. It was originally published by a group of disaffected Harvard alumni led by Theodore Roosevelt's youngest son Archibald. The thesis is that Keynes was a Fabian Socialist whose economic "theories" were calculated to push countries into socialism behind a facade of "saving capitalism from itself." The book also looks at Keynes's perverted sexuality (sodomite and pedophile) as a Bloomsberry--not to be read on a full stomach."

Monkeys have a sense of morality, say scientists: "Monkeys and apes have a sense of morality and the rudimentary ability to tell right from wrong, according to new research. In a series of studies scientists have found that monkeys and apes can make judgments about fairness, offer altruistic help and empathise when a fellow animal is ill or in difficulties. They even appear to have consciences and the ability to remember obligations. The research implies that morality is not a uniquely human quality and suggests it arose through evolution. That could mean the strength of our consciences is partly determined by our genes. The scientists say, however, that the evidence is clear. "I am not arguing that non-human primates are moral beings but there is enough evidence for the following of social rules to agree that some of the stepping stones towards human morality can be found in other animals," said Frans de Waal, professor of psychology at Emory University in Georgia in the United States. In papers at the annual meeting of the American Association for the Advancement of Science (AAAS) this weekend de Waal described experiments on monkeys and apes to see if they understood the idea of fairness. [It sounds like monkeys are smarter than the Leftist philosophers who say that "There is no such thing as right and wrong"]

Primogeniture lives: "Wealthy parents are making their first-born the focus of family ambition, giving them a disproportionate share of time, care and attention, according to research. Younger siblings, by contrast, are being held back in their lives by a relative lack of attention. The findings show affluent modern couples are aping the upper-class tradition of primogeniture. Although poor families also show some extra favour to the oldest child, this practice is far more pronounced among those who are richer - despite there being more resources to share with younger offspring. "Traditionally, aristocratic families tended to give the first heir more wealth," said David Lawson, a behavioural ecologist with the human evolutionary ecology group at University College London, who led the research. "That impulse may be culturally ingrained. Richer families have more time and money to afford surplus benefits for their kids like a good diet, helping with homework and time to read to them at night. These benefits are diluted sharply as more children are born.... In the royal family and, since Norman times, the aristocracy, the system of primogeniture has formalised the practice of favouring the oldest child. This has enabled families to pass power and wealth down the generations by bequeathing estates intact to the oldest son rather than, as in much of Europe, breaking them up by distributing them evenly among siblings."

The latest British bungle: "A new billion-pound fleet of spy planes able to spot the roadside bombs that kill troops in Afghanistan will be out of action until at least the middle of next year because the RAF has failed to train enough crew. Two Sentinel R1 aircraft were deployed to a Gulf base at the end of last year to fly over Afghanistan, conducting trials with their stand-off radar (Astor). The aircraft had an immediate impact - commanders were delighted by its ability to provide high-definition video footage of an area 200 miles long and 200 miles wide, day or night. Astor can detect any movement and even record the speed of a car from more than 200 miles away in almost any weather. It flies seven miles up, far out of sight of guerrillas. It will allow commanders to spot Taliban planting the bombs that David Miliband, the foreign secretary, said last week had led to "strategic stalemate" in Afghanistan. A total of 37 troops have been killed by explosions caused by roadside bombs and mines since the Taliban started using them in the current attacks, which started in August 2007. A further 32 soldiers have died from other causes during the same period. The failure to train sufficient crew and imagery analysts means the RAF will not be able to deploy a Sentinel full-time until 2010. Two crews a plane, making a total of 50 personnel, are required to operate the five aircraft. Ten have been trained".

Failed radio host says Says GOPers Are A**holes: "Are you a conservative? Then you're a d***, and there's something wrong with your brain. At least that's what "24" actress and comedienne Janeane Garofalo believes. According to the former Air America radio host, a conservative starts out an “a**hole,” and the politics come later. She asserted, “The reason a person is a conservative republican (sic) is because something is wrong with them...It really is neuroscience.” In this February 12 interview with the environmentalist celebrity blog Ecorazzi, Garofalo also claimed the “irrational” emotion center of the brain, the limbic system, is what creates conservatives: "The reason a person is a conservative republican is because something is wrong with them. Again, that’s science – that’s neuroscience. You cannot be well adjusted, open-minded, pluralistic, enlightened and be a republican. It’s counter-intuitive. And they revel in their anti-intellectualism. They revel in their cruelty." ... Maybe a 9/11 conspiracy theorist who is fond of angry, vitriolic outbursts should take a look at the limbic system in her own brain for the excessive emotion and fright that she attributes to the right."

For more postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena

List of backup or "mirror" sites here or here -- for readers in China or for everyone when blogspot is "down" or failing to update. Email me here (Hotmail address). My Home Pages are here or here or here

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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)

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