Voice For Liberty

Tag: Interventionism

  • Explaining Again Why Obamanian, or Keynesian, Stimulus Won’t Work

    From The Stimulus Tragedy: Obama bets that we can spend our way to prosperity:

    So there it is: Mr. Obama is now endorsing a sort of reductionist Keynesianism that argues that any government spending is an economic stimulus. This is so manifestly false that we doubt Mr. Obama really believes it. He has to know that it matters what the government spends the money on, as well as how it is financed. A dollar doled out in jobless benefits may well be spent by the worker who receives it. That $1 of spending will count as economic activity and add to GDP.

    But that same dollar can’t be conjured out of thin air. The government has to take that dollar away from someone else — either in higher taxes, or by issuing new debt in the form of a bond. The person who is taxed or buys the bond will have $1 less to spend. If the beneficiary of that $1 spends it on something less productive than the taxed American or the lender would have, then the net impact on growth will be negative.

    Some Democrats claim these transfer payments are stimulating because they go mainly to poor people, who immediately spend the money. Tax cuts for business or for incomes across the board won’t work, they add, because those tax cuts go disproportionately to “the rich,” who will save the money. But a saved $1 doesn’t vanish from the economy, unless it is stuffed into a mattress. It enters the financial system, where it is lent to others; or it is invested in the stock market as capital for businesses; or it is invested in entirely new businesses, which are the real drivers of job creation and prosperity.

    But letting business and individuals decide how to spend and invest their own money doesn’t appeal to people like Obama, Pelosi, and Reid. They think that they know better than you how to spend and invest your own money. This is one of the best reasons to oppose the stimulus. The other best reason is that it isn’t going to work.

  • Stimulus bill payoff to wrong education interests

    The Wall Street Journal analyzes some of the earmarks in the stimulus bill, and finds that specific provisions for spending are going to be wasted — except that they payoff special interests:

    “The Milwaukee Public School system, for example, would receive $88.6 million over two years for new construction projects under the House version of the stimulus — even though the district currently has 15 vacant school buildings and declining enrollment. … The Milwaukee situation is instructive for another reason. The city is home to the country’s oldest and largest school voucher program, which provides public funds for children to attend private schools. … Yet language in the stimulus bill expressly prohibits any dollars from going toward financial assistance to students attending private schools. In other words, Milwaukee can use the money to build schools it doesn’t need, but not to expand education programs that are producing better outcomes for disadvantaged kids. … That $142 billion is little more than a huge stimulus to the teachers unions and lousy school districts to keep doing exactly what they’ve been doing.”

    See A Spending Education: Milwaukee gets money for unneeded schools.

  • NoStimulus.com surpasses 60,000 online petitions

    Update: There’s even more petitions. See NoStimulus.com Effort Crosses 200,000 Petitions.

    Americans For Prosperity is dong a great job opposing the stimulus with their NoStimulus.com website. Visit there for information about the dangers of what President Obama and Congressional leaders are doing. Sign the petition, too.

    Start a petition to get your cause out there.

    Other articles about the stimulus:

    AFP Works to Oppose Stimulus
    Explaining Again Why Obamanian, or Keynesian, Stimulus Won’t Work
    Stimulus Bill Payoff to Wrong Education Interests
    An Austrian Recommendation for President Obama
    The True Danger of the Current Economic Crisis
    Government Spending Is No Free Lunch
    The Bailout Reader

  • AFP Works to Oppose Stimulus

    Here’s a message from Tim Phillips, President of Americans For Prosperity. I listened in to the telephone town hall meeting he mentions. Despite a few technical glitches, these meetings are becoming popular, and serve as an effective way to communicate with a large number of people. Wait — don’t we have the Internet for that?

    Last night, you could feel the energy on our live telephone town hall as 10,819 American citizens joined Americans for Prosperity and Senator Jim DeMint — the leader of the effort to defeat this big government boondoggle.

    During the call one wonderful lady who asked Senator DeMint a question, Lee from Kentucky, told us that she had just gotten her power and phone service back on from the snowstorms that have buried her state and one of her first acts was to call her two senators telling them to vote NO! That’s the kind of commitment we are seeing all over the country.

    During the call, just over 1,500 folks logged on to NoStimulus.com and signed AFP’s petition to Congress — pushing the total number over 42,000. It’s growing by the minutes as people hear about the site and join our cause. Go to NoStimulus.com, and then 10 minutes later hit the refresh button — a hundred or more new activists will have joined you in signing up.

    Today, thousands of activists from last night’s call are jamming the phone lines at the U.S. Capitol telling their senators to vote NO. Senators are feeling the heat in part because of your good work.

    Bloggers across the nation are pounding away with ever growing energy against this Pelosi-Reid-Obama bailout and big government bill. Just go to Google.com and search “Americans for Prosperity.” Then hit the blog tab and you will see all the great Americans who were on last night’s Americans for Prosperity call with Senator DeMint and then blogged about it on their sites.

    On the media front, I’m still cranking through new talk radio shows across the country — just finished one in Madison, Wisconsin.

    The pressure is building and I need your help to make sure that the Senators continue to feel the heat.

    I’m asking you to do at least two things:

    First, Call the switchboard at the U.S. Senate to tell your Senators to vote NO on the Pelosi-Reid-Obama spending boondoggle. The number is 202-224-3121. Just ask the operator to put you through to your senator. Or, you can call the local district office for your senator.

    Second, recruit at least three of your friends or family to go to www.NoStimulus.com and sign the petition by forwarding this email on to them and CCing me or going to our tell-a-friend page. Many people in Washington, D.C. are watching this site to see if the momentum against the Pelosi-Reid-Obama boondoggle is growing. In fact, one of Senator Kennedy’s aides told one of our senior staffers last night that they “know all about our petition” and they’ve been watching the numbers steadily climb as American citizens like you signed the petition telling Congress not to pass this outrageous bill. The NoStimulus.com site is a way for the media and elected leaders to measure the level of opposition to this bill and that’s one key reason it is so important.

    At this point, we do not know when the Senate vote will occur. Senator DeMint’s best guess is tomorrow or Saturday but it could slip into next week. The other side controls the timing of the vote so we’ve just got to keep the pressure building.

    Thank you for all you’re doing. We’ve sure come a long way in the last three weeks. Now, let’s finish the job.

  • An Austrian Recommendation for President Obama

    Robert P. Murphy, author of the fine book The Politically Incorrect Guide to Capitalism lays out what President Obama and Congress can do to really fix our economy.

    In this article, Murphy addresses the critics of those who oppose the proposed stimulus plan. That’s important, because many critics of the stimulus say that the government should do nothing. But doing nothing doesn’t satisfy the feeling that something has to be done. So Murphy has a list of things to do.

    Also, Murphy explains, in one paragraph, the Austrian diagnosis of why there’s a problem. It’s an excellent article, available at the Ludwig von Mises Institute at Do You Austrians Have a Better Idea?

  • With all due respect Mr. President, that is not true

    What isn’t true?

    On January 9, President-elect (now President) Barack Obama said “There is no disagreement that we need action by our government, a recovery plan that will help to jump start the economy.”

    Not everyone agrees with our new president. The Cato Institute placed a full-page advertisement the New York Times today. Its statement reads as follows:

    Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, 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. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

    It would take a long time to count the number of economists’ names who appear below this statement. Of local interest are Arthur Hall and Paul Koch, both of the University of Kansas.

    You can view the ad at www.cato.org/special/stimulus09/cato_stimulus.pdf.

  • The True Danger of the Current Economic Crisis

    Thomas Sowell explains that the true danger we face is not recession or even a depression, but the permanent expansion of government that lingers forever:

    No matter how many times President Barack Obama tells us that these “extraordinary times” call for “swift action,” the kind of economic policies he is promoting take effect very slowly, no matter how quickly the legislation is rushed through Congress. It is the old Army game of hurry up and wait.

    If the Beltway politicians aren’t really trying to solve this crisis as quickly as they could, what are they trying to do?

    One important clue may be a recent statement by President Obama’s chief of staff, Rahm Emanuel, that “A crisis is a terrible thing to waste.”

    This is the kind of cynical revelation that sometimes slips out, despite all the political pieties and spin. Crises have long been seen as great opportunities to expand the federal government’s power while the people are too scared to object and before any opposition can get organized.

    Sowell’s column is What Are They Buying?

  • Economic Stimulus: Timing is Everything

    When I took macroeconomics in college way back in the 70’s, people actually believed in Keynesian economic theory. It was in the textbooks. One of the problems with government attempting to stimulate the economy the Keynesian way is the matter of timing. By the time we’re sure we’re in a recession, Congress passes laws, and the money is spent, the economy may be already out of the recession. Then, all the stimulus of the spending takes effect, the economy becomes overheated, and inflation becomes a problem. So goes the theory, anyway. This is only one of the problems inherent in the government trying to manage the economy. A Wall Street Journal column explains:

    According to Congressional Budget Office estimates, a mere $26 billion of the House stimulus bill’s $355 billion in new spending would actually be spent in the current fiscal year, and just $110 billion would be spent by the end of 2010. This is highly embarrassing given that Congress’s justification for passing this bill so urgently is to help the economy right now, if not sooner.

    The stimulus bill is also a time machine in the sense that it’s based on an old, and largely discredited, economic theory. As Harvard economist Robert Barro pointed out on these pages last Thursday, the “stimulus” claim is based on something called the Keynesian “multiplier,” which is that each $1 of spending the government “injects” into the economy yields 1.5 times that in greater output. There’s little evidence to support this theory, but you have to admire its beauty because it assumes the government can create wealth out of thin air. If it were true, the government should spend $10 trillion and we’d all live in paradise.

    See The Stimulus Time Machine, January 26, 2009 Wall Street Journal

  • Government Spending Is No Free Lunch

    Robert J. Barro, an economics professor at Harvard University and a senior fellow at Stanford University’s Hoover Institution, has an excellent commentary in The Wall Street Journal. This piece explains the problems with the multiplier that backers of government stimulus programs count on to make the government spending work. Here’s an excerpt:

    Back in the 1980s, many commentators ridiculed as voodoo economics the extreme supply-side view that across-the-board cuts in income-tax rates might raise overall tax revenues. Now we have the extreme demand-side view that the so-called “multiplier” effect of government spending on economic output is greater than one — Team Obama is reportedly using a number around 1.5.

    To think about what this means, first assume that the multiplier was 1.0. In this case, an increase by one unit in government purchases and, thereby, in the aggregate demand for goods would lead to an increase by one unit in real gross domestic product (GDP). Thus, the added public goods are essentially free to society. If the government buys another airplane or bridge, the economy’s total output expands by enough to create the airplane or bridge without requiring a cut in anyone’s consumption or investment.

    The explanation for this magic is that idle resources — unemployed labor and capital — are put to work to produce the added goods and services.

    If the multiplier is greater than 1.0, as is apparently assumed by Team Obama, the process is even more wonderful. In this case, real GDP rises by more than the increase in government purchases. Thus, in addition to the free airplane or bridge, we also have more goods and services left over to raise private consumption or investment. In this scenario, the added government spending is a good idea even if the bridge goes to nowhere, or if public employees are just filling useless holes. Of course, if this mechanism is genuine, one might ask why the government should stop with only $1 trillion of added purchases.

    The full article is Government Spending Is No Free Lunch .