There's No Situation So Bad the Government Can't Make It Worse

See the Australian wildfires.

Hat tip:  The Corner

My Very Quick Take on the Stimulus

Pork and fury signifying nothing.

While President Obama's rhetoric could easily be described as Hope and fury signifying nothing.

Fisking Obama

So President Obama has decided to take out in op-ed in the Washington Post to make the case for the pork stimulus bill making its way through the Senate. The problem is that he's not really saying anything of substance that hasn't been said before by other advocates of the bill. In other words, Mr. Obama is relying on the fact that he's the one making the case to make it persuasive.* Unfortunately for him, the fact that he says it doesn't make it so.

President Obama begins by saying

By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring.

While it is certainly possible that we are in the worst economic crisis since the Great Depression, it won't be possible to draw that conclusion for some time, and this is by no means a universal view. Things are bad, and will likely get worse, but the magnitude of the crisis is ultimately determined by what happens, not what might happen. Right now, there is a severe market correction going on as the effects of deleveraging an overleveraged market are felt, and there will undoubtedly be a lot of pain involved, but a lot of pain does not automatically equate to the greatest financial crisis since the Great Depression. Secondly, you do not actually lose money when your investment declines unless you sell the investment before it has regained its original value. The value of my pension fund has declined over the last year, but the losses will only be real if I sell it before the value goes back up. What matters with things like pension funds is not the value month-to-month or even year-to-year, but the value when you cash it in. While it's possible that millions of people had their funds invested entirely in firms like Lehman Brothers and Circuit City, most people's investments are run through things like pension funds, IRAs and 401(k)s. Their value has certainly taken a hit, but I find it hard to believe that millions of families have lost their entire nest eggs.

The President continues:

What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis.

This is so vague as to be meaningless. It reduces to "Americans want Washington to do something that works and do it quickly." This is practically begging the question, "What works?" Should Washington inject itself further into economy than it has already? Should it step back and allow the market to correct? Some combination of the two, and if so, what combination will be most effective? Is any action needed on top of the TARP bill and all of the actions taken by the Federal Reserve? Would it be better for the government to just let things go, to let the market kill off the bad banks and allow banks that did things right to pick up the pieces? Should the government nationalize the banks? How? Purchase toxic assets? At what price? Of Mr. Obama's three criteria of swift, bold and wise, two of them are at odds. Swiftness requires that the analysis and reflection necessary to determine the lieklihood of the efficacy of any action be set aside, meaning that any wisdom inherent in the action taken will result purely by chance. Similarly, ensuring the wisdom of a particular policy requires eschewing swiftness. Cutting tax rates avoids much of this in that it trusts the wisdom of how to spend the money the government is no longer confiscating to the wisdom of the market, but it still requires the government to assess what its budgetary response will be. Will it keep spending at the same level, running the risk of increasing our already mammoth deficit? Will it cut spending and run the risk of alienating consituencies and further degrading the ability of the government to fulfill its duties?

Back to the President:

Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

Mr. Obama certainly seems to have a short memory. Weren't things like the TARP, the Fed cutting interest rates to near zero, the Fed expanding its balance sheet, nevermind the stimulus package from last Spring, supposed to be efforts to either forestall a recession/depression/economic collapse? Do those count for nothing? Have the effects of these policies been fully felt in the economy as a whole? Do we have to start all over again? Is the market failing to correct, or are there signs things are turning around?

This recession might linger for years if nothing is done, but then again it might not. It might come to an end if we pass the stimulus bill, but the stimulus bill could also do nothing or even make things worse. We might lose five million more jobs, but we might not. Unemployment may or may not come near to double digits. Has it been reasonably that the stimulus will do anything to help this situation? Is there any evidence whatsoever that "[o]ur nation will sink deeper into a crisis that, at some point, we may not be able to reverse"? I suppose it's possible, but to assert it without any supporting evidence is little more than naked fear-mongering.

Man, this could take a while.

That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come.

This thought occurred to me when Mr. Obama first made this assertion, but Jim Geraghty expressed it publicly before I did. As long as unemployment stays under 97-98%, hasn't the stimulus done its job? Now, it can be reasonably asserted that Mr. Obama is saying that only two million more jobs will be lost if the stimulus bill is enacted within his desired time frame, and I'll give the President the benefit of the doubt on this one, but he's still not actually making an argument that his stimulus plan will do this: He's merely asserting it. Similarly, there is no evidence that the sort of tax relief Mr. Obama is promoting will have the effect on spending he seems to predict. The last two times we tried using tax rebates to stimulate economic growth (2001 and 2008), it didn't do squat. Unless tax rates are reduced, the effect of the tax relief will be similar to what it was in 2001 and 2008, if not less because people are starting to save more as credit becomes harder to obtain.

Now the President begins to shift gears:

This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education. And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.

So, this is no longer about pulling the economy out of its present travail, but about laying the foundation for future growth. These are important areas of public policy, and crafting good policies that will encourage economic growth and adequately address these issues will take much research, analysis, reflection, deliberation, debate, and consultation. These are not issues to be forced through ostensibly attempting to alleviate a harrowing short-term crisis. As to his promise of transparency, I'll believe it when I see it.

The President continues:

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.

Has anyone seriously suggested "that tax cuts alone will solve all our problems"? Has anyone seriously asserted "that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive"? This is a straw man argument, and poor one at that. Energy dependence and the cost of health care are not driving our current economic problems (though high energy costs exposed the underlying weakness in the economy), and it is therefore not essential to address them in this bill. There is time to address these issues after the crisis abates, especially now that energy prices have fallen back to Earth.**

As for his assertion "that we can meet our enormous tests with half-steps and piecemeal measures", this amounts to a rejection of compromise. Mr. Obama is bound and determined to spend as much money as he can in an attempt to end the recession and wholly restructure fundamental sectors of the American economy. To this end, he will accept no compromise because to do so would result in a half-step. And he will accept nothing which turns the stimulus into a series of piecemeal measures. Given the sorts of things proposed in the stimulus as it it currently stands, I can only assume that the President hasn't actually read this bill, because it is nothing if not a series of piecemeal measures.

I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.

Part of the reason Washington produces half-steps and piecemeal measures is that different factions have different ideas of how things should be done. In order to get things done, compromise has to be made which reduce the ideological purity of legislation. Even within one party, different people have different ideas as to the best way to attain a goal or series of goals. Furthermore, fundamental differences on how best to deal with issues like energy dependence, education, and health care prevents anything substantial being accomplished because there is no clear view of how best to move forward that substantially crosses party lines. The notion that partisan differences are rooted merely in petty power struggles and thus ought merely be cast aside for the common good is risible. While power plays an essential role in politics, principles play a more important role in determining what sorts of policy a politician and a party will support or oppose. Republicans didn't vote unanimously against the stimulus bill in the House of Representatives out of petulance or a desire to spite the President. They voted against it because they thought it a bad bill. If President Obama wants to rise above the petty partisanship that seems so commonplace in Washington (and there is certainly a lot of pettiness in politics), he can start by recognizing that Republicans are making their objections in good faith and avoid publicly trying to bully them (and wavering Democrats, for that matter) into voting for a bill they believe will be detrimental to the welfare of the country.

Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.

Assuming the economy needs some sort of "remedy" from Washington at this point, it is not enough Mr. Obama merely to assert that his is the correct remedy for what ails the economy. There is no argument justifying why Mr. Obama believes his proposed remedy is efficacious, nor evidence presented to make his claim. At best, he is resorting to an appeal to his own authority.

Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.

Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.

Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.

And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.

At what cost? With what degree of efficacy? With what degree of efficiency? With what benefit? These are long-term projects, and to throw them in with the stimulus bill without a proper analysis of how best to go about implementing them is to guarantee poor solutions with little benefit, especially as wasteful expenditures suck money out of the economy, restraining long-term growth while providing sub-par services. The issues the President outlines need to be addressed, but there is a time and place to do so. But this is not it.

These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.

So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

If the economic recovery is going to take years, why is it essential that we act immediately? What's a few weeks or even a few months in process that will play out over the course of several years? Is it not better to take more time and make sure you get the policy right than to rush a bad bill and possibly nip a nascent recovery in the bud?

Finally, the Mr. Obama is deceiving either himself or us when he sets good ideas in opposition to ideological battles. Ideological battles occur precisely when there is a disagreement over whether an idea is good or not. The call to rise above narrow partisanship assumes that Republicans (and arguably Democrats) are putting the interest of the party above the interest of the nation, but if the political battle playing out along largely partisan lines is fundamentally ideological, the issue is not what's best for one party or another, but what is truly best for the country. Before the stimulus bill is passed, this question has to be hashed out, and we have more than enough time for the debate to unfold.

*I'm willing to concede that the constraints of the op-ed format limit his ability to make a case that is both broad and goes beyond simple assertions unsupported by facts.

**Though I do find it ironic that the President who harps so much on energy independence has used his power to block further domestic oil production in the United States.

Hat tip: Planet Gore

Obamanomics

It don't come cheap.

Hat-tip:  The Corner