More Stimulus Spending To Balance The Budget?

I don’t mean to pick on President Obama, but he just seems to be singing the wrong note time after time. Actually, that was a bit of a deception by me: I actually do mean to pick on our president. After his State of the Union speech where he promised everything to everyone, he went on the road saying we needed to spend more to aid the economy (I’m going to guess he said something like “Invest in America”) and cut spending:

A White House official said Mr. Obama’s conception of competitiveness goes beyond stripping away onerous rules and envisions stepping in where the market fails. The official said areas such as renewable energy and scientific research are underfunded by the private sector, because returns are uncertain. These areas are vital to the nation’s long-term growth, the official said, and the state must step in when businesses don’t. The administration is considering matching grants and other partnerships that entice private-sector participation and keep federal investment to a minimum. …

The new spending could include initiatives aimed at building the renewable-energy sector—which received billions of dollars in stimulus funding—and rebuilding roads to improve transportation, people familiar with the matter said. Money to restructure the No Child Left Behind law’s testing mandates and institute more competitive grants also could be included.

While proposing new spending, Mr. Obama also will lay out significant budget cuts elsewhere, people familiar with the plans say, though they will likely fall short of what Republican lawmakers have requested.

The Republicans never miss an opportunity to make a political point:

Republicans are casting the White House’s pivot toward competitiveness as an excuse for bigger government and more spending. They say a surge in federal spending and a $1.3 trillion budget deficit are impeding job creation, and dramatic spending cuts are needed immediately.

In the House, Republicans are pushing to cut $100 billion from the annual budget as soon as this year. A coalition of House Republicans proposed Thursday cutting $2.5 trillion in spending over a decade, pushing nondefense discretionary spending down to 2006 levels for 10 years.

“Today’s the day we finally stop kicking the can down the road,” Rep. Jeff Flake (R., Ariz.) said as the proposal was introduced Thursday.

The White House countered that Mr. Obama’s federal wage freeze will save $5 billion this year and that if we don’t spend, the economy will fail. And Mr. Obama appointed one of The Daily Capitalist’s favorite crony capitalists, Jeffrey Immelt, CEO of GE, to head a new President’s Council on Jobs and Competitiveness. He’ll wade in and get rid of all those confusing regulations, I am sure.

Mr. Obama hasn’t got a clue what really drives the economy.

I don’t put much faith in either party to do the right thing. The Republicans say the right things, but when they had their turn at the wheel, they spent like crazy.

We all know what has to be done: everything must be cut across the board. That means all discretionary programs and non-discretionary programs. I’m talking about defense, education, social security, medicare, you know, all the sacred cows. They won’t do it.

While we will see some token cuts, what is more likely is higher taxes on corporations (excuse me, I meant corporate “tax simplification”) and a national sales tax of some kind. He’ll wait until after the 2012 elections.

Trust me on this one folks.


17 comments to More Stimulus Spending To Balance The Budget?

  • Keith Weiner

    Great article Jeff.

    A fallacy that has got to be as old as the broken window fallacy is one you highlighted in this article:

    “[Obama] … envisions stepping in where the market fails. The official said areas such as renewable energy and scientific research are underfunded by the private sector, because returns are uncertain.”

    Actually those are two fallacies. One is the old saw that the market “fails” (to do what the dictator wants it to do). Central planning has never worked, and every honest observer knows this.

    The other is scientific research is “under” funded (compared to what the dictator wants) and the private sector doesn’t do more because of uncertain returns. So let me get this straight. When people have a choice, they do not spend their own money studying the mating patterns of darter snails or how to get 3% improvements in an energy technology that is orders of magnitude below where it needs to be to profitable?

    So the “magic” of government is that it can throw our money into these projects? People forget that the difference between government and a large corporation is that the government can force you, literally at gunpoint, to obey. Government has a monopoly on force. It has got to be an enormous fallacy in terms of the number of people who buy into it and the economic damaged caused by it, to think that when force enters into the equation better investment (or anything else!) decisions are made.

    This is where the Fed enters the picture. People think that they can spend on such things without cost because of the magic of the central bank. They are dimly aware in the depths of their foggy consciousnesses that tax revenues are limited. But the “lesson” of the past 40 or so years is that “deficits” don’t matter. Pragmatists don’t believe in principles like you cannot spend more than you earn. They believe in whatever “works”. But without principles, they can’t define “works” either. So the standard is whatever you can get away with. For 40 years, they have gotten away with spending in excess of income. So it “works”.

    I believe we are on the cusp of the time when it will no longer “work”, and the pragmatists will not be able to grasp what changed. Other than it must be a bad man in the white house, let’s get rid of pepsi man and go back to someone from the coke party to make it all “work” again!

  • Marco

    “Mr. Obama hasn’t got a clue what really drives the economy.”

    Or anything that comes with being President for that matter. Part and parcel with a greedy/lazy electorate voting in someone with little experience beyond driving book sales based on racial/class strife. Apparently, actual historical accomplishment doesn’t portend to anything these days when empty promises and failed rhetoric of an incompetent suffice. I don’t care what side of the aisle the next President comes from as long as they have a CV that includes accomplishment through experience and execution, are fiscally restrained (best we can hope for), and have the history of creating and adding value (ie, not a lawyer or prof).

  • Norman

    Jeff, You know what really needs to be cut, yet you don’t or won’t say it. With all the material at your disposal, I would think that you would be tired of all the B.S. that’s bantered about today. Yes, the country/Government/taxpayers who foot the bills, cannot afford this continued “KABUKI” that goes on in Washington D.C. That said, this country has got to get out of the 20th Century think & into the 21st Century, which is already 1/10 gone, never to be lived again. The U.S. can’t continue playing cop on the beat, wasting pallet loads of treasure propping up despots, building Taj Mahal type Embassies, stationing the Military all over the World, running through the volunteers to service as just some commodity to be discarded after use. The “denial” that exists today in this country, is growing, not diminishing. If I’ve left you wondering, as the wise ones in your profession keep saying: “it’s jobs stupid” but it’s more than that, “It’s the WARS stupid”, that’s the one that all the dilettantes who masquerade as Patriots fail to mention. I suppose, like everything else, this will fall on deft ears, must likely due to the simple fact that you, as well as others in the business derive your income from buying/selling/prognostication in the financial markets. Get yours while you can, even at the expense of Social/moral integrity. It’s time to close down the Empire built up over the years, bring the Military home, rebuild America, instead of pouring the Treasury of the country down the sewer as has been the practice. How do you face yourself, your family, your children, knowing what you’re doing, is helping destroy the very fabric that I an countless other Veterans gave our blood sweat & tears for, just so you might continue what our forefathers gave us. It took courage, to do what has been the forte of those past & present. So, I ask you 1 simple question: “Do you honestly believe that what you are leaving behind for your family is something to be proud of”?

  • Marco

    Norman, please offer a detailed breakdown of relative budget spending per expense “class” (ie, defense, medicare, medicaid, social security, etc) and then come back on here and tell us seriously that the defense complex is the cause of our problems and should be the sole focal point of targeted cost savings.

    The low hanging fruit and the MAJORITY of what has begun to destroy this country is unsustainable entitlements (60%+ of the budget vs 18-20% for defense). Any strategy to solely reduce one budget class while maintaining the others (at this point in time) is nothing more than partisan protectionism.

    Everything needs to be cut across the board.

  • Keith Weiner

    I can propose a good start. Let’s complete eliminate the Departments of:
    – Education
    – Energy
    – Transportion
    – Interior
    – Health and Human Services
    – Homeland Security

    I may have missed a few there, but that should reduce payroll by a few million plus all of the contractors and vendors and grant recipients who feed at those troughs and uncountable subtroughs.

    Let’s cut back Department of State and Commerce radically. 75% would do for a start.

    Let’s actually sit down and define what is and is not in the US interests worldwide. Let’s immediately cut 100% of everything that is not supporting our interests. Subsidies to countries who hate us come to mind, as does the UN.

    Next we get to the military. Let’s realistically define the threats–and the enemies. Let’s cut away the masses of personnel and budgets for rice bag doling out, school building, nation building, and “defense” of areas that don’t need defense. And for the actual threats, let’s figure out the fastest and cheapest way to defeat them. This may involve nukes.

    FInally, we get to the dole. Everything from food stamps to SS to medicare must be cut back radically to start, and zero’d out as quickly as possible. Anyone who disagrees with this is free to pay for as much welfare out of his own personal wealth as he wants; he will not be stopped. We need to dispense with the idea that morality consists of taking someone else’s money and doling out to those who haven’t earned it. Not only is this evil (literally) but it’s also horrible economics.

    One last thing. Let’s systematically repeal all regulations. They are not only expensive but they block productivity and they are immoral. Few would tolerate it if a gunman who just shot 10 people in a public square was arrested and hanged on the spot. Even a mass murderer with 100′s of witnesses is innocent until proven guilty. Excuse me an alleged mass murderer. Why do we treat productive enterprises as guilty and force them to constantly prove that they are innocent (at their own expense)? This is obscene, not to mention inhibits productivity, hiring, etc.

  • I don’t think Pragmatic is a good term to describe the Fed’s actions being what they did with money was nothing short of highway robbery. I also think “nuking” our “enemies” is a very impractical thing to do as well as inhumane.

    Do you really think our “forefathers” would approve of the suggestions made above if they knew the whole picture?

  • Norman

    Why not just abolish the whole Government, both Federal & State? Then perhaps as the country descends into chaos, you can decide what is important & what isn’t?

  • Jim

    I received this gem in my email this morning from Patrick Barron. Specifically, he was addressing an issue in the EU.

    “In the first week of class for my Austrian Economics students at the University of Iowa we discuss the concept of “Diminishing Marginal Utility” as applied to money. An increase in the money supply conveys NO societal benefit. Among other evils, it transfers wealth from those who produce it to those who have not produced it, the very definition of theft and injustice. By tolerating increased inflation, the ECB is stating publicly that its policy is to transfer wealth by stealth means from some EU members to others. Again, why should those being robbed tolerate such a policy?”

    Isn’t this what the Fed is doing to us? I assume this is why the Progressive’s are blocking Ron Paul’s effort to audit the Fed.

  • doug

    Leslie: for crying out loud. what do you suggest we do with our known enemies? wait for them to nuke us?

    do you suggest we “sit down” with them? what do you suggest we do, should we ask them why they’re mad at us?

    i was 50 yards from the 9/11 tragedy. that was inhumane.

    grow up.

  • Doug. I’m sorry if you misconstrued my statement and I’m sorry for your loss in 9/11. Not all Muslim’s are Jihad. Even though most terrorist’s are Muslim. I am not only referring to Iraq, Afghanistan and Pakistan, but all those who thought MacArthur should have blown up China. I really think immaturity is hardly a description for mass murder and the aftermath of an atomic bomb.

  • doug

    yes Leslie, and i’m sorry for the last comment i made, i regret that. as you can tell, i get emotional on this topic. my apologies.

    one of the beauties of this blog is the adult, intelligent and respectful nature of the comments. i won’t violate that again.

    however i stand by all but the wisecrack from my post.

    it is a very difficult topic. i think the key point is while most Muslims are not Jihad, the actual terrorists are formidable, they are mostly Muslim, and they want to destroy us. and while we spend so much money on military non-threats, we could not possibly allocate enough resources to stomp out terrorism effectively — but we have to, either now or later. so like Keith said, cut the stupid stuff and find the cheapest, most effective way to remove the risks. i believe these risks increase every day, no matter what wars we engage in or avoid. so what do we do? how do we do it?

  • Jim

    Keith’s solutions are all good ones, except for the nuclear option. I tend to agree with the late Sec. McNamara that the only use for a nuclear weapon is to keep someone from using one on you. I suppose that’s a discussion for a different blog.
    I recall Reagan campaigned in 1980 on eliminating the Dept. of Energy. That didn’t work out so well. All of those departments that Keith listed are here to stay until such time as the middle class is wiped out financially. When that happens, things will change.

  • Frederic Bastiat

    The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.