Category Archives: Economics

Oink, Oink

Posted on February 28, 2009 | Comments Off on Oink, Oink

My Congressman, Jim Moran, has a penchant for pork; I’d rather he didn’t. The omnibus bill that Congress recently passed contains $53 million of Rep. Moran’s goodies. The list is here.

Perhaps “goodies” is a misnomer. Some of the projects are better handled by state and local governments. There’s no need for federal involvement in, say, Gang Prevention Services in Alexandria ($250,000), or restoring the Jones Point Lighthouse ($640,000).

$53 million may be less than a rounding error in today’s spending bills — not to mention deficits.. It’s still a lot of money. If it were left in the hands of taxpayers to spend as they see fit, who knows how many jobs would be created? $53 million can support a lot of livelihoods.

Instead, Rep. Moran sees pork projects as vote-getters. We’ll never know what might have been. Similar stories are playing out in districts across the country.

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Posted in Earmarks, Economics, Political Animals

Stimulating Lobbyists

Posted on February 12, 2009 | Comments Off on Stimulating Lobbyists

It’s well established by now that the stimulus won’t be stimulating much of anything.

Turns out one sector of the economy is better off – the lobbying industry. The Hill reports:

After a tough 2008 in which revenues at top firms fell, the stimulus package has been a boon to K Street’s economy. Hundreds of firms, companies and trade groups registered to lobby on the recovery package this January, usually a sleepy month in Washington.

Good for them, I guess. Too bad for the rest of us.

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Posted in Economics, Political Animals, Stimulus

Power, Always Power

Posted on February 9, 2009 | Comments Off on Power, Always Power

Tonight I picked up a book that has been sitting on my shelf for some time, taunting me: Peter Heather’s The Fall of the Roman Empire. Heather has a crisp, easy to read prose style, lightened by occasional flashes of dry wit. The subject matter is of interest, at least to this old history major. Good book.

There’s a sentence early on (p. 19) that made my mind wander to the stimulus package currently before our own Senate.

Disclaimer: I have a dim view of the stimulus. But I don’t see it as an existential threat to society. Thousands of years from now, when some future historian writes The Fall of the American Empire, I doubt that the word “stimulus” will appear in its pages.

All Congress and the President are doing is slowing down the economy temporarily. A bad thing, yes. The decline of our civilization? No.

Why the connection to Rome’s decline, then? Heather speaks to something that doesn’t change a whole lot across time or space: human decency. His simple, profound sentence reads, “Ancient Roman society held that you should not attempt to control others until you could control yourself.”

Ignore that “Ancient Roman society” part. It doesn’t much matter. The bit about control does. At heart, the stimulus is an assertion of control. That’s why it came to mind so readily. Congress is saying, “we know how to run the economy better than the people do. Therefore we will.”

Yet Congress cannot control itself. President Obama’s hopes for a clean bill have proven futile. Billions of dollars in pork projects are making the stimulus even worse for the economy than a clean version.

Congress really must learn to control itself before it attempts to control others. Decency demands it.

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Posted in Economics, History, Stimulus

Least Objectionable Legislator Awards: Bipartisan Edition

Posted on February 5, 2009 | Comments Off on Least Objectionable Legislator Awards: Bipartisan Edition

CEI’s Wayne Crews occasionally bestows “Least Objectionable Legislator” awards when Congress critters do good things. I have two nominations of my own, one Democratic and one Republican.

The Democrat is Rep. Jim Cooper of Tennessee. At a previous job I had the opportunity to occasionally work with him and his staff. I found him to be more open-minded than most partisans, and more willing to buck his party leadership when he thinks they are in the wrong.

He gets his award for his recent remarks about the stimulus. President Obama wants a “clean” bill, meaning free of earmarks and other trickery; the House version of the stimulus is decidedly unclean.

Rep. Cooper has publicly taken Obama’s side, and voted against the bill. Leadership is furious. He is sticking to his guns, possibly at great professional cost. Well done, Rep. Cooper.

The Republican nominee is Sen. Tom Coburn of Oklahoma. He has been a thorn in the side of both parties for years. Not only is he adamantly anti-pork, he is crafty enough to use Senate rules to make his point as irksomely as possible.

Sen. Coburn also co-sponsored the bi-partisan Federal Funding Accountability and Transparency Act of 2006 with then-Sen. Obama. It created USAspending.gov, which attempts to make it easier for the public to track where federal taxpayer dollars are spent.

The stimulus contains the largest earmark ever: $2 billion for FutureGen Industrial Alliance, Inc, of Illinois. Recall that the “Bridge to Nowhere” earmark that led to the end of Sen. Ted Stevens’ career cost barely one tenth that.

Sen. Coburn has offered an amendment to eliminate this earmark from the bill. But that’s not all. Another Coburn amendment “would prohibit any funding provided by the stimulus bill to be spent on casinos, museums, golf courses, stadiums, parks, or highway beautification projects.” The stimulus is supposed to create jobs; such projects don’t.

Coburn’s amendments usually fail. I expect the same fate of these latest Coburn amendments. But at least he’s trying; most members couldn’t be bothered.

Congratulations, Rep. Cooper and Sen. Coburn. Keep up the good work.

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Posted in Earmarks, Political Animals, Stimulus

Don’t Trust Democracy

Posted on January 31, 2009 | Comments Off on Don’t Trust Democracy

Yesterday I posted about Sen. Claire McCaskill’s proposal to legislate a maximum salary. Simple economic logic shows it to be a bad idea.

This bad idea also gets 92% support in a CNN.com poll. Sen. McCaskill must be smarter than I thought.

And far more cynical.

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Posted in Economics, Political Animals, Price and Wage Controls

How to Boost Tax Receipts

Posted on January 31, 2009 | Comments Off on How to Boost Tax Receipts

The Obama administration has found an innovative way to close the tax gap. Via the satire site Scrappleface:

1. Find a wealthy individual who hasn’t paid their taxes.

2. Nominate him or her to a cabinet-level position.

3. Bad publicity ensues. Taxes are paid.

Best of all, tax evasion is a bi-partisan phenomenon. It’ll work just as well during a Republican administration.

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Posted in Economics, General Foolishness, Taxation

2010 Election: Can Everyone Lose?

Posted on January 30, 2009 | Comments Off on 2010 Election: Can Everyone Lose?

The House stimulus vote did not contain a single Republican “yes” vote. Andy Roth thinks that “Democrats now ‘own’ this massive spending bill.”

Maybe the public will see it that way. If they do, that would be a coup for Republicans, akin to the Clinton health care debacle in 1994. If they succeed in labeling Democrats as the bigger-spending party, they’ll probably gain seats in 2010.

All this political maneuvering got me thinking. The Republicans’ main selling point is that Democrats are unfit to govern. They’re right.

The Democrats’ main selling point is that Republicans are unfit to govern. They’re right, too.

Sometimes I think it’s a real shame that elections have to have a winner.

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Posted in Elections, Political Animals, Stimulus, The Partisan Mind

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Senators Say the Darndest Things

Posted on January 30, 2009 | Comments Off on Senators Say the Darndest Things

“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer,” says Sen. Claire McCaskill.

One could level the same charge at Congress; but I digress.


Sen. McCaskill was talking about her new bill. It would cap salaries at companies that take bailout money. In a nice bit of symbolism, Wall Street executives would be allowed to earn no more than President Obama’s salary.

Now, suppose that you’re a talented executive who specializes in rehabilitating poorly performing companies. A turnaround artist. Why would you go someplace that would only pay you $400,000? You’ll work somewhere else. The companies that need top talent the most wouldn’t be able to attract it. To do so would be illegal.

Somehow, I don’t see Sen. McCaskill’s legislation helping ailing companies. Or the jobs they provide.

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Posted in Economics, Political Animals, Price and Wage Controls

Stimulus and Taxes, Part Two

Posted on January 27, 2009 | Comments Off on Stimulus and Taxes, Part Two

When taxes are cut and spending isn’t, future taxes go up. It’s the only way to pay off the resulting debt. That’s why the stimulus plan’s tax cut isn’t really a tax cut.

CBO just came out with a number for this future tax increase: $347 billion. (Hat tip to Katherine Mangu-Ward)

Wait, hold on a minute. I missed something. Actually, that’s just the interest payments on the debt from the stimulus package.

Just the interest payments. $347 billion.

Wow.

That’s going to be a pretty big drag on the economy. Maybe this stimulus isn’t such a good idea.

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Posted in Economics, Stimulus, Taxation

Tax Effects of the Stimulus Package

Posted on January 27, 2009 | Comments Off on Tax Effects of the Stimulus Package

Christina Romer and Jared Bernstein’s January 9 report on “The Job Impact of the American Recovery and Reinvestment Plan” marshals an impressive array of theory and data in support of President Obama’s stimulus package.

Some of their tax analysis seems suspect, though. On page 5 they write, “tax cuts only have effects [on employment] when people go out and spend money.” Sounds reasonable enough. If people don’t spend money, they save it. And people save most of their tax cut windfalls.

But the only way for saved money to have no effect on the economy is to keep it under a mattress. And very few people do that.

Most people save their money in a bank. Or they invest it. The banks spend the money by lending to businesses and homebuyers. They in turn spend the money on their own projects. Companies receiving investment funds spend the money on salaries, capital, and so on. Saved money is still spent, you see. Just by different people.

There is no reason for saved money to create fewer jobs than spent money. Different jobs, certainly. But more or fewer? No compelling theory points in either direction. It depends on what it’s spent on.

The long-run effects of tax cuts are a little trickier. The stimulus package will increase spending. Deficits, too. So really, the tax cut… isn’t. Deficits have to be paid back. That requires higher future taxes. Lower taxes now mean higher taxes later.

Higher government debt also crowds out private investment. Every dollar that investors put in government bonds is a dollar not invested in the private sector. Hard to tell what the net employment effects are. Depends on what the investment opportunities are.

Maybe the stimulus package is a good idea. Maybe it isn’t; I have a strong hunch it isn’t. As regards tax policy, Romer and Bernstein’s report sheds little light.

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Posted in Economics, Stimulus, Taxation