I was curious last night to find out just what our Representatives voted on in HR1 that is going to stimulate the economy. So I read it. Importing it into OpenOffice it was 400+ pages. After reading all of the appropriations, it looks like Obama's campaign list. Literally. There is money being promised to everyone and everything. So the question then is how much stimulus is this really going to produce. To begin the purpose is listed as:
"Making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes."
Every thing looks good except for the last 4 words. "And for other purposes" means they can include whatever they want in the bill and still honestly say that it meets the stated purpose. America, prepare to be fleeced. We should be used to it by now. We had the Bank Bailout which we have no oversight of and no idea what the money was used for, we have the Detroit Bailout which they will be back begging for more in March, and we have 8 years of increasing discretionary spending under the "fiscally conservative" Republicans. Is it any wonder that they lost in '06 and '08? No reason to vote for a closet big spender when you can have the real thing.
To begin with, any massive spending bill that will be hard for the public to swallow needs to have a payoff to make it easier on the palate. This one gives $500 to each individual who files a return (it is slightly more complicated than this, but to simplify things I didn't want to explain all of the details). Now that the masses are placated, the gross spending can begin.
I compared the CBO report from the 2008 stimulus with the 2009 stimulus. The links can be found here and here. One thing to remember, even though we had the 2008 stimulus, the economy continued to tank.
The amount of tax relief (decreased revenues) in 2008 was $100 billion. The amount in 2009 is $76 billion. So we are getting less money back this year than last year. Somehow I don't think that is going to stimulate the economy. More than likely people will use it to pay down debt (just like last year).
Increased spending in 2008 was $58 billion. The amount in 2009 would be $92 billion. Well that is more, but it pales in comparison to the $4-5 trillion (with a T not a B) that has been lost in the stock market and real estate over the last year.
Total change in the first year was $158 billion in 2008 and $169 billion in 2009. In short, this stimulus plan will do about as much as the last stimulus plan in the first year - nothing. Don't plan on the government getting us out of the recession (I wouldn't be surprised if the recession is over by the end of the year anyway whether the government does something or not).
The real difference between the stimulus bills is what they do over time. The 2008 stimulus was primarily concentrated in one year 2008 with another $50 billion of spending increases and revenue decreases in 2009. The 2009 bill is designed to have $350 billion in "benefits" in 2010, $173 billion in 2011, and $50 billion in 2012.
Overall the 2008 stimulus was 57% individuals deciding how to spend the money and 43% the government deciding how to spend the money. In 2009 the ratio is 26% individuals and 74% government. Which one do you prefer?
Here are some other great quotes from the CBO report:
"CBO anticipates that implementation of H.R. 1 would have a noticeable impact on economic growth and employment in the next few years. Following longstanding Congressional budget procedures, however, this estimate does not address the potential budgetary effects of such changes in the economic outlook."
In other words, they assume that the policy only has the benefits listed in the bill. They don't analyze (and never have) how the policy may change the way people spend and do business (thereby indirectly changing the effect on the economy).
"Throughout the federal government, spending for new programs has frequently been slower than expected and rarely been faster."
In other words, the schedule of outlays from the government is the best case scenario. More than likely it will be much more sluggish.
"Historically, money appropriated for highways and transit is spent at a slow rate in the first year and has an extremely long “tail,” in that funds provided in a particular year are frequently spent over a six-to-eight-year period."
So one of the key job creators that is being pushed in this bill, probably will not result in any jobs this year. And last my favorite:
"Moreover, under H.R. 1, some programs would receive funding that is significantly above (double, triple, or more) the amounts provided for existing or similar programs in recent years. Frequently in the past, in all types of federal programs, a noticeable lag has occurred between sharp increases in budget authority and the resulting increases in outlays. Based on such experiences, CBO expects that federal agencies, along with states and other recipients of that funding, would find it difficult to properly manage and oversee a rapid expansion of existing programs so as to expend the added funds as quickly as they expend the resources provided for their ongoing programs."
In other words, we are going to throw so much money at all of these federal agencies, they won't know what do with it. Also, doesn't it bother anyone that in some cases we are providing "double, triple, or more" money to a program or agency than they normally get? I wish my job would do that for me. Trust me, I could figure out what to do with triple my salary.
Bottom line, we are in a recession. We are probably going to be for most of this year. This bill won't do anything to change that. In the long run, we will come out of the recession, lets just hope the government isn't still trying to micromanage the economy when we do. Propping up failing companies (or failing mortgages) right now will only lengthen the process.
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