It's not surprising that the Obama administration has shown no interest whatsoever in allowing the market to self-correct. No, Geithner, Summers and Rubin are devout Keynesians who will assuredly continue throwing good money after bad in a desperate attempt to stave of a full-blown depression. The right thing to do would be to decapitate poorly managed businesse and leave those that have shown themselves resistant to this slowdown intact, and indeed, stronger. The economic law of the jungle ensures that what remains is that which was intended.
The Three Horsemen of the Apocalypse may fend off an immediate meltdown, but I can personally guarantee that in the very near future, Summers, Rubin and Geithner will, in turn, be raked over the coals by a congressional oversight committee questioning the wisdom of a $5 trillion budget deficit hangover resulting from in an ill-conceived plan to jumpstart an economy already crippled by debt. I shudder to speculate where our national debt will finally clock in--$14, $16 maybe $18 trillion?
Given the scale of Obama's electoral whoredom, I suspect that many of the businesses currently fishing for a handout are the very same ones that managed to 'scrape' together $28,000 a plate for one of his many election fundraisers. Political IOUs are a bitch, particularly if one of your hand picked economic gurus (Rubin) was responsible for wrecking Citigroup.
Instead of allowing GM, AIG, Citi and others to fall flat on their faces, our esteemed politicos will lavish tens if not hundreds of billions upon them as reward for stunningly stupid business practices. But that's only half the story. Now that Citi has been bailed out and a full $100 billion worth of toxic assets have been spirited away (I could have swore that buying up toxic assets was a thing of the past - hmmmm) to that magical place where sickly MBSs and CDSs go to get well, what will be Paulson's response when Wells, BofA and others insist on buyouts of the garbage contaminating their books? I think they'll be told to get fucked if history is any indicator. Moral hazard is alive and well in America.
Now for the $700 billion dollar question: how will Obama 'preserve or create 2.5 million jobs' in just over two years? Enquiring minds want to know, Mr. President. Altough details have been spotty at best, it appears that it will cost us anywhere from the increasingly unlikely $500 billion figure to the increasingly likely $1+ trillion amount that would be needed to get the economy jumping. So, what does the Obama stimulus plan entail?
1. Tax cuts . . . you're fucking kidding me, right? In light of the ENORMOUS budget deficits we'll soon be incurring, this seems like a really poorly conceived idea. Tax cuts are seductive on the surface, but studies have shown time and again that they do little to stimulate the economy and create budget shortfalls in the process. In fact, several studies have shown that modest benefits realized from increased personal savings are outweighed by budget deficits:
Researchers at the Joint Committee on Taxation, the Congressional Budget Office, and the Brookings Institution have all found that large unpaid-for tax cuts reduce economic growth over the long run. For example, a study by Brookings Institution economist William Gale and then-Brookings economist (now CBO director) Peter Orszag concluded that making the 2001 and 2003 tax cuts permanent without offsetting their cost would be “likely to reduce, not increase, national income over the long run.”
The reason behind these results is that, even if tax cuts have modest positive effects on work and savings decisions, those effects are outweighed by the negative consequences of higher budget deficits. In claiming that tax cuts will boost savings, investment, and GDP growth, supporters often seem to forget that national savings has two components: private and public (i.e., government) savings. Tax cuts could positively affect private savings, although, as the Congressional Research Service has noted, studies have failed to find large effects. But when the federal government runs a deficit, it pays for the deficit by borrowing money from the private sector, which reduces national savings. By adding to deficits, unpaid-for tax cuts thus generally reduce national savings.
2. Environmentally friendly technologies—the "green economy." Sounds great - how can I get a piece of that action, Mr. President? I want a job in an environmentally friendly technology in the green economy sector, like say, ethanol production or 'clean coal'.
''We'll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jump-start job creation in America and lay the foundation for a strong and growing economy,'' Obama said. ``We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.''
Translation: we haven't worked out a goddamn thing. We're currently grasping at straws, but we can promise you this much: bridges to nowhere and exquisitely expensive wind farms (courtesy of The People's Bank Of China) constructed by companies offering kickbacks to Obama functionaries in exchange for lucrative no-bid contracts. We promise new schools with fancy quads where your mildly retarded sons and daughters can surf the web on their new Xeon-powered laptops and even type clever things like "OMFG - LOL". We promise to churn out the most woefully unprepared students endless amounts of borrowed money can create. That is our promise to you.
Vagueries about environmentally friendly jobs, new roads and tax cuts? That's going to put 2.5 million people to work? As far as I can tell, it will put a few million illegal immigrants back to work, but that's about it. The amount of corruption inherent in this kind of pork barrel spending will be mind boggling. Watch and see how many hundreds of millions disappear into Barbadian bank accounts while we get shoddy Kellog, Brown and Root roads and collapsable Halliburton bridges.
More on the stimulus package as details are made public . . .
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