Congress Gossip Blog
Stimulating the Economy
January 22, 2008 - by Donny Shaw
As the Senate convenes today for its first full session back from recess, it seems like the policy makers in D.C. have only one thing on their minds: designing and enacting an economic stimulus plan to help the country through an impending recession. You might have caught some of the front-page features on this in the papers over the weekend, or some of the chatter on blogs, and you’ve probably seen today’s news that the Fed made a serious cut to the interest rate. Here’s what people are saying about what’s coming down the pipe.
As discouraging economic indicators keep coming in faster and faster, the Bush Administration and most in Congress have come to agree that some kind of quick and targeted fiscal plan is needed to inject money into the economy and give it a boost. But there is disagreement over many of the details: how big the overall package should be, if there should be an upper income limit on who can receive the benefits, if lower-income benefits such as unemployment insurance and food stamps should be extended, and more.
Economic uncertainty has been evident for the past several weeks by following visitors on OpenCongress, especially their investigations into the “subprime” lending crisis in the housing market and its affects on the greater economy. For example, the ”<a href=”http://www.opencongress.org/bill/110-h3648/show”>Mortgage Forgiveness Debt Relief Act of 2007” has been the most-viewed bill on the site for the past few weeks, and users have made tax rebates the fourth most-viewed issue area on the site. Also, the latest five bills in the <a href=”http://www.opencongress.org/issue/show/4424_economic_policy”>Economic Policy issue area contain two bills marked as “hot” by OpenCongress bloggers.
We have put together a collection of some of the recent news and blog coverage that has accompanied the initial talks in DC about what should be in the economic stimulus package. Check them out to get a sense of all the different factors, theories and politics shaping the debate. It seems to me that bloggers from both sides of the aisle agree on at least a couple of things: that for this to be effective, it has to happen fast; and that lawmakers should resist the requests of special-interest lobbyists.
The package is expected to be formally introduced into Congress as a bill sometime soon, but until it is, consider this the space for sharing your thoughts on it. Check out some of the links below and then feel free to leave a comment discussing how you think the stimulus should be designed, or highlighting an overlooked provision, or prognosticating how you think it will eventually be passed. We figure that, since the problems in the economy are affecting all of us, we should all be able to have our say on what can be done to help the situation.
Pictured above is President Bush, VP Cheney and US Treasury Secretary Henry Paulson talking about the economy at the White House.
News Coverage from the past week:
- <a href=”http://www.bloomberg.com/apps/news?pid=20601087&sid=aEgwdDHD5Fbs&refer=home”>Bloomberg: “Fed Cuts Rate 0.75 Percentage Point in Emergency Move” (Jan. 22, 2008)
- <a href=”http://ap.google.com/article/ALeqM5h19_YeGzwzlmJhx42iIA7nJF0_UAD8UB09F00”>AP: “White House Flexible on Stimulus Plan” (Jan. 22, 2008)
- <a href=”http://krugman.blogs.nytimes.com/2008/01/21/stimulus-issues/”>Paul Krugman, NYT op-ed : “Stimulus issues” (Jan. 21, 2008)
- <a href=”http://ap.google.com/article/ALeqM5h19_YeGzwzlmJhx42iIA7nJF0_UAD8UB16D00”>AP: “White House Mulls Stimulus Plan”
- <a href=”http://www.chron.com/disp/story.mpl/nation/5471229.html”>Houston Chronicle: “Key lawmaker predicts economic stimulus by March”
- <a href=”http://ap.google.com/article/ALeqM5h19_YeGzwzlmJhx42iIA7nJF0_UAD8U9PTRO1”>AP: “Schumer: Expand Those Helped by Stimulus”
- <a href=”http://krugman.blogs.nytimes.com/2008/01/15/stimulus-never-mind/?scp=1&sq=economic+stimulus”>Paul Krugman, NYT op-ed: “Stimulus? Never mind” (Jan. 15, 2008, Krugman NYT blog archives)
- <a href=”http://www.nytimes.com/2008/01/20/washington/20rebate.html?scp=9&sq=economic+stimulus”>NYT: “Tax Rebate or Payment? A Policy Debate Begins”
- <a href=”http://english.aljazeera.net/NR/exeres/169FBF87-A5D2-476A-8F0E-396A1A883980.htm”>Al Jazeera English: “US Fed chief backs stimulus plan”
- Slate: “Stimulating Problems” (in “Today’s Paper’s” feature, Jan. 17 2008)
- <a href=”http://www.bloomberg.com/apps/news?pid=20601087&sid=am1tkidLxHT0&refer=home”>Bloomberg: “Bush Stimulus Plan Includes $1,600 Rebate, People Say”
- <a href=”http://www.npr.org/templates/story/story.php?storyId=18159629”>NPR Commentary: “Economist: Don’t Jump the Gun on Stimulus Plans”
Blog coverage from the past week:
- Capitol Briefing: “Congress on the Clock for Stimulus”
- TaxVox: “Stimulus: Who Should Get a Rebate?”
- <a href=”http://www.bloggingstocks.com/2008/01/21/an-economic-stimulus-package-in-march-will-be-too-late/”>BloggingStocks: “An economic stimulus package in March will be too late”
- <a href=”http://conservativevoice2008.blogspot.com/2008/01/economic-stimulus-crack-down-on.html”>The Conservative Voice: “Economic Stimulus – Crack Down On Predatory Lending!”
- <a href=”http://www.kiplinger.com/businessresource/forecast/archive/Is_Economic_Stimulus_Enough_080118.html”>Kiplinger Business Resource Center: “Economic Stimulus: Bush and Congress Agree It’s Needed – A rare bipartisan mood is putting wind in the sails of a stimulus package.”
- <a href=”http://watthead.blogspot.com/2008/01/take-action-to-support-sustainable-just.html”>Watthead: Energy News & Commentary: “Take Action to Support a Sustainable, Just Economic Stimulus”
- <a href=”http://senatus.wordpress.com/2008/01/21/economic-stimulus-package-by-early-march/”>Senatus: “Economic Stimulus Package By Early March?”
- <a href=”http://www.redstate.com/blogs/ernest_istook/2008/jan/17/stimulus_more_big_spending”>RedState: ”’Stimulus’ = More Big Spending”
- <a href=”http://globaleconomicanalysis.blogspot.com/2008/01/fiscal-stimulus-doomed-to-fail.html”>Mish’s Global Economic Trend Analysis: “Fiscal ‘Stimulus’ Doomed To Fail”
- <a href=”http://www.ombwatch.org/article/blogs/entry/4480/3”>OMBWatch: “The CAP Plan: Stimulating Debate, not Spending”
- <a href=”http://www.washingtonmonthly.com/archives/individual/2008_01/012916.php”>Washington Monthly: “Economic Update”
- <a href=”http://blog.thehill.com/2008/01/17/stimulus-package-may-be-answer-to-declining-economy-rep-mike-conaway/”>The Hill: ” Stimulus Package May Be Answer to Declining Economy (Rep. Mike Conaway)”
- <a href=”http://www.crooksandliars.com/2008/01/17/lobbyists-trying-to-influence-the-economic-stimulus-package/”>Crooks and Liars: “CNN reports that Lobbyists are trying to influence the Economic Stimulus package”
- <a href=”http://www.ombwatch.org/article/blogs/entry/4475/3”>OMBWatch: “Election Year a Stimulus for Bipartisanship?”
- <a href=”http://scottott.townhall.com/g/26e8cdb2-2030-4e99-8c21-dec6b835faab”>Townhall: “Mr. President, Don’t Stimulate Us”
- Inclusion: Independent Progressive New: “Assessing the Bush Stimulus Plan”
- <a href=”http://socialwelfarespot.blogspot.com/2008/01/workable-economic-stimulus-plan-from.html”>Social Welfare Spot: “A Workable Economic Stimulus Plan from the Economic Policy Institute”
- Economic Policy Institute”: “Strategy for economic rebound”
Have a tip? Let us know in the comments below … or paste in a link to other helpful articles.
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The Hill is a bit elitist. You have to be elected to blog. Isn't that the opposite of this blog?
<Scott Ott> at Townhall.... seems like a blog about Wierd Science. Either that or he's talking about people just don't understand him........
http://blog.russnelson.com/economics/stimulus.html
Bloomberg this morning released a description of what the stimulus package is shaping up to look like ::
http://www.bloomberg.com/apps/news?pid=20601087&sid=atd7gXmX2POw&refer=home
Krugman is not happy with it ::
http://krugman.blogs.nytimes.com/2008/01/24/stimulus-disappointment/
Alex Stenback has heard from "a very reliable source" that much of the FHA modernization bill (S.2338) will be included in the economic stimulus package:
"Sources in the House, the Senate, and the White House are all indicating today that a tentative consensus has been reached that the economic stimulus bill that Congress will send to the President will include much of the FHA Reform Legislation including raising the FHA loan limit max to match the FHA conforming limit AND a one year raise of the conforming limit to $625,000 with the possibility of an additional one year extension at expiration. All sources also indicate Congress will deliver the bill to the President before their break in mid-February and that it should be signed by the end of February. Obviously this is not "done" but all of the sources I am using are very close to the action. This would mean that we could see at least the loan limit portions of the legislation we are hoping for within the next 6 weeks."
http://www.behindthemortgage.com/behind_the_mortgage/2008/01/news-on-conform.html
And below are some reactions to the "news":
http://calculatedrisk.blogspot.com/2008/01/were-all-jumbo-subprime-now.html
http://www.chrishayes.org/blog/2008/jan/24/worst-stimulus-ever/
From OMB Watch, see
http://www.ombwatch.org/article/articleview/4148/1/192?TopicID=5
and
http://www.ombwatch.org/article/articleview/4147/1/526
From OMB Watch, see
http://www.ombwatch.org/article/articleview/4148/1/192?TopicID=5
and
http://www.ombwatch.org/article/articleview/4147/1/526
Economic Malady – Stimulus Insufficient
The underlying problem with the economy is an extreme maldistribution of income between the working class and the capital owners. When a CEO can make 300 million dollars while an average worker's wages haven't even kept pace with inflation what results is a dysfunctional market economy starved for consumption spending. The average American has had to fuel his/her spending with debt obtained by borrowing on the equity within their home - that phantom equity has now evaporated.
In order to correct this out of balance condition there needs to be laws in place (similar to the anti-Trust legislation) that caps the annual income of all capital owners and their surrogates (CEOs, CFOs, etc.) at a specific federal percentage above that of the highest paid worker within their respective firm. Also, we need to eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
Essentially, FDR was accurate when he characterized the Great Depression as an out-of-balance Economic malady. Rural income prior to the Great Depression was significantly lower than urban income, now (overvalued home equity) as then there was unlimited amounts of overvalued phantom equity flowing into the stock market, the income differential between labor and capital while nowhere near the current astronomical level was still much higher than sustainable. There in lies the root cause of the out-of-balance condition that precipitated the Great Depression. Any system including the market economy that gets to far out balance does not function properly. Certain constraints need to exist to keep the market economy from slipping into a dysfunctional state. Balance is the essence of stability nothing short of this will guarantee permanence.
John Maynard Keynes –
If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes its effects in increasing the propensity to consume is, of course, all the greater.
Aggregate consumption depends mainly on the amount of aggregate income.
Consumption – to repeat the obvious is the sole end and object of all economic activity.
We cannot, as a community, provide for future consumption by financial expediants [stocks, bonds, 2nd mortgages on home loans, etc] but only by current output.
Capital is not a self-subsistent entity existing apart from consumption.
Consumption is directly tied to the level of employment.
My Proposed Program
• 2 year 800 billion emergency Infrastructure Investment Jobs Creation Program (IIJCP) aimed at building new interstate highways, mass transit systems, schools, bridges, public hospitals, libraries, and assorted public buildings.
• Eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
• Taxation of corporate profits in the amount of 95% for firms that exceed a threshold level of jobs outsourced to a foreign country.
• Taxation at the rate of 80% on individual yearly income received from any corporation, not-for-profit organization, or any form of legal entity where the total income exceeds the U.S. average yearly median individual income by 200%.
• Fair trade agreements that ensure nations will offer decent wages, humane working conditions, and sound environmental policies.
• A nationalized health care system for all U.S. citizens.
• An effective federally funded tuition assistance program for U.S. citizens targeted at professions in demand.
• Repeal all legislation that inhibits the right’s of individuals to organize under labor unions regardless of position or any other currently disqualifying classification.
My Observations:
• An economy can only function when a large proportion of the populace is engaged in the economy thus able to purchase what is produced.
• If price is inelastic and labor remuneration static demand will fall due to reductions by industries in their capital base (the most important being labor).
• Firms forced to compete (those that are not oligopolies) in an economic environment where demand is declining will still compete on price but efficiency gains and operating cost reductions by nature have marginal declining utility whereby a point is reached when the firm's factors of production (land, labor, or capital) must be slashed. These cuts in factors of production will have a multiplicative effect throughout an economy resulting in an ever building 'wave' of economic decline.
• It is important to keep in mind that an economy cannot continue to grow when long-term consumption continues to decline. This in turn ties directly to reductions in the factors of production to accommodate continual long-term reductions in consumption.
• When geographical barriers, constraints to the free flow of labor resources, underemployed resource utilization, similar knowledge distribution across all nation state’s, and nation state governmental inconsistency exists no global free market can exist and thereby at the nation state level no significant corresponding opportunity cost for engaging in one form of economic endeavor over another.
Well here's the deal with the $150 billion stimulus package. As you already know, we are in a period of stagflation (where there is an impending recession + inflation) where commodity prices are going through the roof. And if the Bush Administration hands out this stimulus package of $150 billion or whatever, it will finance this via Ben Bernanke printing lots more money through his printing presses - more like throwing money off the helicopters flying high in the sky. What will happen from this? More inflation! This will lessen purchasing power of consumers and devalue the US dollar, thus I think this stimulus package is a short term problem to a long term problem.
Visit my blog @ mortgage calculator www.2mortgageloancalculator.com if you want to learn more about my theories, thanks!
There are simple ways to address and avert a recession. a major way to do so would be to provide jobs through construction of vital infrastructure in america, and moving towards sustainable homegrown energy for america. by investing in our fuel independance we will create many jobs as a country while consuming less oil from volatile countries. i think the government should pursue a bill that caps variable interest rates that are bankrupting many families and causing this recession at 7.85% which is alot lower than many mortgages are currently assessed at, but higher than the current interest rates. by setting an interest limit on variable mortgages more americans will be able to remain in their homes. I also believe cutting interest rates by a full percentage point will stimulate our economy further, it will correct the glut of housing inventory currently unsold, and provide stable and secure mortgages for families. I would suggest the government begin to transition out of the war in iraq and start using the funds to invest in american jobs, infrastructure, and overall betterment of america as a whole. although it will not happen under this president a major reform to lower healthcare costs and make sure all americans are insured will greatly remove a huge burden currently placed on society and will allow many more lower wage hardworking people to live better and remove a huge burden and liability from their balance sheet. energy costs are crippling for many americans, if as a society we move towards sustainability and reduced consumption of non renewable fuels it will have an overall beneficial effect to all americans, save money, the environment, and lead to stabilized costs. I believe there are solutions that can be funded without major costs to taxpayers to re-invigorate this economy. any package pursured should be a catch all and provde solutions from all corners to come together to support the low income americans being hit by the current crisis. combining a manditory refinance law to protect consumers, while passing huge conservation and environmental sustainability package, with a job creation and neccesary infrastructure package, we will see many net positive results and avert serious effects of a recession. if that then is combined with healthcare reform we will most likely reverse current job loss, attract new businesses in america, reduce large expenditures and liabilites for our low income residents and set ourselves down the path of job creation, a robust economy, and the ability for more americans to remain in their homes throughout this current brink of recession and mortgage crisis.
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