Sunday, February 08, 2009

 

Talking (Clown) Heads Agree on Stimulus Stupidity

Of the various positions and postures taken by the talking heads (mostly congress-people) on the regular Sunday morning shows, two very intriguing arguments emerged:

1. Nobody knows whether the current plans (separately by the House and Senate) will work.
2. Almost everybody agrees that "something must be done."


At some point, one has to recognize that these two positions - in a real world, say, business - cannot peacefully coexist.

In business, if a manager or group of managers were to approach the executives of a firm with a plan that they said they were unsure about, but that they felt should be implemented immediately, they'd likely be fired, or at least, ignored and castigated.

Sadly, the American public isn't afforded the opportunity to veto the government's massive "stimulus" plan, now hovering somewhere between $780 and $825 billion, depending on which version - House or Senate - one studies.

What's even more disconcerting is the sheer size of the proposal: a stunning 760 pages in the House version, with more added and amended by the Senate. One can safely assume that nary a Senator or Representative has read the entire bill. That would take and average reader a couple of days. Our "busy" legislators don't have that kind of time, but they'll likely go ahead and pass this monstrosity next week.

The most cogent discussion on what would actually stimulate the economy was on ABC's This Week with George Stephanopolous," largely spirited by three fellows who are notably NOT elected or administration officials: George Will, Robert Reich and Newt Gingrich.

Between them, they correctly postulated that the most immediate stimulus to the entire economy - done with alacrity and efficiency - would be to make deep cuts in broad tax grabs, specifically payroll taxes, social security and medicare contributions and capital gains taxes.

Cutting the payroll tax, which affects a huge number of workers, would be easy to do and could be immediately implemented. Somebody - I don't know who, but I believe it was a government regulator - said it would take three months to rework the payroll tables. There's the typical government cop-out on why our leaders won't do what the American public wants and prefers. It's a straw man argument when one considers that the stimulus plan currently under debate will take anywhere from 6-24 months for the effects to be implemented.

It's also a huge lie. If the government wanted to reduce payroll taxes - even on selected income levels or at varying amounts by income level - it could issue such a measure within a week's time, simply by informing tax preparers (businesses) of the percentages, i.e., 50% off this level, 30% off this level, etc.

Besides, most of the nation's tax deductions are handled by computer, or by the major companies which have made a business of dealing with the complexity of the federal and state tax codes, Paychex and ADP. The adjustment to lower deductions would be painless, simple and hugely beneficial, putting more money into the hands of citizens, instead, as Mr. Will pointed out, as part of the government taxing and regulatory system that "wants to do the spending for you."

There has been a great deal of discussion about how effective the American Recovery and Reinvestment Act (ARRA) will be in stemming the loss of jobs and creating new ones. Frustrated at not being able to find an appropriate breakdown of the major spending in the bill, I found some hint of where the money is going in a Wall Street Journal article, entitled A 40-Year Wish List.

On the sidebar, the Journal breaks out $265 billion in what is mostly "welfare" spending on medicade ($81 billion), food stamps (20 billion), extensions of unemployment insurance ($36 billion) and COBRA insurance extensions ($30.3 billion). Color me blind, but I cannot fathom how shoving additional billions into these programs is going to translate into jobs.

A number of private economists have called this stimulus package a big mistake. You can clearly count me in that camp. It's a bloated, unwise, excessive spending program that will likely make matters even worse by failing to address the actual problems in the economy and bandaging over them with more handouts.

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