Following In The Footsteps Of Carter?

Dave Kopel blasts into the Bush-Pelosi “stimulus package” at The Volokh Conspiracy:

Here’s how to deal with a recession: A federal government which is already spending more than its income should borrow even more money, so as to give lots of people a tax rebate. This is the bipartisan plan of President Bush and Congress. They are taking a leaf from the presidency of Jimmy Carter.

Even accounting for inflation, the Bush-Reid-Pelosi rebate is far more profligate than the proposed Carter rebate of 1977. But the two rebates appear to be based on the same demand-side principles.

He’s right on that. The “stimulus package” is great politics, but absolutely horrendous policy. When we’re already running the budget into the ground, the last thing this country should be doing is trying to jump-start the economy by giving everyone a check. It’s a bit of “bread and circuses” politics that demonstrates just how economically illiterate the government is.

Middle class voters are feeling a squeeze, but that’s a symptom of a larger problem. The reason why the dollar is falling and the markets are volitile is because the US is on an economically unsustainable course: we’re spending too much, regulating too much and we have a massive entitlement crisis looming and no one has the political will to touch it. When even the French are being more fiscally responsible than we are there is a serious problem.

A realistic stimulus plan would involve significant cuts in spending, making the current tax rates permanent, and structural economic reforms like ensuring that depreciation tables don’t artificially increase the taxable assets of a business. However, none of those things are particularly “sexy” and don’t have much impact to the average voter. So instead, President Bush and Congress are planning to bribe the American people.

In the end, this plan is ultimately self-defeating. We can’t get out a problem created by fiscal profligacy by being even more profligate—and while a tax rebate check is a nice thing to have, it’s not going to have the long-term effect necessary to lift the economy. Even if we do get some economic stability in the next few months, that’s more likely due to the sub-prime crisis easing rather than some government check.

This isn’t a stimulus package, it’s a bribe, and while it may be politically popular, it’s not going to fix our underlying economic problems.

5 thoughts on “Following In The Footsteps Of Carter?

  1. “He’s right on that. The “stimulus package” is great politics, but absolutely horrendous policy. When we’re already running the budget into the ground, the last thing this country should be doing is trying to jump-start the economy by giving everyone a check.”

    Come again? All these years, you’ve had no problem growing deficits to finance tax cut after tax cut in the name of economic stimulation. Why now are you suddenly against it? Because more than just the richest 1% of Americans are gonna get some money from this quasi-tax cut?

    “A realistic stimulus plan would involve significant cuts in spending”

    Um, no. Government spending props up an ailing economy from deeper despair given the lack of private sector spending that occurs in recession. That’s Economics 101, Jay. WHo are you trying to kid?

    “making the current tax rates permanent”

    How will the economy of 2008 improve by extending tax cuts already in place until 2011? And how does this premise dovetail with your newfound interest in not increasing the deficit?

    “However, none of those things are particularly “sexy” and don’t have much impact to the average voter.”

    Not only are they “unsexy”, they would either worsen or have no impact on the economy we claim we want to give a shot in the arm. The rebate check idea is a crock of shit that amounts to election-year bribery (you are half right on this issue, which is half more right than you usually are!), but is considerably more likely to generate a smidgen of a net benefit than any of the trite Club for Growth talking points that you pimp no matter what condition the economy is in.

  2. Come again? All these years, you’ve had no problem growing deficits to finance tax cut after tax cut in the name of economic stimulation. Why now are you suddenly against it? Because more than just the richest 1% of Americans are gonna get some money from this quasi-tax cut?

    Actually, I wasn’t a big fan of the 2001 rebates either.

    Not all tax cuts are the same. That’s why we’re called “supply side” economists…

    Um, no. Government spending props up an ailing economy from deeper despair given the lack of private sector spending that occurs in recession. That’s Economics 101, Jay. WHo are you trying to kid?

    Then you just failed Economics 101. That kind of crude Keynesian economics have already been well debunked before. The last time someone tried that strategy was the 1970s—the result was double-digit unemployment, 17% interest rates on loans and “stagflation.”

    Do yourself a favor and go to your local library and pick up the book “Commanding Heights” by Daniel Yergin and Joseph Stanislaw. It goes through every time someone’s tried that strategy in the last 100 years and how badly it’s failed every time it’s been tried.

    How will the economy of 2008 improve by extending tax cuts already in place until 2011? And how does this premise dovetail with your newfound interest in not increasing the deficit?

    Because markets tend to be forward-looking. Businesses are already making their 2010 forecasts, which is adding to the uncertainty. You’re not going to engage in an expensive expansion of your infrastructure that will take longer than a few years if you think that your tax bill is going to skyrocket in the next few years.

    Again, you need to pick up a basic text on economics so you understand these concepts. A good general book is “Basic Economics: A Citizen’s Guide to the Economy” by Thomas Sowell.

    Not only are they “unsexy”, they would either worsen or have no impact on the economy we claim we want to give a shot in the arm. The rebate check idea is a crock of shit that amounts to election-year bribery (you are half right on this issue, which is half more right than you usually are!), but is considerably more likely to generate a smidgen of a net benefit than any of the trite Club for Growth talking points that you pimp no matter what condition the economy is in.

    Perhaps before you start commenting on economic matters, you should at least have a little background on the subject…

  3. “Not all tax cuts are the same. That’s why we’re called “supply side” economists…”

    As I suspected, you’re opposed to these rebates because somebody other than millionaires will be getting a check from the government. Do us all a favor and admit that rather than hiding behind a disingenuous conversion to opposing deficts.

    “That kind of crude Keynesian economics have already been well debunked before. The last time someone tried that strategy was the 1970s—the result was double-digit unemployment, 17% interest rates on loans and “stagflation.””

    Yes Jay, when the private sector is in a bearish nonexpansion mode, that’s a PERFECT time for government to simultaneous slash its spending, piling onto the ranks of the unemployed and making sure factory orders for new works projects (or earmarks for that matter) go unfilled. It’s no wonder you guys brought us the Great Depression 80 years ago.

    “A good general book is “Basic Economics: A Citizen’s Guide to the Economy” by Thomas Sowell.”

    I’ve read enough of Sowell’s ridiculous columns to be incredibly skeptical of his “good general book”. Think I’ll stick with economics education from my buddy Professor Paul Krugman.

    “Perhaps before you start commenting on economic matters, you should at least have a little background on the subject…”

    You’re calling for massive cuts in government spending on the heels of what’s predicted to be a difficult recession. I’ve had enough “background on the subject” to know that’s a recipe for ruin.

  4. As I suspected, you’re opposed to these rebates because somebody other than millionaires will be getting a check from the government. Do us all a favor and admit that rather than hiding behind a disingenuous conversion to opposing deficts.

    Does your straw man keep the crows away?

    Yes Jay, when the private sector is in a bearish nonexpansion mode, that’s a PERFECT time for government to simultaneous slash its spending, piling onto the ranks of the unemployed and making sure factory orders for new works projects (or earmarks for that matter) go unfilled. It’s no wonder you guys brought us the Great Depression 80 years ago.

    No, it’s the perfect time to reduce tax rates, especially on investments and encourage private enterprise to invest and grow. That’s how Kennedy did it in 1961, Reagan and Kemp did it in 1983, and Bush did it in 2001 and 2003.

    Odd how you credit supply-side economists with “bringing us the Great Depression” when the concept didn’t even exist then. What actually caused the Great Depression? The combination of the Smoot-Hawley Tariff, and massive contraction of the money supply. (Which is why it’s not a surprise that Ben Bernanke cut rates so drastically—he wrote the definitive piece on the Fed’s missteps in 1929.)

    And what party is it that’s A) isolationist on trade and B) generally leans towards neo-Keynesian theories? Why, that would be the Democrats, no wouldn’t it?

    I’ve read enough of Sowell’s ridiculous columns to be incredibly skeptical of his “good general book”. Think I’ll stick with economics education from my buddy Professor Paul Krugman.

    Actually, Peddling Prosperity is not a bad book. His polemical crap from 2001 isn’t about economics, and isn’t worth reading. And besides, you clearly don’t understand Krugman, since you can’t get basic foundational principles of economics right.

    You’re calling for massive cuts in government spending on the heels of what’s predicted to be a difficult recession. I’ve had enough “background on the subject” to know that’s a recipe for ruin.

    Then you haven’t had enough background on the subject. If government spending really propped up an economy, the 1970s should have been an economic boom and the mid-1990s should have been a depression.

    Again, you keep spouting all these silly little theories, but you can’t back them up with facts, and all the real-world examples go against your points. Perhaps you should read more and spout less?

  5. “No, it’s the perfect time to reduce tax rates, especially on investments and encourage private enterprise to invest and grow.”

    The above retort was in response to my questioning of the logic that cutting government spending in the time of a recessionary private sector is foolhardy economics. As a guy who was defending said scenario, I can see why you’re now attempting to redirect the argument back to “the perfect time to reduce tax rates”, even though in that particular point, I said not a word about reducing tax rates, only the idiocy of widespread cuts in government spending as private sector spending also freezes up.

    “That’s how Kennedy did it in 1961″

    I keep inviting you to the same pledge….that if you’ll agree to bring back the JFK era of 70% top tax rates and 44% labor union participation, I’ll be more than happy to call him “the original supply-sider”.

    “Reagan and Kemp did it in 1983″

    As with everything Reagan-related, you give half the facts and ignore the less convenient other facts…in this case that Reagan proceeded to raise taxes three times in 1982, 1983, and 1986 after his 1981 tax cuts produced a calamity of deficient revenues.

    “and Bush did it in 2001 and 2003.”

    He sure did….and what kind of favorability numbers does he have on his handling of the economy to show for it?

    “Odd how you credit supply-side economists with “bringing us the Great Depression” when the concept didn’t even exist then.”

    What did exist then was Herbert Hoover refusing to unbalance the budget and release from federal coffers the funds necessary to stimulate a disastrous economy….you know, kind of like you were suggesting we should do today.

    “If government spending really propped up an economy, the 1970s should have been an economic boom and the mid-1990s should have been a depression.”

    Strawman. I said that when an economy is already ailing, government spending acts as a stimulant to fill the vacuum left by diminished private sector spending….and correspondingly that your diagnosis of cutting gov’t spending heading into an economic soft spot would be an epic mistake.