When will Obama stop bad mouthing the economy?

It was just a week ago that Barack Obama stood up and told the country that unless the economic stimulus package was passed last Friday, doom and gloom would occur. He proceeded to set up an environment where it was physically impossible to read the entire disasterous pork bill. Well, the bill passed and Barack Obama signed it....4 days later. And the economy tanked again.

I am starting to wonder at what point Obama will be forced to stop his strategy of declaring everything a disaster so he can continue to push through policies in this country that would NEVER be passed when examine in the light of day. We now finish the week much worse than when we started it. And Obama wants another 1 trillion for banks and also wants to bail out people who cannot afford their mortgages.

The media love to compare this president to Lincoln, Roosevelt and JFK. Why is that I keep thinking that he is more of Millard Filmore than not.

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Stimulus ideas you disagree with are still ideas!

This morning I read an editorial in the Trentonian written by Donna Brazile decrying the fact that the GOP was "nitpicking" on the stimulus. Even more so, her contribution to the discussion was that Republicans had no ideas to add to the discussion. I am paraphrasing here because I do not want to dignify her statements by quoting them because they are so disingenuous.

During this stimulus debate, there were several alternative ideas put forward to create something that was stimulative and not just a Democratic party spendathon. Some of the Republicans ideas were as follows:

1. Real tax relief - The Obama plan offered 13 dollars per paycheck for those who qualify. This will have zero is no impact because everyone knows they are temporary. Republicans continuously fought to increase the return of taxpayer money back to those who earn the money. Apparently, this doesn't qualify as an "idea" because it is a core principle of conservatives.
2. Eliminate all non-stimulative spending from the package - We do not even know half the mess that this congress has showered upon its special interests. Every single spending item in this plan should have been evaluated in the context of real impact on the economy.
3. Small business tax relief - Small businesses add jobs. Government spending on welfare doesn't. Isn't it interesting that the small business breaks to stimulate job growth were stripped from the bill.
4. MORE spending on infrastructure. Republicans agree on the infrastructure ideas and wanted them more immediate and more stimulative. Of course, Republicans were not trying to stage this money for Obama's next election as Democrats were apparently trying to do.

Even the Republican Study Committee submitted their own bill of which the summary is shown below:

The Economic Recovery and Middle-Class Tax Relief Act of 2009

“Responsible and immediate economic stimulus for every American family and business without burdening future generations.”

Financial markets are tumbling worldwide. The unemployment rate is climbing. It is clear that more Americans are struggling to make ends meet and that the economy needs a boost. The question is: from where should that boost come, Washington or the private sector? Conservatives believe the answer is the private sector. History shows that the best way to encourage an economic turnaround, help preserve jobs, and spur widespread economic growth is to ensure that job-creators face a lower
tax burden.

That’s why the Republican Study Committee (RSC) is introducing the Economic Recovery and Middle-Class Tax Relief Act of 2009—to provide some much-needed, incentive-based relief to jobcreators and to reduce the cost that government imposes on middle-class families. The RSC’s Economic Recovery and Middle-Class Tax Relief Act is designed to provide broad, growth-oriented, permanent incentives for economic activity across all sectors and industries, with immediate application and sustained, long-term implications. This will ensure that Washington takes a back seat to Main Street and job creators are empowered to do what they do best—create jobs.

Highlights: The RSC’s Economic Recovery and Middle-Class Tax Relief Act is based on three main themes:

1) Support Families through Tax Relief; 2) Provide Economic Relief for American Businesses and Entreprenuers; and 3) Save Future Generations from a Crushing Debt Burden.

Support Families through Tax Relief
1) Five Percent Across the Board Income Tax Cut. This provision would reduce the six federal income tax rates by 5% beginning with 2008, and make the new rates permanent. Under current law, by contrast, income tax rates will increase in 2011.
2) Increase the Child Tax Credit from $1,000 to $5,000. Under current law, families are eligible for a $1,000 tax credit for each child under the age of 17. This provision would increase, and make permanent, an increase in the child tax credit to $5,000 beginning in 2008. This will provide a substantial, immediate tax cut for middle-class families. The increased credit would not be refundable.
3) Make the Lower 15% Rate on Capital Gains and Dividends Permanent. The Jobs and Growth Tax Relief Reconciliation Act of 2003 lowered the top tax rates on capital gains and dividends to 15%. Under current law the lower rates currently in effect expire at the end of 2010, which means that the top capital gains rate will go back to 20% and the top tax rate for dividends will be 39.6%. The last time the capital gains tax rate increased (1987), capital gains tax collections fell by 54% over
the first five year and then took a full decade to recover. This provision makes the 15% rate permanent.
4) Repeal the Alternative Minimum Tax on Individuals. The AMT was created in 1969 to prevent 155 wealthy taxpayers from using loopholes in the tax code to avoid paying taxes altogether. Under current law, the tax will hit more than 30 million people in 2009. There is a broad consensus that this is both an unintended result and an unfair one, which is why Congress has repeatedly passed an “AMT patch” to limit the scope of the tax. The legislation would permanently repeal the AMT.
5) Permanently Repeal Required Distributions on Retirement Accounts. Under current law, senior citizens, beginning at the age of 70-and-a-half, are required to make mandatory withdrawals from their IRAs and 401(k)s. Though temporarily suspended for 2009, this provision in the tax code is scheduled to go back into effect in 2010 and for every year thereafter. This provision in the tax code needlessly complicates financial planning for retirees, restricts the freedom of seniors to make
their own decisions on when to make withdrawals, and in the short-term will force many seniors to sell a portion of their assets at a loss. The bill permanently repeals this provision.
6) Make All Withdrawals from IRAs Tax- and Penalty-Free During 2009. As a general matter, the purpose of 401(k)s and IRAs is to incentivize retirement savings. However, individuals who are facing foreclosure or some other financial emergency during the current recession should have penalty-free access to all of their savings. Especially since, without any other alternative, some
families facing hardship will have no choice but to take the penalty. The bill would, for 2009, make all withdrawals from IRAs penalty- and tax-free.
7) Increase by 50% the Tax Deduction on Student Loans and the Tax Deduction on Qualified Higher Education Expenses. Under current law, the tax code provides a tax deduction of $2,500 for interest on student loans and a tax deduction of $4,000 for higher education expenses. This provision would increase the value of both by 50% or to $3,750 and $6,000 respectively, and apply both provisions to a larger number of middle-class families by allowing any individual earning up to $75,000, or any family earning up to $150,000, to claim the full deduction.


Provide Economic Relief for American Businesses and Entrepreneurs
1) Full, Immediate Expensing. The bill would allow all businesses to immediately expense—or fully deduct on their tax returns—the costs of assets (including buildings) they purchase for their business in the year that they buy such assets (“Section 179” expensing). Under current law, businesses can only take limited deductions in pieces, over several years. By uncapping and accelerating the expensing, this provision would encourage the purchase of assets with which to
grow a business.
2) Significant Reduction in the Top Corporate Income Tax Rate. The bill would immediately cut the top corporate income tax rate from 35% to 25%, aligning it with the average rate in the European Union. By allowing businesses to keep more of the money they earn, this provision would encourage the expansion of businesses, the hiring of more workers, and an acceleration of investment, while making American companies more competitive internationally.
3) End the Capital Gains Tax on Inflation. The bill would index for inflation the cost basis used when calculating the capital gains tax on assets acquired before the end of 2009. Under current law, the capital gains tax is based on the difference in the original purchase price of the asset and the sale price of the asset. However, some of this difference, or “gain,” can be attributed to inflation. By effectively reducing the amount of a gain that is taxable, this provision would encourage the
movement of capital in 2009 and spur voluminous economic investment.
4) Simplify the Capital Gains Rate Structure. The bill would allow corporations to benefit from the 15% capital gains rate. Under current law, individuals pay a top capital gains rate of 15%, but corporations are subject to a 35% top rate. By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials with which to create jobs and grow the economy.
5) Make the R and D Tax Credit Permanent. The Research and Development tax credit is currently due to expire at the end of 2009. Originally enacted as party of President Reagan’s Economic Recovery Tax Act of 1981, it has since been extended on 13 separate occasions without being made permanent. The purpose of this tax provision is to spur research and development in the private sector.
6) Extend the Carryback Period for Net Operating Losses to Seven Years. A business incurs a net operating loss when its tax liability is negative in a given year. Under current law, there is a twoyear carryback period for businesses to receive refunds on previously paid taxes. In other words, a business may receive a refund equal to their negative tax liability up to the amount of taxes paid
over the previous two years. This legislation would extend this period from two years to seven years, which will smooth out changes in business income, and incentivize private sector investment and job creation.

Save Future Generations from a Crushing Debt Burden
1) NO Trillion Dollar Spending Spree. Even before Congress enacts one penny of spending from a “stimulus” bill currently being put together by Speaker Nancy Pelosi and Senator Harry Reid, this year’s deficit is projected to be, by far, the highest peacetime deficit in the history of the country—8.3% of GDP. And this is because federal spending is projected to be 24.9% of GDP (also the highest figure in American history, excepting World War II), even before any new spending is
enacted. This legislation does not contain one penny of new spending, and rejects the idea that massive new government spending will lead to an economic recovery. Borrowing from one part of the economy and redistributing it to others will not grow the economy.
2) A Down-Payment on Spending Restraint. The bill includes a one-percent reduction to FY 2009 discretionary spending, excepting the Defense and Military Construction-Veterans appropriations bills. This is a modest limit on the extent to which spending will otherwise increase compared to FY 2008, and is a first step toward a commitment of spending restraint.

Lack of ideas indeed. I had lived through this silly assessment in New Jersey which goes essentially unchallenged in the press. The sad thing is that too many people believe it and do nothing, read nothing and do not act.

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Earmarks vs Porkulus

Barack Obama and congressional Democrats keep touting a canard that this wonderful stimulus bill they are ramming through is "completely free of earmarks". Let's examine that statement. The definition of an Earmark is as follows (from Wikipedia):

In US politics an earmark is a congressional provision that directs approved funds to be spent on specific projects or that directs specific exemptions from taxes or mandated fees.

Earmarks can be found both in legislation (also called "Hard earmarks" or "Hardmarks") and in the text of Congressional committee reports (also called "Soft earmarks" or "Softmarks"). Hard earmarks are binding and have the effect of law, while soft earmarks do not have the effect of law but by custom are acted on as if they were binding.[1] Typically, a legislator seeks to insert earmarks that direct a specified amount of money to a particular organization or project in his/her home state or district.

So if we parse the words, to be an earmark it should:

a. the direction of funds in a bill
b. be inserted by a senator or member of congress
c. to benefit their states or districts financially

I have reviewed the drafts of pieces of this legislation and the summaries. I would estimate that more than half of this entire bill is an earmark. Just because the spending size is so large that multiple senators and members of congress are taking home the loot, doesn't negate it fact that it is for an earmark.

Some favorites rumored to be in the final legislation:

- LA to Vegas train (Reid)
- $30 million dollars in wetlands preservation for San Fran (Pelosi)
- $200 million dollar power plan in IL (Obama)
- Major funds for building govt building projects in Maryland, Virginia and Georgia
- 80 billion for outright payments for state who have through their out of control spending are in financial trouble (see California, New York, Michigan and New Jersey)
- 6.5 billion for National Institute of Health as a buyout for Republic Arlen Specter


If it looks like an earmark, costs like an earmark, is hidden into legislation like and earmark with no attribution....it's an earmark.

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Democrat Stimulus Bill must be rewritten - CALL YOUR SENATOR!

As we have written in the space before, the "stimulus bill" is primarily a collection of Democratic party detritus and paybacks to donors from the Presidential campaign. Since the urgency of this legislation was to stimulate the economy, this bill should be killed in the senate. There are many valid programs in the bill and they should be given the time and daylight the legislation process normally provides. This middle of the night robbery of a 900 BILLION dollars (more than most Presidents spend in an entire term (4 years not 2 weeks) is actually a massive spending bill and should not be fast tracked in its present form. If the Senate believes that a stimulus package is needed, they ought to get to work and actually produce one.

A vote is possible today so you should contact your Senators immediately.

For New Jersey residents(don't hold your breath getting any real fiscal responbibility out of these two), here you go:

Lautenberg, Frank R. - (D - NJ)
324 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-3224
Web Form: lautenberg.senate.gov/contact/

Menendez, Robert - (D - NJ)
317 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4744
Web Form: menendez.senate.gov/contact/contact.cfm

For everyone else, follow this link to find your Senator.

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Stimulus that doesn't stimulate - Part II

In our first post examining the American Reinvestment and Recovery Act we examine each category of spending and commented on whether or not it was worthwhile as well as its impact on stimulating the economy. Last week saw a Congressional Budget Office report (or draft) that drew some of the same conclusions that we did here. From the Washington Post article on the subject:

Less than half the money dedicated to highways, school construction and other infrastructure projects in a massive economic stimulus package unveiled by House Democrats is likely to be spent within the next two years, according to congressional budget analysts, meaning most of the spending would come too late to lift the nation out of recession.

A report by the Congressional Budget Office found that only about $136 billion of the $355 billion that House leaders want to allocate to infrastructure and other so-called discretionary programs would be spent by Oct. 1, 2010. The rest would come in future years, long after the CBO and other economists predict the recession will have ended.

This lays bare what is obvious to everyone but the most partisan Democrat-that the stimulus is a massive spending bill that is using the problems with the economy to justify the biggest government shopping spree in 60 years. And the reason is equally obvious. These politicians know that there will be will not be the normal money spigot they are used to under normal spending evaluation and deliberation in the legislature.

A side story on the CBO report is that the alleged report is no longer available. you can assign any motive you want for it but you can read it here and decide for yourself. Look for a new report soon that will sand over the factual rough edges on this one and make it appear the the spending is more immediate.

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Democrat stimulus package or massive pork bill? You decide-Part 1

The American Recovery and Reinvestment Bill of 2009 is perhaps the most appalling piece of proposed legislation I have ever seen. The stated purpose of the bill is to jumpstart the economy and create jobs. The bill itself claims that there are no earmarks in this bill. That is one of the most comical claims I have seen as this entire bill is an earmark that will be shoved down the throat of taxpayers with little or no debate.

Under the guise of providing help to the economy, the democrats are proposing a spending bill that right up front promises the following:

The package contains targeted efforts in:
• Clean, Efficient, American Energy
• Transforming our Economy with Science and Technology
• Modernizing Roads, Bridges, Transit and Waterways
• Education for the 21st Century
• Tax Cuts to Make Work Pay and Create Jobs
• Lowering Healthcare Costs
• Helping Workers Hurt by the Economy
• Saving Public Sector Jobs and Protect Vital Services

In the first part of this series, let's examine each of these main points and their description to see what is really going on with this bill.

Clean, Efficient, American Energy: To put people back to work today and reduce our dependence on foreign oil tomorrow, we will strengthen efforts directed at doubling renewable energy production and renovate public buildings to make them more energy efficient.
• $32 billion to transform the nation’s energy transmission, distribution, and production systems by allowing for a smarter and better grid and focusing investment in renewable technology.
• $16 billion to repair public housing and make key energy efficiency retrofits.
• $6 billion to weatherize modest-income homes.

Half of this is alleged investment in infrastructure. For any investment in infrastructure to be considered able to produce a "stimulus" effect, it must be able to add money or jobs to the economy immediately. The transformation of the energy grid fails miserably under those terms. Anyone who has ever tried to even consider upgrading the pathetic energy infrastructure in New York knows that the minute you mention it, you are setting yourself up for years of lawsuits from environmental, neighborhood and civil rights groups. Even if this money is to go to giant windmills (no-where near the Kennedy estate please), it would take years for that money to make it into the economy.

The rest of this section is money that will go down the money pit of HUD. Because you see, the only place to distribute this money is via Housing and Urban Development, long a wasting place of billions of your tax dollars. I do not know of a single "public housing" project that I would consider truly successful mainly due to the fact that those who live in them do not consider themselves responsible for the care and upkeep of their own homes. This is welfare pure and simple. And expensive welfare at that.

Transform our Economy with Science and Technology: We need to put scientists to work looking for the next great discovery, creating jobs in cutting-edge-technologies, and making smart investments that will help businesses in every community succeed in a global economy. For every dollar invested in broadband the economy sees a ten-fold return on that investment.
•$10 billion for science facilities, research, and instrumentation.
•$6 billion to expand broadband internet access so businesses in rural and other underserved areas can link up to the global economy.

Ten billion dollars on research. For what? And how will this impact the economy any time soon? Science is by its very nature long term. This will have zero impact and is likely just liberal code for publicly funded stem cell research. The other 6 million for broadband is a joke. I don't know where these politicians are living but the public sector has expanded broadband just fine on its own. This is just a waste of 6 billion dollars and even though one more cow in Nebraska may be able to watch YouTube, I fail to see the stimulative impact.

Modernize Roads, Bridges, Transit and Waterways: To build a 21st century economy, we must engage contractors across the nation to create jobs rebuilding our crumbling roads, and bridges, modernize public buildings, and put people to work cleaning our air, water and land.
•$30 billion for highway construction;
•$31 billion to modernize federal and other public infrastructure with investments that lead to long term energy cost savings;
•$19 billion for clean water, flood control, and environmental restoration investments;
•$10 billion for transit and rail to reduce traffic congestion and gas consumption.

At least this part of the bill has been debated somewhat in light of day. The biggest issue here is that construction projects take too long to get going to help the economy. While the claim of "shovel ready" projects may have an impact, no one seems to ask why these "shovel ready" projects were not funded and build before under previous transportation bills. It is likely because in the list of state priorities, they were way down. I recently had a three year construction project near my house that netted an extra lane entering the turnpike (despite no traffic jams prior to the construction), a jub handle which now causes traffic jams and a drainage pond that wouldn't have been necessary had the skipped the project altogether. Oh, and it cost me about $2,000 in suspension work to my vehicle due to the ongoing mess and poor road conditions. Can you say "construction union payback"?

Education for the 21st Century: To enable more children to learn in 21st century classrooms, labs, and libraries to help our kids compete with any worker in the world, this package provides:
•$41 billion to local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion).
•$79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities distributed through existing state and federal formulas, $15 billion to states as bonus grants as a reward for meeting key performance measures, and $25 billion to states for other high priority needs such as public safety and other critical services, which may include education.
•$15.6 billion to increase the Pell grant by $500.
•$6 billion for higher education modernization.

Over 140 billion dollars to education. And not one new idea to transform our inner city public schools so that poor kids can learn to work instead of learning to become criminals. Need proof? Front page of the Trentonian this morning had the headline "City School Riot". This money is payback to the teacher's unions who excel at spending public money while resisting any accountability. We don't need
21st century classrooms. We need teachers who can teach, students and parents who want to learn and a commitment from the community that anyone who wants to get in the way of that should be removed from the equation.

Tax Cuts to Make Work Pay and Create Jobs: We will provide direct tax relief to 95 percent of American workers, and spur investment and job growth for American Businesses. [marked up by the Ways and Means Committee]

The first mention of a direct impact item on the economy. And guess what? No money mentioned. No mention of the fact that this tax cut will be coupled with a tax increase for those making more than 250,000 (IE the small businesses that will be doing the alleged hiring). This will do nothing to help the economy and will also do nothing to help business as it is just cleverly worded drivel. And while we are at it, we have mentioned before that given that 48% of workers pay no tax and this plan is to provide tax relief for 95% of workers, this is pure and simply a welfare check for half of the recipients.

Lower Healthcare Costs: To save not only jobs, but money and lives, we will update and computerize our healthcare system to cut red tape, prevent medical mistakes, and help reduce healthcare costs by billions of dollars each year.
•$20 billion for health information technology to prevent medical mistakes, provide better care to patients and introduce cost-saving efficiencies.
•$4.1 billion to provide for preventative care and to evaluate the most effective healthcare treatments.

Does anyone believe that any government plan will decrease the red tape that is crippling the nation's healthcare system and driving doctors to other jobs? Computerization will not reduce medical mistakes and will not save lives. It may make the system more efficient but how about some other ideas. For example, how about spending money on tort reform so that billions of dollars in cost can be wrung out of the healthcare system from frivolous lawsuits? Has anyone considered standard testing methodologies so that doctors do not feel that they have to prescribe tests that purely serve to protect themselves in case of a lawsuit? In any case, this is all long term investment and will have zero impact on the economy.

Help Workers Hurt by the Economy: High unemployment and rising costs have outpaced Americans’ paychecks. We will help workers train and find jobs, and help struggling families make ends meet.
•$43 billion for increased unemployment benefits and job training.
•$39 billion to support those who lose their jobs by helping them to pay the cost of keeping their employer provided healthcare under COBRA and providing short-term options to be covered by Medicaid.
•$20 billion to increase the food stamp benefit by over 13% in order to help defray rising food costs.

Help for out of work employees is not a bad thing. 102 billion dollars seems a bit out of line with the actual unemployment figures I have seen. But wait. 20 billion of this has nothing to do with people out of work. It is an increase to food stamps. 39 billion to Cobra? One of the main reasons businesses are letting people go right now is the rising employee social costs. A big part of that is healthcare. The Cobra system is an exceptionally inefficient way to provide healthcare as it costs the employer the ability to scale back their overall healthcare plan while costing the government far more than it should pay than if it created its own group insurance. Someone should get creative here. But no matter, these outlays are in no way going to stimulate anything. They are a necessary thing to do but won't help the economy.

Save Public Sector Jobs and Protect Vital Services: We will provide relief to states, so they can continue to employ teachers, firefighters and police officers and provide vital services without having to unnecessarily raise middle class taxes.
•$87 billion for a temporary increase in the Medicaid matching rate.
•$4 billion for state and local law enforcement funding.

Save public sector job. That's a winner. Does anyone not get the fact that the people who are losing their jobs right now are the people who pay the bills? And while this plan does nothing for them, it borrows from our children to ensure public sector employees keep their jobs. In New Jersey, private sector employment has been falling for several years while public sector job growth has continued unabated. Enough is enough. And much the same as the other categories, this will have zero impact on the economy.

This is frankly unbelievable. 800 billion dollars and virtually no spending aimed at fixing the economy. This bill is one big spend fest that will do nothing to turn our economy around. It's sad that no one seems to care.

Read this horrific proposed bill in its entirety here.

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