Stimulus Plan

Confused about the 'stimulus' plan?

That's understandable, because it's not, and as a result, it produces cognitive dissonance in all thoughtful people who contemplate it.  If you're not confused, you're a Democrat.....exit now please, or you'll be confused.

I've searched far and wide to glean information about what's in the approximately 600 page bill.  As you can imagine, it's not something that the Congress wants citizens to have access to.  However, some folks have taken the time to make it a bit easy to comprehend in reference to measurements that most can understand.  Barry Ritholtz, Bianco Research and Bloomberg have provided the context, and SuitablyFlip has provided effective graphics.

Here are some great graphics to assist in getting your head around the numbers:

Let's put the numbers of the stimulus bill in historical perspective:

Now, let's put it in current perspective:

Now, let's see how it relates to everyday life:

Flip also took a stab at how much of a federal payroll tax holiday we could buy with that $1.2 trillion (the total including interest on incremental borrowing) and how much of a jobs boost that might give us.

Well, let's do the math.  GDP in 2009 will come in at around $14 trillion (assuming a -2% nominal output growth for the year).  If federal payroll taxes hold at approximately 6.5% of GDP, they will total $910 billion.  Half of this is withheld from employees (including the self-employed), while the other half is paid by their emlpoyers.  Between Social Security and Medicare, the employer's share of the load adds up to 7.65% of gross compensation (up to the annual maximum per employee).

Excusing employers from paying this tax would cost an estimated $455 billion per year (ignoring the growth effect of removing hiring disincentives).  With $1.173 trillion to play with, you could fund a payroll tax holiday for more than 2.5 years.

Rep. Louie Gohmert (R-TX) has proposed something similar, but he's only looking for a two-month holiday.  He'll be delighted to hear we can stretch it for more than 30!

Extrapolating from estimates by Heritage's Center for Data Analysis, a 1-point change in the payroll tax rate ratchets the pace of job creation by 147,000 per year.  Eliminating the employer-side payroll tax completely would be a 7.65-point reduction.  Acknowledging that the delta of 147,000:1% wouldn't be static the whole way down, using that as a general guide gets us to 1.12 million incremental jobs per year.

Over 2.5 years, that's good for more than 2.8 million new jobs.

Yes, that's lower than the President's most recently upgraded "create or preserve" estimate, but ours has the benefit of being neither pulled from thin air, nor based on adiscredited theory of economics.  Plus - as briefly noted above - our estimate ignores the inevitable growth effect of lowering the cost of doing business.  Businesses will be able to add more jobs, get more done, ship more things, and earn higher profits (which increases corporate and individual income tax revenues, thus partially offsetting the cost of the tax holiday).

If per capita GDP remains constant at $45,700 and assuming a 28% average effective individual tax rate, those 2.8 million new jobs would account for $45 billion in incremental tax revenues during the 2.5 year payroll tax holiday and $18 billion per year thereafter.  Over the 11-year duration of proposed stimulus outlays, this would haul in an extra $207 billion.  The above analysis doesn't include incremental borrowing costs associated with the tax holiday, but this incremental individual income tax revenue would offset most of it.  Incremental corporate tax revenues (owing to incremental corporate profitability) would likely offset the rest, with room to spare.

It's also worth noting that these 2.8 million new jobs would all be private sector jobs generated in the free market, which is significantly more advantageous and productive than conjuring up jobs by swelling the ranks of government agencies and/or empowering a handful of lawmakers to pick winners and losers among the prviate sector.

But we're not going to get millions of private sector jobs generated in the free market.  Because we're not going to get a payroll tax holiday (or any other genuine tax relief).

We're going to get a trillion-dollar camper with faux wood grain.

Stimulus Plan Won't Work

A plan is needed, but not this one.

The essential rational and justification to enact a stimulus plan is rather basic economics, and given the unique situation, justified. Aside from the significant amount of money involved, it’s not that much more complex than the decisions people make about their own family finances, so it speaks to the absolute ignorance of the majority of our citizens that they can’t figure out when their getting rolled!

This stimulus plan is the biggest boondoggle we’ve ever witnessed. Obama proclaimed that he’d stop all earmarks…and that was an easy statement for him, as he know that he wouldn't see any as they’ve all been rolled up into this singular piece of porcine excrement called a stimulus bill. It’s also very telling when the Congressional Budget Office (staffed by Democrats now), says that a mere $26 billion of the House stimulus bill's $355 billion in new spending would actually be spent in the current fiscal year, and just $110 billion would be spent by the end of 2010. This is highly embarrassing given that Congress's justification for passing this bill so urgently is to help the economy right now, if not sooner. The Democrats were so embarassed by the report that the report was pulled from view by the Appropriations Committee.

This administration is not concerned about the stimulus and fixing the economy immediately.  If they did, they would be attempting to assure us that this was a manageable situation.  Instead, they keep sowing gloom and doom in a determined effort to keep raising the general anxiety level, while attempting to frighten people into supporting their supposed stimulus plan. In addition, their refusal to state their commitment to specific tax policies forces most businesses to stay all new activities until they can understand how Obama’s tax policies will impact their plans.  The net result is a stalled economy. 

This situation isn’t accidental, it’s purposeful.  Like many others, Obama and the Democrats know that the American public’s ability to tolerate anxiety and suspense is very limited, so they know that they won’t have to keep stoking the fires of fear for much longer in order to get what they want….cart blanche approval on the largest and loosest appropriation of funding Liberal activities that this country has ever seen, without having to go through the normal discovery and approval process that would expose these items as either pure waste or political payoffs.   

The majority of the plan is basically a payback to the Teacher’s and the Construction Trade Unions, as well as funding for government health care expansion.  Their plan, which includes an expanded SCHIP, will effectively get us to the tipping point where single-payer health care is unavoidable due to the skewed market environment they are createing.  There’s so much funding here that the Democrats don’t even know what else they want to do with it yet…..but they will…..and it won’t be good for the United States.

According to the Congressional Budget Office (CBO) The majority of the funds will not provide any stimulus, and in fact will not even be able to be deployed until well after the recession has ended.

Nina Easton in Fortune magazine states that Obama economic adviser Christina Romer has studied 20th-century recessions and concluded that monetary tools, not fiscal spending, produced recoveries. Even in the Great Depression, monetary expansion, not FDR's public works, opened the way toward recovery beginning in the spring of 1933. Despite that knowledge, Romer and other Obama advisers are expecting that the $825 billion package under consideration in the House will be big enough to change the history that they've all studied.  In addition, they are also betting on the fact that a package divided between $550 billion in spending and $275 billion in tax cuts will be the right mix, even though Romer's research also shows tax cuts to have a larger multiplier effect on the economy than spending.

Even David Brooks in the NY Times presents a negative view of the bill:

There is a strong case to be made for a short, sharp stimulus package to restrain the collapse of the American economy. This would involve big, simple programs with immediate impact — a temporary cut in the payroll tax, big aid to the states, expanded unemployment insurance and food stamps.

There’s also a very strong case to be made for long-term government reform. America could fundamentally rethink its infrastructure policies...

But the stimulus bill emerging in the House of Representatives does neither of these things. The bill marked up Wednesday in the Appropriations Committee is a muddled mixture of short-term stimulus haste and long-term spending commitments. It is an unholy marriage that manages to combine the worst of each approach — rushed short-term planning with expensive long-term fiscal impact.

The bill has three essential failings. First, it lacks any strategic vision. This $825 billion bill has to be passed within weeks. There’s no time for fundamental rethinking or new approaches. Instead, there’s a sloppy profusion of 152 different appropriations — off-the-shelf ideas that mostly create costlier versions of the status quo.

The committee staff took the kernel of President Obama’s vision — infrastructure programs to create jobs — and surrounded it with an undisciplined sprawl of health, education, entitlement and other spending. There’s money for nurse training, Medicare, Head Start, boatyard support, home weatherization and so on. Eleven of the programs in the bill account for the vast majority of the actual job creation. The rest may be worthy or not, but they have little to do with stimulus. The total package is so diffuse, it costs $223,000 to create a single job.

Second, the bill has relatively modest short-term impact. Many parts don’t even pretend to be stimulus measures, like funding for basic research, or special ed programs. But even the parts of the bill that aim to stimulate will have modest near-term impact. A study by the Congressional Budget Office found that less than half of the money for infrastructure and discretionary programs would be spent by Oct. 1, 2010.

Many of these non-stimulus elements may, or may not be, worthy expenditures.  But, they are not stimulus  programs, and should be decided upon in the normal process, not rushed through for approval because of the heightened state of alarm the Democrats have created.


 Republican Minority Leader John Boehner released the following information on the plan:

1. The House Democrats’ bill will cost each and every household $6,700 additional debt, paid for by our children and grandchildren.

2. The total cost of this one piece of legislation is almost as much as the annual discretionary budget for the entire federal government.

3. President-elect Obama has said that his proposed stimulus legislation will create or save three million jobs. This means that this legislation will spend about $275,000 per job. The average household income in the U.S. is $50,000 a year.

4. The House Democrats’ bill provides enough spending — $825 billion — to give every man, woman, and child in America $2,700.

5. $825 billion is enough to give every person living in poverty in the U.S. $22,000.

6. $825 billion is enough to give every person in Ohio $72,000.

7.  Although the House Democrats’ proposal has been billed as a transportation and infrastructure investment package, in actuality only $30 billion of the bill — or three percent — is for road and highway spending. A recent study from the Congressional Budget Office said that only 25 percent of infrastructure dollars can be spent in the first year, making the one year total less than $7 billion for infrastructure.

8. Much of the funding within the House Democrats’ proposal will go to programs that already have large, unexpended balances. For example, the bill provides $1 billion for Community Development Block Grants (CDBG), which already have $16 billion on hand.  And, this year, Congress has plans to rescind $9 billion in highway funding that the states have not yet used.

9. In 1993, the unemployment rate was virtually the same as the rate today (around seven percent). Yet, then-President Clinton’s proposed stimulus legislation ONLY contained $16 billion in spending.

10. Here are just a few of the programs and projects that have been included in the House Democrats’ proposal:

• $650 million for digital TV coupons.
• $6 billion for colleges/universities — many which have billion dollar endowments.
• $166 billion in direct aid to states — many of which have failed to budget wisely.
• $50 million in funding for the National Endowment of the Arts.
• $44 million for repairs to U.S. Department of Agriculture headquarters.
• $200 million for the National Mall, including grass planting.
• $400 million for “National Treasures.”

11.  Almost one-third of the so called tax relief in the House Democrats’ bill is spending in disguise, meaning that true tax relief makes up only 24 percent of the total package — not the 40 percent that President-elect Obama had requested.

12. $825 billion is just the beginning — many Capitol Hill Democrats want to spend even more taxpayer dollars on their “stimulus” plan.

This is not a Democrat vs Republican issue, it's an American issue.


Contact your Representative and Senator now and tell them to vote no on this Bill.  We have time to create a better plan.  The Democrats rush to push this legislation through is indicative of their desire to prevent understanding of what they are doing.