Category Archives: Media Criticism

Avoiding Hoover

Jim Manzi has a good post on the real implications of this disaster wending its way all too quickly down Pennsylvania Avenue.

What I find most appalling about it are the perverse incentives and moral hazards that it sets up. Buy more house than you can afford? No problem, the taxpayers will prop you up and keep you in it. Spending more than revenue in your state capital? Don’t sweat it, we’ll just steal money from other states so you can keep it up.

It is punishing the prudent and rewarding the irresponsible. And when you set up a system like that, you’ll get a lot less of the former and a lot more of the latter behavior. At some point, Atlas will shrug. I don’t know how far off we are from it, though.

[Update a few minutes later]

Welcome to the Great American Handout.

“Thugs Ransacking My House”

Well, Arnold Kling certainly isn’t mincing any words:

“I think about the stimulus as an economist but I feel it as a father. Barack Obama is destroying my daughters future. It is like sitting there watching my house ransacked by a gang of thugs. That’s how I feel, now back to how I think.”

As noted if you read the whole thing, this isn’t a “stimulus” plan. It’s a grow-government-and-make-us-all-increasingly-dependent-on-it plan. The welfare provision alone is proof of that.

That Seventies Show

It’s the return of malaise.

More confidence building, from the “indispensable” tax dodger who is now in charge of collecting our taxes:

Where was Geithner the Technocrat when you needed him? Because that is just what the markets need right now: a detailed, technocratic explanation of the way forward. This might have been the clincher as far as investors are concerned: “We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it.” In other words, “We have have concrete and high detailed plan to develop a concrete and highly detailed plan. We’ll get back to you.”

Oh, and it would be nice if he could do all that without painting such an unremittingly bleak picture of the economy. But more important is to change the mark-to-market accounting rules that are needlessly driving the financial system into the ground. Former FDIC Chairman William Issac has told the Securities and Exchange Commission that every money center bank in the 1980s would have gone bust had they been forced to sharply write down the value Latin American debt: “If we had followed today’s approach during the 1980s, we would have nationalized nearly all of the largest banks in this country and thousands of additional banks and thrifts would have failed. I have little doubt that the country would have gone from a serious recession into a depression.” Sound familiar?

And along with that change, how about embracing the private sector as the surest path back to prosperity? Cut corporate taxes. Suspend capital gains taxes. Indeed, one reason why Geithner may have been so vague about the bank rescue plan is that ultimately the plan may entail such high government borrowing that announcing it now would have derailed the current $800 billion Obama stimulus plan.

And wouldn’t that be a shame?

Speaking of cutting corporate tax rates, what would really help would be to simply eliminate them. A simple reduction in rate does nothing to reduce the high costs of bookkeeping and accounting that are made necessary by the need to sort out taxable deductions from other expenses. I’m sure that this is a huge drag on the economy (though it would still exist, unfortunately, for individuals). Eliminating the tax completely would free up vast amounts of corporate wealth for more productive activity.

[Mid-afternoon update]

Well, people do laugh at clowns:

The laughter was at its height when Obama officials explained that the White House planned to guarantee a wide swath of toxic assets — which they referred to as “legacy assets” — but wouldn’t be asking Congress for money. Rep. Brad Sherman (D-CA), a bailout opponent in the fall, asked the officials to give Congress the total dollar figure for which they were on the hook. The officials said that they couldn’t provide a number, a response met by chuckling that was bipartisan, but tilted toward the GOP side. By guaranteeing the assets, Geithner hopes he can persuade the private sector to purchase a portion of them.

Financial messes like this are fundamentally a crisis of confidence. The Dow plunged 400 points after the news conference. I think that the Geithner pick is turning out to be a disaster, on multiple levels.

[Another update]

More thoughts from Megan McArdle:

I don’t envy Geithner his position. But he’s known this was coming for months. I expected a little more than telling us that he wanted to spend a lot of money to help banks clean up their balance sheets. We knew that much already.

I’m glad I don’t have his job, but I wish that someone else did. And the buck stops with the man who appointed him.

What Do You Think?

OK, so we have a bill that has passed both the House and the Senate, both of which are controlled by the Democrats. In both houses, they were rushed through with little debate, and in the House, it was almost entirely crafted by the Democratic leadership, without even significant input from the Blue Dogs, let alone the Republicans. It is hundreds of pages, and totals close to a trillion dollars (a mind-numbing number that may necessitate updating the old Dirksen quote) in new spending, paid for with money that the nation doesn’t have. It has many items in it that are not obviously aimed at stimulating the economy, but rather in advancing various social and political goals, but it’s hard to be sure because few have had the opportunity to even read, let alone comprehend the whole thing.

Now which is the more likely scenario?

A. It is the output of a sober, long-debated process that was totally focused on improving the American economy, carefully considering the potential unintended consequences of every item in the bill, with associated committee hearings and qualified witnesses, or

B. It is an overnight cut’n’paste concatenation of every item on pent-up Democrats’ wish lists going back to 1994, when they lost control of the Congress, because everyone wants to get a ride on the late-Christmas tree that is sure to go through via fearmongering by a popular new president.

Come on, folks. William of Ockham had just the tool for this conundrum.

I know where my money is.

Straw Men

I’m listening to the president, and on the verge of throwing something at the flat screen. I’m very tired of hearing him make the vague “argument” that we can’t get out of this situation with the “same failed policies of the past eight years.” This is apparently an argument against tax cuts in the “stimulus” bill, though it’s hard to know, because it’s vague. Why won’t some reporter ask him what in the hell he’s talking about? To actually put forth his supposed theory of how we got here, and what “failed policies” caused it? Because if he’s arguing that we’re in trouble because of tax rate cuts, that’s a ludicrous proposition. He seems desperate, and has fallen back on the only thing he seems to know how to do — campaign with vague and misleading rhetoric.

Charles Johnson has further commentary on these Obama strawmen.

[Update a few minutes later]

Some questions that the president should, but probably won’t be asked tonight.

[Update a few minutes later]

More thoughts from Victor Davis Hanson:

…things are upside down: The conservatives are mad that Bush over-spent, and suddenly when out of power want to restore fiscal sanity, while Obama says that the Bush borrowing brought on this mess and must be addressed by more borrowing. What is what? Conservatives suddenly are once again fiscal purists when out of power? Liberals blame Bush for reckless Keynesian spending and want to cure it by more of the same?

Few tell the truth: The conservatives should say ‘Mea culpa—our deficit spending and borrowing helped to get us into this mess, so we’ve seen the error of our ways, and want you liberals not to repeat our mistakes.’ And the liberals should say, ‘Bush on the budget was one of us in borrowing and spending and priming, so we can’t really trash the last eight years since we’re now advocating more of the same.’

Yes, few tell the truth. Including, foremost, the president.

[Update late morning]

“The worst bill since the 1930s.” An interview with economist Robert Barro.

[Evening update]

He’s doing the press conference now, and repeating the stupid, false history that we’ve done nothing in the past eight years except tax cuts. I want to throw a shoe at him.

[Bumped from this morning]

[Update a few minutes later]

He claims that he’s been “civil” and “respectable.” I don’t think that it’s either civil or respectable to set up strawman arguments based on a false history, and kick them down. And now he’s claiming that there are no earmarks in this package? Please.

This Is Stimulus?

One of the (no doubt many) economic time bombs in the bill could force employers to extend COBRA for decades. What’s the problem?

The HR departments for large employers are looking at this provision with great alarm, as indicated in this policy brief. PricewaterhouseCoopers produced an analysis which pegs the ten-year cost of this provision at $39 billion to $65 billion just for those current COBRA-eligible workers age 55 to 64. The estimated costs would be even higher if the analysis assumed, as is reasonable, that many more workers would elect early retirement if they were assured of access to group-rated insurance.

What would employers do if faced with the costs of implementing this provision? It’s fairly predictable. They would hire fewer workers, and pay their current employees less. Not exactly “stimulus.”

Indeed, this is exactly the kind of complex provision which should be considered by Congress only after careful study and a hearing or two to avoid unintended consequences. Certainly it has no business on a bill purportedly aimed at promoting short-term job growth. Unfortunately, logic and reason may not be enough to prevail in the current mad-dash rush to “pass something.”

I suspect that most of the bill is like that. This is madness. The Founders would be appalled at what has happened to the Republic.