Obama the deficit hawk

Posted by Dan Spencer

http://www.redstate.com/

“We are not going to be able to perpetually finance the levels of debt that the federal government is currently carrying.” — President Obama, February 12, 2009

That was yesterday, before the Congressional Democrats and three Senate Republicans gave President Obama his national debt-busting $787 billion bailout boondoggle, which will actually cost $3.27 trillion.

Now, with his so-called “stimulus” in hand, Obama will morph into a deficit hawk.
Obama’ has scheduled his “fiscal-responsibility summit” for February 23, and according to the Wall Street Journal, three days later, Obama will start to pressure politicians to address the country’s debt crisis.

Oh the irony hypocrisy Obama. How does this president get away with having everything both ways?

Who voted for and against the Stimulus Bill?

Click here to see who voted on Friday Feb. 13th for the President's debt-busting stimulus package. Cross-posted from Obama Alert.

Democrats muscle huge stimulus to brink of passage

WASHINGTON (AP) — In a major victory for President Barack Obama, Democrats muscled a huge, $787 billion stimulus bill to the brink of final passage Friday night in hopes of combating the worst economic crisis since the Great Depression. Republican opposition was nearly unanimous.

The vote in the House was 246-183 for the package of tax cuts and federal spending that Obama made the centerpiece of his plan for economic recovery.

The Senate was following suit in a roll call that was without suspense but extended into the night. That was to allow time for Democratic Sen. Sherrod Brown to fly back from Ohio, where his mother died earlier in the week. His was the decisive 60th vote for the bill.

Obama is expected to sign the bill soon.

Supporters said the measure would save or create 3.5 million jobs. House Majority Leader Steny Hoyer conceded there was no guarantee, but he said that "millions and millions and millions of people will be helped, as they have lost their jobs and can't put food on the table of their families."

Vigorously disagreeing, House Republican leader John Boehner of Ohio dumped a copy of the 1,071-page bill to the floor in a gesture of contempt. "The bill that was about jobs, jobs, jobs has turned into a bill that's about spending, spending, spending," he said. No House Republican voted for the measure.

The legislation, among the costliest ever considered in Congress, provides billions of dollars to aid victims of the recession through unemployment benefits, food stamps, medical care, job retraining and more. Tens of billions are ticketed for the states to offset cuts they might otherwise have to make in aid to schools and local governments, and there is more than $48 billion for transportation projects such as road and bridge construction, mass transit and high-speed rail.

Democrats said the bill's tax cuts would help 95 percent of all Americans, much of the relief in the form of a break of $400 for individuals and $800 for couples. At the insistence of the White House, people who do not earn enough money to owe income taxes are eligible, an attempt to offset the payroll taxes they pay.

In a bow to political reality, lawmakers included $70 billion to shelter upper middle-class and wealthier taxpayers from an income tax increase that would otherwise hit them, a provision that the nonpartisan Congressional Budget Office said would do relatively little to create jobs.

Also included were funds for two of Obama's initiatives, the expansion of computerized information technology in the health care industry and billions to create so-called green jobs the administration says will begin reducing the country's dependence on foreign oil.

Asked for his reaction to House passage of the bill, Obama said "thumbs up" and indeed gave a thumbs-up sign as he left the White House with his family for a long weekend in Chicago.

Congress cast its votes as federal regulators announced the closing of the Sherman County Bank in Loup City, Neb.; Riverside Bank of the Gulf Coast in Florida, based in Cape Coral; Corn Belt Bank and Trust Co. of Pittsfield, Ill.; and Pinnacle Bank of Beaverton, Ore. They raised to 13 the number of failures this year of federally insured banking companies and were the latest reminders of the toll taken by recession and frozen credit markets.

The day's events at the Capitol were scripted to allow Democratic leaders to fulfill their pledge to send Obama legislation by mid-February.

"Barack Obama, in just a few short weeks as president, has passed one of the biggest packages for economic recovery in our nation's history," said House Speaker Nancy Pelosi, anticipating final Senate passage.

The approval also capped an early period of accomplishment for the Democrats, who won control of the White House and expanded their majorities in Congress in last fall's elections.

Since taking office on Jan. 20, the president has signed legislation extending government-financed health care to millions of lower-income children who lack it, a bill that President George W. Bush twice vetoed. He also has placed his signature on a measure making it easier for workers to sue their employers for alleged job discrimination, effectively overturning a ruling by the Supreme Court's conservative majority.

Obama made the stimulus a cornerstone of his economic recovery plan even before he took office, but his calls for bipartisanship were an early casualty.

Republicans complained they had been locked out of the early decisions, and Democrats countered that Boehner had tried to rally opposition even before the president met privately with the GOP rank and file.

In retrospect, said White House chief of staff Rahm Emanuel, the White House wasn't "sharp enough" in emphasizing the benefits of the bill as Republicans began to criticize spending on items such as family planning services, anti-smoking programs and reseeding the National Mall.

Senate Majority Leader Harry Reid faced a different task _ finding enough GOP moderates to give him the 60 votes needed to surmount a variety of procedural hurdles. To do that, he and the White House agreed to trim billions in spending from the original $820 billion House-passed bill, enough to obtain the backing of GOP Sens. Olympia Snowe and Susan Collins of Maine and Arlen Specter of Pennsylvania.

As the final compromise took shape in a frenzied round of bargaining earlier this week, it was trimmed again to hold the support of the moderates, whose opposition to a new program for federal school construction caused anger among House Democrats.

In the end, a compromise was reached that allows states to use funds for modernizing schools. But in a display of displeasure, Pelosi decided to skip the news conference last Wednesday where Reid announced a final agreement.

In addition to tax relief for individuals and businesses who purchase new equipment, lawmakers inserted breaks for first-time homebuyers and consumers purchasing new cars in an attempt to aid two industries particularly hard-hit by the recession. In response to pressure from lawmakers from Pennsylvania, Indiana and elsewhere, the bill was altered at the last minute to permit the buyers of recreational vehicles and motorcycles to claim the same break as those buying cars and light trucks.

In the House, all 246 votes in favor were cast by Democrats. Seven Democrats joined 176 Republicans in opposition.

Democratic group targets Leonard Lance's vote against stimulus

by Jessica Coomes
www.lehighvalleylive.com

Originally published Feb. 2, 2009

Less than a month after U.S. Rep. Leonard Lance, R-Hunterdon, took office, a national Democratic organization is airing ads in his congressional district, criticizing his vote against an $819 billion economic stimulus package.

The radio spots, which debut today and will run for a week, are paid for by the Democratic Congressional Campaign Committee, the same group that provided significant financial support on behalf of Democrat Linda Stender, Lance's opponent in the November election.
The Democratic committee now is targeting ads at 28 Republican House members, all of whom joined their party in voting against a Democratic-sponsored stimulus bill last week. No House Republican supported the package, though the Democratic majority was able to pass it.

On Monday, Lance's chief of staff, Todd Mitchell, reiterated why the congressman voted against the stimulus bill: "The House-passed stimulus legislation is a $1.1 trillion spending package that was not developed in a spirit of bipartisanship. The Democrat leadership should follow the lead of President Barack Obama in being willing to consider Republican ideas that reduce wasteful spending and help create jobs for middle-class families and small businesses."

When Lance voted against the bill, he called the package "wasteful spending," citing provisions that would not stimulate the economy, including $1 billion for the upcoming census, $650 million for digital TV converter boxes, and $600 million for government vehicles.

"I hope the stimulus bill that moves through the Senate contains improvements and suggestions from the Republican side of the aisle," Lance said at the time. "I will review it when it comes back to the House of Representatives to see if it has become a better bill. We can do better."

The Senate this week is taking up its version of the stimulus bill.

Lance is the only Republican in New Jersey or Pennsylvania to be singled out in the Democratic Congressional Campaign Committee's latest ads.

"We will continue to go district by district to hold Republicans who continue to vote in lockstep with party leaders and against the folks in their districts accountable," Brian Wolff, the committee's executive director, said.

The Democratic group released a transcript of the short radio spot: "Did you know Congressman Leonard Lance voted against economic recovery to immediately create and save over 171,000 New Jersey jobs? Times are tough; tell Leonard Lance to put families before politics."

Ryan Rudominer, a spokesman for the Democratic Congressional Campaign Committee, would not say how much the organization spent on the Lance ads.

Rudominer said the committee is choosing not to say which radio station or stations in New Jersey are running the spot.

Despite the Democratic committee's efforts on behalf of Stender during the 2008 election, Lance won the district to replace retired Republican congressman Mike Ferguson.

No alternative to inflation

By: John Kemp
http://www.reuters.com/

-John Kemp is a Reuters columnist. The views expressed are his own –

Every budding economist is taught the distinction between nominal variables (expressed in terms of contemporary cash values) and real variables (adjusted for inflation and expressed in constant-dollars).

An oil price of $50 per barrel in 1980 is not the same as an oil price of $50 a barrel in 2009 because inflation has steadily eroded the purchasing power of the currency in the intervening years. Moreover, economists are taught that real values are more important than nominal ones — because “money is a veil” (to use the phrase of the Austrian economist Joseph Schumpeter).

Prices are important because they perform a signaling and allocating function, encouraging supply and rationing demand. What matter are relative prices not absolute ones.

If all prices and wages double, there is no impact on the distribution or quantity of production and consumption because the relative prices remain unchanged. Money is a veil and focusing on nominal values risks succumbing to money illusion — believing that purchasing power or wealth has increased simply because it is expressed in more units of a devalued currency.

When the US Department of Commerce releases its updated National Income and Product Accounts at the end of each month, investors focus on the real growth rate in GDP, adjusted for inflation. You would be hard pressed to find the nominal GDP growth rate on dealing screens, or for that matter in the Commerce Department’s press release.

But surely that doesn’t matter, because we are only interested in how much output is produced, how many cars, how many homes, not their selling value.

Wrong.

Because one set of important relationships in the economy is almost always expressed in nominal terms, not real ones: debt.

If household incomes double in nominal terms, and the price of a representative basket of goods also doubles, purchasing power has not changed. But the proportion of household income spent servicing and amortizing old debts is halved.

Nominal values become crucially important in a dynamic economy where time as well as price is important, and where debt contracts such as mortgages and firm loans are fixed in nominal terms rather than indexed.

Prices have two functions: a static function allocating resources among producers and consumers; and a dynamic function generating incomes, saving and a flow of payments on debt contracts. For the static function, what matters is real or relative prices. But for the dynamic one, nominal prices are more important because they determine the sustainability of the fixed debt contracts.

NOMINAL GDP GROWTH STALLS

The nominal income or cash flow received by households determines how easily they can repay debt contracts fixed in nominal terms. In the same way, the nominal income or cash flow received by companies determines how easily they can repay debt contracts in fixed currency.

At the most general level, nominal GDP is in some sense the “national cash flow” — and determines how easily the economy as a whole can support an overall debt structure fixed in nominal terms. Nominal GDP growth becomes exceptionally important, especially at times when debts are at a high level.

The attached charts show quarter-on-quarter and year-on-year growth in GDP in both nominal and real terms since 1947.

Chart 10 shows the quarter-on-quarter growth in real GDP (expressed at annualized rates). Real GDP growth is very variable. Declines in real GDP during recessions are common.

Real output has fallen in 37 quarters since 1947 (about 15% of the time) and risen in 207 quarters (about 85% of the time).

But look at Chart 11, which shows the quarter-on-quarter growth in nominal GDP. Nominal output has only fallen 13 times since 1947. The last quarter-on-quarter decline in nominal GDP was in Q3 1982.

Before that, you have to go back to Q4 1960 to find a quarter in which GDP declined in nominal terms. Chart 12 shows nominal GDP growth on a four-quarter or year-on-year basis. Nominal GDP growth has not been negative year-over-year since Q1 1961.

From the late 1960s through until the current decade, relatively high rates of inflation ensured that GDP continued to grow in nominal terms even when it fell in real ones during cyclical recessions. Even during the deep recessions of the 1970s and 1980s, nominal GDP was generally growing because the decline in real output was more than offset by relatively high rates of price and wage inflation.

Payment ability for households which experienced unemployment and firms that experienced a sharp drop in demand for their products was often severely impaired. For these few, homes were often repossessed and individuals and companies could be made bankrupt.

But for the majority of households that remained employed, and for companies that experienced only a moderate decline in demand, wage and price inflation continued largely unabated, continued to raise their nominal cash flows, and make it easier to pay off debts incurred during the previous boom.

The combination of falling output with rising prices (labeled “stagflation” ) is usually seen as the worst possible outcome for the economy. Well, the worst except one: debt-deflation.

Because stagflation in the 1970s and 1980s ensured that, for most people, the real burden of debt remained manageable, or even improved, despite the recessions. The misery was borne by the minority of workers who became unemployed and the minority of firms that became insolvent. For the rest, inflation continued to boost nominal cash flows and increase debt-service capacity.

The strong, consistent growth of nominal GDP between the late 1960s and the late 1990s was mostly the product of persistent inflation. Before the mid 1960s, in the 1940s and 1950s, inflation rates were much lower, and nominal GDP growth was much more variable, turning negative on ten occasions between 1947 and 1960.

But in the current lower inflation world, the risk of nominal GDP turning negative has increased. During Q4 2008, nominal GDP growth turned negative for the first time in 25 years. Inflation (essentially zero) was not enough to offset the decline in output in real terms (-0.9% compared with the previous quarter).

Output looks set to decline further in Q1 and probably Q2 2009, and price inflation will probably turn negative. So at some point during H1 2009, nominal GDP growth will turn negative year-on-year for the first time since 1961.

NEED TO REKINDLE INFLATION

It is the sudden shrinkage of GDP in nominal terms which presents the greatest threat to the solvency of the banking system and the rest of the economy in the coming year. Because if GDP starts shrinking persistently in nominal terms, the already high burden of servicing debt contracts fixed in nominal terms will rise further.

Every job that is lost and every factory that is closed or put on short-time reduces real output. But every wage cut and price reduction is also reducing the cash flows which households and firms need to pay their debts, deepening the crisis.

Governments and central banks are now under intense pressure to sustain nominal GDP, and restart nominal growth, by boosting employment and fueling at least a modest pick up in inflation.

The target is shifting from restarting real growth to restarting nominal growth. Economist Samuel Brittan has written previously in the “Financial Times” about the need for the government and the Bank of England to have a target for nominal GDP growth (rather than a narrow focus on consumer price inflation). But the same is true for the other G20 economies.

Fiscal and monetary policy needs to create enough real demand and inflation; sustain employment and wage levels; raise output and prices.

In some sense, rekindling inflation has become a necessary and inevitable part of the solution to the current crisis.

Newest National Debt Statistics posted February 2009

The following information was compiled through statistics found at www.TreasuryDirect.gov

National Debt (as of Feb. 5, 2009)
Held by the Public: $6,410,020,402,165.47
Intragovernmental: $4,307,977,718,122.23
Total: $10,717,998,123,287.70

Interest:
January 2009: $3,132,139,257.38
Fiscal Year 2009: $138,450,208.820.69

Gifts to reduce the Public Debt
December 2008: $56,102.15
Fiscal Year 2009: $512,826.72

Increase in Debt this fiscal year:
$693,273,226,375.21

Increase in Debt since Obama Adminstration took office:
$89,116,637,777.47

Club for Growth Announces First "Comrade of the Month" Winner

Barney Frank Takes Prize in a Landslide

From a Press Release from "Club for Growth"

Washington – The Club for Growth’s award to the first Comrade of the Month goes to...Democratic Rep. Barney Frank (MA-04).

As Chairman of the House Financial Services Committee, Rep. Frank won the award for his instrumental role in shepherding the $700 billion TARP plan through Congress. This program marked a massive expansion of government and intrusion into the free market. By rewarding irresponsible actors, it sets a dangerous precedent that will have negative effects for years to come. Rep. Frank’s role in this process is all the more offensive, considering his persistent opposition to serious reform of Freddie Mac and Fannie Mae over the past couple of years.
The Comrade of the Month award will be awarded at the end every month to the public official or figure who best lives up to the policies of big government and favors restrictions on economic freedom.

Throughout the month of January, the Club for Growth received nominations from people all across the country. At the end of the month, the Club selected five nominees for Club for Growth members to vote on. Barney Frank won January’s title by an overwhelming margin.
“Barney Frank has certainly done his fair share to grow the size and power of the federal government at the expense of hard-working taxpayers,” said Club for Growth President Pat Toomey. “We hope this award will shine an even brighter light on the most egregious policies that seek to limit economic freedom.”

Minnesota's 4th Congressional District Representative Betty McCollum (D) and Florida Governor Charlie Crist were also nominated.

Club for Growth 'Comrade of the Month' nominations Jan 2009

From the Club for Growth website:

January's 'Comrade of the Month' Finalists

The Club just announced the finalists for our first ever "Comrade of the Month" award. An email was sent to Club members today to let them vote on the overall winner, which will be announced on Monday.

So here are finalists for January:

FLORIDA GOV. CHARLIE CRIST: State Farm Insurance recently announced that it would stop selling property insurance in the Sunshine State due to overly punitive government regulations. In response, Crist was unremorseful. He said, ""Well, they probably charge the highest rates in the state anyway. I think Floridians will be much better off without them." Crist now wants to punish State Farm by kicking their auto insurance business out of Florida as well. Crist tries to pass himself off as a fiscal conservative, but his actions as governor contradict his rhetoric.

REP. BARNEY FRANK (D-MA): As head of the House Financial Services Committee, Frank was instrumental in shepherding the $700 billion TARP plan through Congress. This new program did something that was unthinkable only a few years ago -- government ownership of the nation's largest banks. This has set a dangerous precedent that will have long-lasting negative effects for years to come. What's particularly offensive is that Frank routinely defended Freddie Mac and Fannie Mae when both companies were taking on more and more bad loans, which led to the current economic crisis.

CHICAGO MAYOR RICHARD DALEY: Townhall's Amanda Carpenter recently wrote, "Chicago Mayor Richard Daley has kicked hundreds of families out of their homes and relocated a cemetery full of buried bodies to build a whopping $15 billion airport expansion Chicago residents oppose, airlines don't want and he doesn't have the money to build. The kicker is that Daley stands a solid chance of getting a good chunk of the boondoggle funded in Washington's forthcoming stimulus bill under Barack Obama's pledge to dramatically increase infrastructure spending." It's almost too unbelievable to be true, but it is. Here's the underlying legislation.

REP. BETTY MCCOLLUM (D-MN): From a Club member: "I'd like to nominate Rep. Betty McCollum of Minnesota's 4th District. Fortunately she's not my Congressman, but last week she introduced H.J. Res. 4, which proposes a Constitutional Amendment decreeing health care is a Constitutional right" It's clear that McCollum doesn't understand economic liberty. Nothing can be considered a "right" when obtaining that right strips the rights from someone else. The text of her resolution can be found here.

BOB BECKEL: This nominee actually makes his own case for the award. The liberal pundit (and former manager for the Mondale campaign) asked a conservative pundit on TV, "What's wrong with some form of socialism in certain areas?" You can watch the video here (at 3m50s mark).

Crist, McCollum up for 'Comrade of the Month' award

Charlie Crist up for supply-siders’ ‘Comrade of the Month’ award
by Wayne Garcia

The Club for Growth, Grover Norquist’s supply-side neocon outpost, puts a boot into Florida’s governor this week as it institutes its first Comrade of the Month award:

FLORIDA GOV. CHARLIE CRIST: State Farm Insurance recently announced that it would stop selling property insurance in the Sunshine State due to overly punitive government regulations. In response, Crist was unremorseful.

He said, “”Well, they probably charge the highest rates in the state anyway. I think Floridians will be much better off without them.” Crist now wants to punish State Farm by kicking their auto insurance business out of Florida as well. Crist tries to pass himself off as a fiscal conservative, but his actions as governor contradict his rhetoric.

Crist is up against Congressman Barney Frank, Chicago Mayor Richard Daley, Congresswoman Betty McCollum and liberal pundit Bob Beckel. All Democrats

Iceland Economy Ahead of the Pack, for Better and Worse

By Greg Palkot
FoxNews

Shockwaves still are being felt around the world from the global financial crisis, and nowhere is the impact more direct or more destructive than in the small isolated island nation of Iceland.

This week, outgoing center right Prime Minister Geir Haarde tendered his resignation following weeks of regular protests by Iceland citizens angry about the government's inability to handle the country's economic troubles. Protests that resulted in a violent clash with police for the first time in Iceland since 1949.

Haarde now likely will now be replaced by a center-left politician.

What's significant is that for the first time a national government has collapsed due to the economic crisis. What's surprising is that it happened in usually low-key Iceland.

But then again, Iceland has been the scene of a lot of "first's" during this economic crisis. It has been called a "leading indicator" of what was to come in this financial maelstrom, a sort of "canary in the coal mine" of our economic woes.

It took on this role because Iceland's banks were overleveraged with more debt than others as it kept bankrolling entrepreneurs going on a buying spree abroad — banks which, when the chits started to be called in and the subprime market froze up, were more vulnerable than most. This was compounded by the fact that Iceland is a tiny country which doesn't have the financial resources to bail the banks out.

If you look at the history of Iceland's troubles recently it's always a bit ahead of the U.S. and other European countries on many points: The banks failed and got nationalized earlier; the stock market crashed earlier and harder, and now unemployment and inflation numbers are rising fast. They even protested before anyone else did, which resulted in a whole new government.

That's why, once again, Iceland holds a lot of prominence as a bellwether. Experts told FOX News that this country is not the only one that will "kick the rascals" out over the financial crisis, but is the first. They particularly note young democracies on the periphery of Europe, such as Bulgaria and the Baltic countries, have also seen violent protests recently related to the economy.

And even more mainstream European nations like Greece have been hit with unrest. Looking at weak economies and soaring unemployment rolls, experts say that in countries like Italy and Spain protests can't be far behind.

The parallels are now being drawn not just with the nasty protests in Europe of 1968, but — much more tellingly — to the demonstrations that broke out during the Great Depression.
Today, populist politicians are beginning to gain favor in this tumultuous period, and that is not necessarily a good thing for the countries involved, or for U.S. relations.

Case in point is Iceland, once again. The most favored political party right now in Iceland is the Left-Green's, which will be a principal member of the interim coalition government here. It doesn't fully support possible European Union membership for Iceland, but more significantly for the US, it would like to pull Iceland out of NATO.

Iceland was a founding member of North Atlantic Alliance. Due to its utterly strategic location just under the Arctic Circle it played a crucial role for the U.S. during the Cold War. There was a U.S. air base on the island up until 2006. It is no coincidence that former President Reagan knocked heads together here with his Soviet counterpart. The image Wednesday of a NATO flag being burned by protestors in front of a meeting held by the Alliance cannot be too pleasing to the U.S.

All of sudden this global financial crisis looks like it could spread, not just in geographical and monetary terms, but in substance as well. And just as the experts can't define when the downward spiral of financial woes will stop, they also can't say how severe the political collateral damage will be. But many predict that there may be more dangerous days ahead.

Greg Palkot is FOX News' foreign correspondent reporting from Iceland's capital, Reykjavík.

House passes economic stimulus bill

By David Jackson and Richard Wolf
USA TODAY

WASHINGTON — The Democratic-controlled House of Representatives quickly approved President Obama's $819 billion economic recovery plan Wednesday.

The vote was 244-188, mostly along party lines.

"We don't have a moment to spare," the president said earlier in the day.

The vote sent the bill to the Senate, where debate is expected to begin as early as this week on a companion measure already taking shape. Democratic leaders have pledged to have legislation ready for Obama's signature by mid-February.

A mere eight days after Inauguration Day, House Speaker Nancy Pelosi, D-Calif., said the events heralded a new era. "The ship of state is difficult to turn," she said. "But that is what we must do. That is what President Obama called us to do in his inaugural address."

No Republicans supported the measure. Eleven Democrats opposed it. The vote was Obama's first test of the bipartisanship he pledged in his campaign.

After a meeting with executives, which Obama described as "sober" because of the tough times, the president said the group was "confident that we can turn our economy around."

Obama visited Capitol Hill on Tuesday to address GOP criticism that the package has too much spending and not enough tax cuts. He won compliments but few converts.

"I don't expect 100% agreement from my Republican colleagues," Obama said between meetings with House and Senate Republicans. Citing a recent round of layoffs among large U.S. companies, he said, "I do hope that we can all put politics aside and do the American people's business right now."

Senate Republicans hope to make changes before it reaches Obama — possibly by adding small business tax cuts or road and bridge spending.

Though GOP lawmakers said they appreciated Obama's visit Tuesday, their leaders urged a "no" vote because of the bill's price tag. "All it does is burden our kids and their kids with more debt," said House Republican leader John Boehner of Ohio, citing a non-partisan Congressional Budget Office estimate that the plan would add $347 billion in interest on the national debt over 10 years.

Two-thirds of the House bill, or $550 billion, is new spending. That includes money to states and localities, increases in unemployment benefits and other aid to Americans hard hit by the recession, as well as construction projects designed to create jobs. The remaining $275 billion is tax cuts to encourage new spending.

Obama promised to consider Republicans' ideas, but many said they will wait and see. "Reaching out is one thing," said Sen. Jon Kyl, R-Ariz. "Actually taking action to include Republican ideas is another."

Contributing: The Associated Press

Show us the money

www.thespectrum.com
St. George, Utah

The debate is raging on Capitol Hill about what should be done to stimulate the economy. The recession continues to hit new depths, and the one thing that there is agreement on with many lawmakers is that something must be done.

The questions, however, relate to what should be done and at what cost.

Estimates put a stimulus package backed by the Barack Obama administration at almost $1 trillion. Such a move could push the federal budget deficit to more than $1.5 trillion and the overall national debt to more than $10 trillion.

It's an obscene amount of money and a crushing debt that will have to be shouldered by our children, grandchildren and - at this rate - great-grandchildren and beyond. While some form of intervention by the federal government may be needed, closer scrutiny of what will be spent also is needed.

Take, for example, the $700 billion stimulus plan passed by the Democratic Congress and signed by former President George W. Bush. The way the money has been used was so poorly monitored that there is almost no way to know how much of the taxpayers' money was wasted. We simply can't afford a repeat.

Congress must turn a much more watchful eye toward monitoring the spending of any taxpayers' money. One group that could play a significant role in that effort is the Blue Dog Coalition - a group comprised mostly of Democrats who push for more conservative measures in the realm of economics. This group has grown to 47 members by sticking to the message that our practices today shouldn't create obstacles for future generations. A growing deficit and corresponding national debt do both.

The Blue Dogs could be the people's watchdogs. To do so, they will have to be more vocal than ever and will have to make some public statements in committee hearings and from the House floor if there is ever going to be a change.

The reality is that stimulus packages have become the "pork-barrel" spending of the 21st century. Everyone wants a piece of the action. Even Utah is asking for billions of dollars in stimulus money.

In some cases, that money is going to be spent wisely to save jobs and to keep communities intact. In some cases, the money could be squandered or go toward projects that benefit only a few when it could be used to assist many.

There's no doubt that this is a large task. Admittedly, the nation is in uncharted territory with this economic downturn. Now is a time for fresh ideas and for a willingness to learn from past mistakes.

It's a time for leadership.

Whether it's the Blue Dogs, Republicans or elected officials of some other ilk, we need to see our lawmakers scrutinizing any further spending they way they research and criticize campaign opponents. They need to show the public that they are working to find the best solution that costs the least amount of money.

A bad decision now could cost our nation even more down the road.

10 questions about the economic stimulus bill

By Brian Riedl
The Heritage Foundation

The $800 billion economic "stimulus" bill may be more appropriately called the "Obama debt plan." It will, after all, dump $6,700 per household of new debt into the laps of our children and grandchildren. Whether it will actually stimulate the economy is another matter. So perhaps politicians can first answer a few questions from the back of the classroom:

» President-elect Barack Obama claims that spending approximately $800 billion will create or save 3.675 million jobs. That comes to $217,000 per job. This doesn't sound like a very good value, especially with the national average salary around $40,000. Wouldn't it be cheaper to just mail each of these workers a $40,000 check?

» Politicians say deficit spending will expand the economy (as if President Bush's $300 billion budget deficits brought economic nirvana). If that were true, then the current $1.2 trillion deficit -- the largest in history -- would already be rescuing the economy. It's obviously not. So why would $800 billion more of the same suddenly end the recession?

» We're told that government spending will add new spending power to the economy. But Congress doesn't have a vault of money waiting to be distributed: Every dollar lawmakers "inject" into the economy must first be taxed or borrowed out of the economy. If government borrows the money from American investors, investment spending drops accordingly. If it's borrowed from foreigners, net exports drop accordingly. How does borrowing $800 billion from one group of people and giving that $800 billion to another group of people make us wealthier?

» Some answer the previous question by saying that transferring income from savers to spenders keeps more money circulating through the economy. That made some sense in the 1930s when people hid their savings in mattresses because they didn't trust the banks. But today, people use their savings to pay down debt, invest or put it in banks -- in each case, making the purchasing power available to others wishing to borrow. Thus, savings circulate through the investment spending side of the economy. How does transferring money out of investment help?

» Policy-makers are basing the "stimulus" bill on economic models that wrongly assume every $1 of government spending increases the economy by approximately $1.60. Is it really that simple? By that logic, debt-ridden, big-government countries like Italy, France and Germany should be wealthier than America. And why stop at $800 billion? Such logic suggests unlimited prosperity could be guaranteed by the government borrowing and spending $800 trillion. Should America be basing such costly decisions on these types of economic models?

» Lawmakers tell us every $1 billion in highway "stimulus" can be spent creating 34,779 construction jobs. But Congress must first borrow that $1 billion out of the private economy. Won't the private sector then lose the same number of jobs?

» During the 1930s, New Deal lawmakers doubled federal spending -- and unemployment remained above 20 percent until World War II. More recently, Japan responded to a 1990 recession by passing 10 "stimulus" bills over eight years (building the largest national debt in the industrialized world) -- and their economy remained stagnant. Why do lawmakers believe the same failed approach will succeed for the U.S. today?

» The economy sank because people over-borrowed for houses they couldn't afford, and financial institutions over-borrowed for investments they badly misjudged. Washington's solution is to borrow $800 billion that it cannot afford. How will adding $800 billion to the national debt (which will also raise interest rates) solve a recession created by imprudent borrowing? And who will bail out the American taxpayer when the bill comes due?

» Temporary tax rebates were implemented in 1975, 2001 and 2008, and most economists agree they failed to help the economy. Long-term marginal tax rate reductions implemented in 1982 and 2003 both substantially increased economic growth. So why are lawmakers planning another round of temporary tax rebates, followed by an increase in tax rates?

» Mayors have pledged to spend stimulus funds on items such as a mob museum in Nevada, a polar bear exhibit in Rhode Island, and curbing prostitution in Dayton, Ohio. As National Review asked, how come one Bridge to Nowhere is a national embarrassment and 1,000 Bridges to Nowhere are a "stimulus?" Given the 11,000 annual earmarks, why should taxpayers trust politicians to spend this money better than they would spend it themselves?
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Brian M. Riedl is the Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
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(c) 2009, The Heritage Foundation

Motley Fool: Fed's Bubble Trouble

Peter Schiff - The Fed’s Bubble Trouble
January 09, 2009

A few weeks ago when the Fed announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff’s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of “buy the rumor and sell the fact.”

If it is well known that Fed will be a big purchaser of Treasuries, those buying now will be positioned to unload their holdings when the buying spree begins. If the Fed pays higher prices in the future, traders can earn riskless speculative profits. If the traders lever up their positions, as many are likely doing, even small profits can turn unto huge windfalls.The downside of course, is that all of the demand for Treasuries is artificial.

Treasuries are now in the hands of speculators looking to sell, not investors looking to hold. These players are analogous to the mid-decade condo-flippers who flocked to new developments for quick profits. They did not intend to occupy their properties, but rather flip them to future buyers. Once these properties came back on the market, condo prices collapsed, as developers were forced to compete for new sales with their former customers.

This is precisely what will happen with Treasuries. Just as the U.S. government issues mountains of new debt to finance the multi-trillion annual deficits planned by the Obama Administration, speculative holders of existing debt will be offering their bonds for sale as well.

In order to prevent a complete collapse in the bond prices the Fed will be forced to significantly increase its buying. However, since the only way the Fed can buy bonds is by printing money, the more bonds they buy the more inflation they will create. As inflation diminishes the investment value of low-yielding Treasuries, such a scenario will kick off a downward spiral.

But the more active the Fed becomes in their quest to prop up bond prices, the bigger the incentive to hit the Fed’s bid. The result will be that all Treasuries sold will be purchased by the Fed. But with the resulting frenzy in the Treasury market, and with inflation kicking into high gear, we can expect that demand for other debt classes that the Fed is not backstopping, such as corporate, municipal and agency debt, to fall through the floor, pushing up interest rates across the board.

In order to “save” the economy from these high rates the Fed will then have to expand its purchases to include all forms of debt. If that happens, run-away inflation will quickly turn into hyper-inflation, and our currency will be worthless and our economy left in ruins.

To avoid this nightmare scenario, the Fed should pull out of the bond market before it’s too late and let prices fall to where real buyers, those willing to hold to maturity, re-enter the market. Given how high inflation will likely be by the time this happens, my guess is that long-term Treasury yields will have to rise well into the double digits to clear the market.

But we should know that the bursting of the bond market bubble will have even more dire consequences than the bursting of prior bubbles in stocks and real estate. Significantly higher interest rates and inflation that will result will severely compound the current problems.

Imagine how much worse our economy would be if we faced double digit interest rates? In addition, not only will homeowners be confronted with record high mortgage rates, but the Government will be staring at trillion dollar annual interest payments on the national debt, making interest by far the single largest line item in the Federal budget. Just like homeowners who relied on teaser rates, the Government will face a similar problem when all its low-yielding short-term debt matures.

The grim reality of course is that when the real estate bubble burst the Government was able to “bail-out” private parties. However, when the bond market bubble bursts, it will be the U.S. Government itself that will be in need of the mother of all bailouts. If U.S. taxpayers or foreign creditors are unwilling or unable to pony up, and if the nightmare hyper-inflation scenario is to be avoided, default will be the only option. If misery really does love company, Bernie Madoff’s clients might finally find some comfort.

Newest National Debt Statistics posted January 2009

Happy broke New Year! Here is the first National Debt report for 2009 - the "Year of Insolvency."

The National Debt as of 31 December 2008 (as reported on www.TreasuryDirect.gov):

Public Debt
$6,369,318,869,476.54

Intragovernmental Holdings
$4,330,485,995,135.59

Total:
$10,699,804,864,612.13

Increase in Fiscal Year 2009 (Oct 1, 2008 - Dec. 31, 2008):
$675,079,967,699.64

Interest payments:
December 2008
$97,775,030,034.07

Fiscal Year 2009
$135,318,069,563.31

Gifts to reduce the public debt:
November 2008
$423,874.62

Fiscal Year 2009
$456,724.57

Happy New Year!

$266.9B doled out from $700B bailout

The following Associated Press story appeared on page 2C of the January 9, 2009 issue of the St. Paul Pioneer Press.

The Treasury Department announced Thursday that it has disbursed $266.9 billion from the $700 billion financial rescue program.
In its latest update to Congress, the department said it closed $65.4 billion in transactions since its last report on Dec. 2. Under the law that Congress passed Oct. 3, Treasury must provide a report summing up its activities once its commitments pass certain milestones. The new report included $187.5 billion provided to banks in an effort to get them to resume more normal lending and $19.4 billion for the auto industry.

Concerns grow over Treasury's handling of $700B bailout

by David Barstow
New York Times
January 9, 2009

In a report scheduled to be released today, the congressional panel overseeing the $700 billion federal bailout has expressed growing concern about the effectiveness and execution of the rescue plan.
A draft of the report criticized the Treasury Department for its "shifting explanations" about the underlying purpose of the bailout, its failure to answer many of the panel's questions and its failure to require financial institutions receiving bailout money to fully account for how they are using the public's money.
"The recent refusal of certain private financial institutions to provide any accounting of how they are using taxpayer money undermines public confidence," the draft of the report said. "For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore."
The 45-page report also asserted that the Treasury, in defiance of what the panel claimed was Congress' clear intent when it passed the bailout bill in October, had taken "no steps to use any of this money to alleviate the foreclosure crisis."
The Treasury declined to comment on the panel's latest findings with the bailout, known as the Troubled Asset Relief Program.
But in testimony to Congress and elsewhere, Neel Kashkari, the Treasury official overseeing the bailout, repeatedly has asserted that the rescue plan is in fact working as intended. While cautioning that its full effect will take time to register, he has argued that the rescue plan already has begun to reduce foreclosures while also providing crucial stability and liquidity to the financial system.
According to a New York Times running tally, the Treasury already has committed $359 billion of the $700 billion to banks, credit-card companies, automakers and insurance companies, among others. The oversight panel's latest assessments are likely to fuel the debate over how to spend the remainder of the bailout money.
The congressional oversight panel has three Democratic appointees and two Republican appointees. It is led by Elizabeth Warren, a Harvard law professor and expert on bankruptcy and credit-card issues. A spokesman for the panel declined to comment on the draft report.
The preliminary report raises new questions about the single biggest component of the bailout, the Capital Purchase Program, under which the government has invested tax dollars into scores of banks it judges to be healthy. According to the Treasury, the government has injected $177.5 billion in bailout money into 214 financial institutions.
The report, though, questioned whether the Treasury could accurately assess the health of these banks, especially given the collapses of several banks that once were deemed to be healthy.

Budget deficit to reach $1.2 trillion

By Lori Montgomery Washington Post
Updated: 01/07/2009 10:59:53 PM CST

WASHINGTON — The nation's budget deficit will soar to an unprecedented $1.2 trillion this year, congressional budget analysts said Wednesday, a startling tide of red ink that could dampen enthusiasm on Capitol Hill for some of President-elect Barack Obama's most ambitious priorities.

In the first official estimate of the damage done to the nation's finances by a weakening economy and various financial sector bailouts, the Congressional Budget Office reported that the gap between government spending and available revenue will exceed 8 percent of the overall economy by the end of September, a yawning chasm not seen since the end of World War II.
The news drew a grim reaction from Congress, where the chairman of the Senate Budget Committee, Sen. Kent Conrad, D-N.D., called the figure "jaw-dropping." While lawmakers said they expect to dig this year's hole even deeper by approving a massive stimulus package aimed at pulling the nation out of recession, Conrad and his House counterpart, Rep. John Spratt, D-S.C., said they have warned Obama to limit the package to temporary measures that will not add to the deficit in future years.

The two Democratic budget leaders also cautioned Obama to find ways to pay for any other initiatives he pursues after taking office later this month, including expensive promises to expand access to health care for the uninsured, develop new sources of alternative energy and offer a bevy of new tax cuts to middle-class families.

"We should be very skeptical about any policy changes that add to the deficit and the debt that are permanent in nature," Conrad told reporters.

At a news conference in Washington, Obama greeted news of the mounting deficit by vowing to ensure that government dollars — either in the stimulus package or routine programs — are not wasted.

To that end, he announced the appointment of Nancy Killefer, an assistant secretary of the Treasury in the Clinton administration, to serve as "chief performance officer" in the White House budget office. In the newly created post, Killefer will be tasked with retooling budget practices and slashing unnecessary programs.

Obama once again declined to say how he plans to eliminate the growing budget gap, which is projected to narrow somewhat as the economy improves but explode again as the retiring baby boom generation sends the cost of the entitlement programs — Social Security, Medicaid and Medicare — skyrocketing. Obama said he will offer "very specific outlines" for addressing short- and long-term deficits when he submits his first budget proposal to Congress next month.
"We are beginning consultations with members of Congress around how we expect to approach the deficit," Obama said. "We expect that discussion around entitlements will be a part, a central part, of those plans."

So far, however, Conrad said Obama's team has been cool to requests to establish a bipartisan task force that would re-examine the entitlement programs, as well as the nation's tax system, and develop a long-term plan for bringing costs and revenue in line.

Where does the problem lie?

This graphic is courtesy of King Banian at SCSU Scholars I invite all interested readers to check out King's economic commentary at that site.

Editorial: Dems to Run the Country Like they Ran Their Blue States

Dems to Run the Country Like They Ran Their Blue States (Into the Ground)
By JB Williams, Right Side News.com
January 4, 2009

As the nation braces for Democrats to take unbridled control of the federal government, some lessons about how big a mistake that really is are already coming to light. Just as no non-union manufacturer is asking for a government bailout, only Democrat run states are begging for federal funds to avoid the inevitable bankruptcy of the states they have run into the ground.
In addition to Bush's trillion dollar nationalization of the financial industry, and in addition to Barack Obama's trillion dollar "stimulus package" (aka affirmative action welfare initiative), another trillion dollars in new national debt is being demanded by a group of Democrat governors who have run their states into the ground.

Following the lead of Republicrat California Governor Arnold Kennedy, New York Democratic Gov. David Paterson, New Jersey Gov. Jon Corzine, Massachusetts Gov. Deval Patrick, Ohio Gov. Ted Strickland and Wisconsin Gov. Jim Doyle are asking the incoming resident-elect to print another trillion dollars to bailout Democrat run states.

"We are not crying wolf. This is one of the worst situations our states have faced," Strickland said. "This is a real crisis. These are real problems. And if we don't get some significant assistance many of those in our states will suffer greatly."

According to the Democrat governors, blue states are unable to manage themselves. In order to make up for the shortfalls, Jersey Democrat Corzine said the incoming Obama administration and Congress will need to free up $1 trillion in federal spending for state assistance. "We're all going to be Herbert Hoovers if we're not careful here," he said.

For those of you who are keeping track, combined with Bush's trillion dollar bailout of the financial industry and Obama's trillion dollar "stimulus" affirmative action, another trillion for blue state bailouts will bring the total to $3,000,000,000,000 (3 TRILLION) in new national debt over the next few months, and still counting.

Your "Fair Share"

Since taxpayers don't have the luxury of printing money on demand like the federal government, taxpayers must look at all of this more realistically. Just because you have not received the bill yet, doesn't mean the bill isn't coming due.

Based upon IRS reports regarding who picks up the national tab for everything in this country today, here's your "fair share" of the $3 trillion dollar Democrat debacle. Find your income level and see how much you owe to pay for this monstrosity we call a federal government "stimulus package."

Tax Bracket
Income & Up
Due from each Working American
% of Inc.
Top 1%
$388,806
$772,064.52
198.6%

Next 4%
$153,542
$97,983.87
63.8%

Next 5%
$108,904
$41,225.81
37.9%

Next 15%
$64,702
$19,974.19
30.9%

Next 25%
$31,987
$8,314.84
26.0%

Bottom 50%
<$31,987
$2,314.84
7.2%

If you happen to be one of the fortunate American success stories making at or above $388k a year, your "fair share" of the $3 trillion in new debt is a minimum of $772,064.52, not counting interest if you can't right a check for that amount today. That's two years of your income...
If you are one of the top 5% of income earners that Obama has promised to tax into the bottom 50%, making at or above $108k per year, your "fair share" of the bailouts proposed will be $41.225.81, or 37.9% of your annual income, in addition to the taxes you already pay.

And even if you are one of the bottom 50% of income earners who voted Democrats into power, your "fair share" is $2314.84 or 7.2% of your income, not counting interest.

This is just to pay for the NEW spending, not including any of the existing national debt or related interest.

The Buck ALWAYS Stops with the Taxpayer

As if completely unaware of the fact that our federal government is so deep in deficit spending that China can own us if they just call in our loans, Democrat governors are issuing this warning to Washington DC, "that states across the country will be forced to make drastic budget cuts in the face of unprecedented deficits."

Ohio Democrat Strickland said. "This is a real crisis. These are real problems. And if we don't get some significant assistance many of those in our states will suffer greatly."

Strickland added that the situation facing the state of Ohio is so dire that in order to balance his state's budget, he would have to fund every state program at 75 percent of its current level. "If I were simply to flat fund the operations of this government, I'd end up with $7.3 billion in deficit," he said. "We're just trying to keep afloat."

What do they think the American taxpayer is doing right now?

This is Just the Beginning!

At the root of the mortgage crisis was a Democrat affirmative action lending policy required by Democrats in congress.

You remember Democrats blocking Republican efforts to remove federal gasoline taxes when gas was $4.00 a gallon. Now the same Democrats are proposing to double the federal gas tax while gas is at $1.65 a gallon. That should stimulate growth...

Non-union manufacturers are not seeking government bailouts. Union manufacturers are... all of which support Democrat politicians in election after election.

The 50% of voters who voted Democrats into unbridled power pay only 2.99% of all federal taxes collected. So of course, they are not the least concerned with the current runaway federal government threatening to bring America down to economic third world status.

It's the 50% who voted against Democrats, those who pay 97.01% of all federal taxes collected, and who live in or run RED states which are NOT seeking federal bailouts, who are up in arms over the ongoing nationalization of private industry after private industry.

That's because as you can see in the chart above, they will get the lion's share of the tab for all of this nonsense.

"Change" is Here!

Karl Marx sought the ultimate power of a proletariat (working class) government free to take from each according to his ability and redistribute to each according to his government defined sense of need. Blue state governments are a great example of the limited capacity of the proletariat class's ability to run things. In a couple weeks, they take unchecked charge of the nation.

This is the change which is now upon us.

For more than 230 years, personal freedom, individual liberty, the unalienable right to Life and the pursuit of Happiness reigned in the greatest nation known to mankind. The most prosperous, powerful, generous nation in human history was the result.

Throughout history, nations run by the proletariat class have gone bankrupt under the weight of endless social spending in a society increasingly unable to produce. Eventually, these nations have become unable to feed their people.

For more than 230 years, America has been the prosperous nation that has fed the millions unable to feed themselves around the globe. Who will feed Americans when they are no longer able to feed themselves?

"Change" - It's here... I fear for those who have not prepared. ---------------------------
JB Williams JB_Williams@comcast.net

"If there must be trouble, let it be in my day, that my child may have peace." - Thomas Paine, The American Crisis, No. 1, December 19, 1776