Before President Bush took office, the federal government took in $2 trillion in revenue in 2000. As Bush leaves office, the federal government is expected to take in $2.4 trillion in 2009. In other words, after eight years under President Bush, the federal government is taking in $400 billion more a year in revenue. So why did Congressional Budget Office project a $1.4 trillion deficit for the 2009 budget? Massive spending increases. In 2000, the federal government spent just $1.8 trillion. Now [1] the CBO estimates that the feds will spend almost double that, $3.5 trillion, in 2009. Oh, and by the way, these figures do not include the nearly $1 trillion in new deficit spending that President-elect Barack Obama wants to throw at our struggling economy.

Yesterday House Democrats unveiled their first economic stimulus package bid. Current price tag: $825 billion. Everybody in Washington expects that total will go up quickly when the Senate adds its wish list sometime next week. But Democrats in the House are already making it clear that even this soon to be trillion dollar package is just a down payment. [2] The Hill reports: “House Appropriations Chairman David Obey (D-WI) said the massive bill ‘may undershoot the mark’ and suggested Congress may have to spend more money to stimulate the economy.”

None of these unprecedented figures even includes the $350 billion in bailout money spent by the Treasury since October, or the additional $350 billion the Senate gave Obama “[3] virtually unfettered authority to spend” yesterday. Those are considered ‘investments’ and for the purposes of accounting fictions do not count as spending. But all that money comes from somewhere, and the Obama team views the two programs inexorably linked. [4] The Washington Post reports: “Top Obama officials say both initiatives are critical to turning the economy around: The spending package seeks to stimulate spending by showering cash on consumers, local governments and businesses. The bailout program, meanwhile, attempts to forestall trouble in the financial system, where risky lending practices helped spark the recession in the first place.” But is their any real difference between the spending package and the bailout program? [5] The Post also reported earlier this week that the Obama team was seeking to expand the bailout program to “municipalities, small businesses, homeowners and other consumers.” Sounds exactly like the stimulus package to us.

So adding in the $160 billion stimulus package President Bush signed this spring, the federal government has already pumped $510 billion into the economy and now wants to add another, at minimum, $1.2 trillion. Is any of this working? Is there any science or history that suggests it will? No. As Heritage Senior Policy Analyst Bian Riedl [6] points out:

Policymakers 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?

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 solve a recession created by imprudent borrowing? There is an alternative. [7] Long term tax cuts coupled with [8] long term spending cuts. The borrowing bailout parade is what got us into this mess. It is time for a new direction.

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URL to article: http://blog.heritage.org/2009/01/16/morning-bell-the-borrowing-bailout-parade-must-end/

Is Mexico near collapse?

Why the bailout will kill good business

Ford did more than just offer credit.  They have improved their product, introduced cutting-edge technology, and built the kind of efficient vehicles the incoming Obama administration wants.  The pricing is still not as competitive as it needs to get against Toyota and Honda, but Ford has moved in all the right directions — and they have built buzz in the car industry which they hope to convert to better sales.

And after doing all of that, the government plans to restore the credit of the two companies who have not succeeded in improving their product or their sales.  This is what is wrong with government bailouts of private enterprise at their core.  They subsidize failure and penalize success.  The government will wind up distorting this market just as surely as they did the housing and lending markets, pushing Ford to the side as GM and Chrysler get a head start on their domestic competition.

Instead of picking winners and losers, and of burdening manufacturers and other markets with social-political engineering like CAFE standards, Congress should butt out and let private enterprise fend for itself.  Only when the Congress ex machina ceases to exist will the stakeholders in the auto industry — management, labor, and suppliers — start negotiating in earnest to rescue their own pocketbooks.  Now, though, that healthy process ends up being a “competitive disadvantage” to subsidized competition.

• [22] President Bush and Barack Obama have joined forces to ask Congress for the second $350 billion of the $700 billion financial bailout.
• As the federal bailout takes shape, [23] many states continue to spend money at boom-time rates even though revenue is sinking.
• Obama has [24] already shelved a major portion of the business tax component of his stimulus plan.
• Obama’s plan to close prison at Guantanamo [25] will take at least a year.
• [26] Israelis are united on Gaza as censure rises abroad.

Article printed from The Foundry: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/01/13/morning-bell-will-chu-let-america-power-up/

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But if taxpayers really do have to shell out all that money as they see their neighbors — or even themselves — getting laid off and being foreclosed on, they should at least see how the money's spent.

The incoming Obama administration can improve on this by pushing for more transparency and accountability. But will it?

House Banking Committee Chairman Barney Frank, D-Mass., whose advocacy of forcing banks to be instruments of social justice helped cause the mess we're in, is also pushing TARP reforms that would impose "the most stringent nontax executive compensation restrictions" — including forbidding golden parachute payments to executives and applying executive pay limits retroactively.

Unfortunately, this is what the lack of transparency and no clear strategy for exactly how the rescue money would be used has set us up for: The micromanaging from Washington of the biggest financial institutions.

Surprise: Obama to issue order to close Gitmo in first week

• 13 years ago in his State of the Union Bill Clinton said that “the era of big government is over.” But Thursday, [8] President-elect Barack Obama said government was the solution.
• President-elect Barack Obama’s Treasury Secretary nominee Timothy Geithner is planning to include reauthorization of the second $350 billion into Obama’s stimulus plan and plans to give the bailout cash to [9] municipalities, small businesses, homeowners and other consumers.
• 90% of donations received by Obama’s inauguration fund so far have been raised by well-heeled fund-raisers, including Wall Street executives [10] whose companies have received billions of dollars in federal bailout money.
• The U.S. Treasury has [11] failed to reveal its strategy for stabilizing the financial system, not answered questions asked by a government watchdog, and has done nothing to help struggling homeowners, a report being released Friday charges.
• As deputy attorney general in 1999, Attorney General nominee Eric Holder Holder pressed subordinates to drop objections to clemency for 16 members of [12] violent Puerto Rican nationalist organizations.

Article printed from The Foundry: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/01/09/morning-bell-workers-deserve-better-than-a-big-labor-lackey/

Barack Obama, it is said, will inherit the worst times since the Great Depression. Not to minimize the crisis we are in, but we need a little...

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Not to minimize the crisis we are in, but we need a little perspective here.

The Great Depression began with the Great Crash of 1929. By 1931, unemployment had reached 16%.

By 1933, 89% of stock value had been wiped out, the economy had shrunk by one-third, thousands of banks had closed, a third of the money supply had vanished, and unemployment had reached 25% — among heads of households. And in those days, there was no unemployment insurance, no Medicare, no Medicaid, no Social Security, no welfare.

FDR's answer: vast federal spending, tough new regulations on business and higher taxes — like Herbert Hoover before him, only more so.

The Depression lasted until war orders from the Allies brought U.S. industry back to life. Before 1940, not once did unemployment fall below 14%. In May 1939, Treasury Secretary Henry Morgenthau testified:

"We are spending more money than we have ever spent before, and it does not work. . . . I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises.

"I say after eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt, to boot."

Politically, the New Deal was a smashing success, with FDR's landslides in 1932, 1934 and 1936 virtually wiping out the GOP.

Yet, economically, the New Deal was a bust, failing utterly to restore prosperity. Despite the indoctrination of generations of schoolchildren in New Deal propaganda, that is the hard truth.

Already staring at a $1.2 trillion dollar deficit for the year ending Sept. 30, about 8% of the entire U.S. economy, Obama intends to add a stimulus package of $700 billion to $1 trillion, yet another 5% to 7% of gross domestic product. The resulting deficit would be twice as large as Reagan's largest, 6% of GDP, which was the largest since World War II.

And how is this Niagara of money to be spent?

Hundreds of billions will go out in checks of $500 to $1,000 to wage-earners and individuals who do not even pay taxes. This is much like the George McGovern "demogrant" program of 1972, where every man, woman and child, if memory serves, was to get a $1,000 check from the U.S. government.

Other hundreds of billions will go to shore up state and municipal spending. Other hundreds of billions will go for "infrastructure" projects, another name for earmarks, which is a synonym for pork.

Now, as Obama does not intend to raise taxes, at least now, he is going to have to borrow this near $2 trillion from foreigners or U.S. taxpayers, or the Fed will have to create the money. Undeniably, this will have an impact upon the economy. But what will that impact be?

Where in history, other than World War II, is there evidence that such a mass infusion of spending restored prosperity?

Obama and the Democrats are taking a historic gamble, not only with their careers but with the country. If this monstrous stimulus package — plus the trillions in hot money — do not work, if the two ignite rampant inflation — rather than real growth — we are all out of options. The toolbox is empty.