Abstract Capital: The Stimulus Debate

Abstract Capital

Monday, March 2, 2009

The Stimulus Debate

Great news for frugality!

Since the stimulus package debate is seeming to quiet down and an eventual passage is impending, I thought I'd comment re its impact on we the everyday consumer citizen. Here is an excellent link to an interactive pie chart of where the President's proposed spending increases will go.

Observations:

Dislikes

Too Little Spending

1. Transportation, Housing, & Urban Development -
Only $1.5 billion for the Homelessness Prevention Fund
Only $1.3 billion for the Federal Aviation Commission
2. Labor, Health and Education -
Only $50 million for Higher Education
Only $3.25 billion for Training & Employment Services
Only $890 million for the Social Security Administration
3. Agriculture and rural development
Only $750 million for the Food and Nutrition Service
Only $3.1 billion for Administration for Children and Families
4. Defense Spending
Only $3.734 billion for operation and maintenance of military and operations
5. Commerce, justice and science
Only $3.2 billion for maintenance of the Justice system
Only $300 million for the Office on Violence Against Women

Total: Only $18.74 billion

Too Much Spending

1. Transportation, Housing, & Urban Development -
Over $5 billion for the Public Housing Capital Fund (for repairs to public housing)
$5.5 billion for the National Surface Transportation System (to use following the recommendations of a relatively small federal panel)
Over $8.4 billion for the Federal Transit Administration (to use on public transportation including city buses, public subways, light rail, commuter rail, monorail, passenger ferry boats, trolleys, commuter vanpools)
2. Labor, Health and Education -
Over $12.4 billion earmarked under the title "Education for the Disadvantaged" (the No Child Left Behind Act)
Over $1.07 billion for School improvement programs
$3 billion tabbed for the Office of the Secretary of Health and Human Services

Total: $35.37 billion too much

Suggestions

Lower tax rates, allocate spending better
Eliminate the payroll tax
Cut capital gains taxes
Please privatize the school system
Reduce the federal corporate tax
Do not repeal NAFTA

Likes

Good Spending

1. Labor, Health and Education -
$13.5 billion for Special education programs
$13.93 billion in Student financial assistance & aid administration
$1.958 billion for Health Resources and Services Administration
$160 million for the Office of Job Corps

the rest seems equivocal to me, it's debatable whether we "need" $11.8 billion on the Rural Housing Service, or $450 million on "Cooperative Services", essentially a federal bureau that deals with price gouging farm subsidies, or nearly $30 billion on the Federal Highway Administration, these seemed to be the most notable features of this new spending bill. Sure when people are afraid to spend, the government can increase demand by spending all over the place, but there are some other interesting aspects to it. I'll admit I dislike more than what I like on this bill, I'm not a believer in the idea that the government can "smooth" the business cycle by raising taxes and decreasing spending during periods of growth, and increase spending during recessions or depressions to stimulate the economy all of a sudden.

When the government spends, it has to borrow money, and when it does it forces interest rates to rise, making it more difficult for us to individually borrow money from our banks. I've also read that on average each of us will get a whopping $8 dollars per week (that is an average though, higher income earners will get much less) in our tax "rebate" checks from the government, and it makes me a little leery that we're told that we're going to have our taxes lowered when our rates are going to stay exactly the same, that we're only getting temporary (and not very substantial) rebate checks, and that this massive increase in spending is going to have to make our tax rates actually increase in a few short years.

Still, there's a lot to like about this bill. I don't think it will "create jobs" like the president says it will, honestly the big premise of that is that by spending on highway expansion and infrastructure maintenance we will significantly reduce unemployment; I don't think it will reduce our tax burden, I don't think an average of $8 a week, or an average of an extra $416 a year in extra take-home via tax rebates will boost spending ($416 over a year isn't a whole lot, it's an extra $1.14 per day), if anything it will increase our tax rates again in a few years; still, there is a lot to like about this bill. Many of the major reasons we are in this economic boondoggle is because of the general ineptitude of the previous administration. One of the most fantastically dumb policy moves in U.S. history, going to war in Iraq, has dramatically decreased business confidence and made consumers more uncertain, and massively increased government spending and in turn levied a huge monetary burden on us. These are things we've had to inherit with our new President, I trust this one much more than the last, and so much of this money is needed to pay Justice Department employees better and especially for the least well off of our society. I'd like to see much more spending on these programs as you can see, the homeless, vocational job re-training and special education have been neglected and really need a boost in assistance, and even though a lot of this money is going elsewhere for somewhat political purposes rather than policy reasons, this is an okay first try by the new President

posted by Flaco @ 9:48 AM

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