David Kirkpatrick

October 21, 2009

A stimulus by any other name …

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 3:16 pm

… still spends public money.

All jokes and complaints aside, Obama does have an impressive economic team in place working hard to solve a massive and ongoing problem. I may not like the way things are going, but I will defer to experts implementing their plan.

From the link:

You won’t see it all in one neat package. And you won’t hear the White House call it stimulus.

But there’s a good chance lawmakers will decide to extend some of the stimulus measures included in the $787 billion economic recovery package passed in February and possibly create some new ones as well.

On Wednesday, House Democrats are convening a forum of economists to debate the state of the economy, with a specific focus on job creation. And lawmakers are convening hearings on Capitol Hill this week to discuss the economic outlook and the state of the housing market.

A number of ideas on the table are lifeline measures, while some are flat-out incentives to spur economic activity.

June 26, 2009

News on the stimulus

This is one of those bonus two posts in one.

Up first is an update on the stimulus job guidelines, something the states have been waiting for from the Fed. Sounds like the method for counting jobs created by the stimulus program is a bit fast and loose.

From the link:

From the minute President Obama declared that the $787 billion federal economic stimulus package would save or create 3.5 million jobs, state officials have been confused about how to count those jobs.

Now, four months later, the White House has offered states guidance. The advice includes a description of the programs subject to the job-reporting requirements.

“All we’re asking them (states) to do is a simple headcount,” Rob Nabors, deputy director of the White House Office of Management and Budget, told the Wall Street Journal.

In other words, he said, recipients of federal stimulus dollars should use their best guess as to whether a job would have been saved or created if the stimulus plan had not been approved.

Some critics say such leeway could lead to contractors and state officials inflating the job numbers, or undercounting.  They also worry that employers, in reporting to states the number of jobs generated or saved, will not be diligent about including subcontractors.

“It also seems that OMB is not imposing strict rules on how employers measure the number of jobs retained as a result of stimulus funding and is willing to let them lump together jobs created and jobs retained,” said  Good Jobs First, a national jobs policy resource center in Washington, D.C.

Next up is a little analysis on why the stimulus isn’t doing all that much stimulating from Bruce Bartlett.

From the link:

For a program to be stimulative, it must bring forth economic activity that otherwise would not have taken place. The classic example is public works. When a new road or bridge is built, construction companies have to purchase concrete, steel and other materials that create business for other companies. They also employ workers that otherwise would not be working, paying them wages that they will spend, producing jobs and incomes for other workers.

If this works the way it is supposed to, stimulus spending has a multiplier effect throughout the economy. A Council of Economic Advisers study estimated that government purchases of goods and services raise the gross domestic product by $1.57 for every $1 spent. By contrast, tax credits and income transfers are much less stimulative, raising GDP by considerably less than $1 for every $1 rise in the deficit.

Since 60% of the stimulus package had a multiplier effect of less than one, only 40% of the package went to programs like public works that have a high multiplier. Moreover, the programs with a low multiplier were the fastest ones to implement; those with a high multiplier take much more time to come online. According to Elmendorf, by the end of fiscal year 2009, which ends on Sept. 30, about a third of the least stimulative spending will have been spent vs. only 11% of the highly stimulative spending.

June 18, 2009

SBA’s America’s Recovery Capital loans

This Small Business Administration program looks like a boon for Main Street (remember way back when small to mid-sized business was called “Main Street?” Oh yeah, that was just a few months ago … ) as long as banks decide to play nice.

I understand banking’s fear of becoming over leveraged, and the pressures being put on banks by regulators to keep adequate cash reserves. At the same time the stimulus money was injected into the market to, you know, stimulate. Cash on bank balance sheets is stimulating nothing other than possibly some bank managers’ pants.

The program is there, the cash is there so here’s some advice to the banking world — get with it and start stimulating.

From the link:

Struggling small business owners can begin applying next week for an interest-free debt-relief loan through a new Small Business Administration program — if, that is, they can find a bank to process their application.The new “America’s Recovery Capital” (ARC) loan program, authorized by February’s stimulus bill and slated to launch on June 15 after four months of planning, aims to make small, government-backed loans available to viable companies laid low by the recession. (For full details on ARC eligibility and loan terms, click here.) But the loans will be made and managed by SBA lenders, and so far, few have jumped on board.

Before the details of the program were released on Monday, lenders were hesitant to commit, concerned that there wasn’t enough economic incentive for them. Now, with key details about how the program will work finally available from the SBA, many haven’t retreated from their initial wariness.

“While we have received a few requests from our customers, we are still leaning against it,” says John Handmaker, president of Quadrant Financial, a small business lender based in Louisville. “The guidance from the SBA indicated rates and terms, which have provided some clarity, but we’re not 100% certain about what we need to be careful of. We don’t feel we have a solid grasp of the standard operating procedures and rules, and we’re not going to jump in until we really understand it.”

March 9, 2009

Is this a depression or recession?

Probably a little of both, and could turn into a full-blown depression. Fun topic, huh?

From the link:

way to search for turnaround signals is to watch contingency, contract and temporary hiring. That’s a harbinger of payroll action because employers hire temps when business begins to increase instead of immediately adding employees.

Unfortunately, the American Staffing Association charted a sharp decline in temporary-help hiring. Fourth-quarter staffing company employment was down 19.5 percent from the same quarter a year earlier.

When “the bottom fell out of the economy,” said the staffing association’s president, Richard Wahlquist, “demand for temporary and contract employees shrank at an unprecedented rated.”

Dave McDowell, president of Mid-America Personnel and Staffing Services, noted that regional demand for hourly industrial placements is off as much as 40 percent from this time last year.

Another job market indicator, the Society for Human Resource Management’s Leading Indicators of National Employment report, also issued Friday, was “bleak” for March.

More than twice as many human resource managers told the survey that they will cut payrolls in March (34.9 percent) than hire (15.3 percent).

So, how certain are we that the economy will get worse before it gets better?

Robert Barro, a fellow at Stanford University’s Hoover Institution and an economics professor at Harvard University, researched 209 worldwide stock market crashes and 59 depressions and concluded that the United States has a 20 percent chance of depression.

How to keep the recession from being a depression is one point of the Obama administration’s recovery package.

“So far, monetary policy has been stimulative. Now we hope, by midyear, that fiscal policy will make a difference,” said Charles Krider, a business professor at the University of Kansas. “The real key is making a difference in consumer confidence. We need confidence along with correct policies.”

But few expect any sign of a turnaround before the end of this year.

And Anirvan Banerji, with the Economic Cycle Research Institute, said there’s always a possibility that cures from the past won’t work in today’s “fast-moving, highly leveraged, highly networked economy.”

Like Morici, Banerji said we’ll need to wait and see what to ultimately call this economic cycle.

“The Great Depression didn’t start out as a depression,” Banerji said. “It started out as a recession.”

February 18, 2009

The stimulus hits Main Street

Filed under: Politics — Tags: , , , — David Kirkpatrick @ 11:31 am

To the tune of $75 billion for staving off foreclosusres.

From the link:

Seeking to stabilize the foundering housing market, President Obama is offering a plan to help as many as nine million families refinance their mortgages or avoid foreclosure, according to a summary released by the White House on Wednesday morning.

The plan, which is more ambitious than expected, would spend $75 billion to help keep as many as four million families in their homes, and would help as many as five million more refinance their mortgages to take advantage of lower interest rates.

“The plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too,” the White House said in a fact sheet.

February 17, 2009

Five-act play on Wall Street stupidity

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:35 pm

Pretty funny stuff from MainStreet.com. Here’s five bits of prima-facie evidence of Wall Street stupidity.

From the link, number one with a Dumb-o-meter score of 95:

If Tim Geithner actually believed his “Financial Stability Plan” was going to calm anybody, we’d hate to hear his ideas on how he would wreak true terror.

Stocks in New York sold off sharply Tuesday after the Treasury secretary unveiled his much-hyped plan. (The fact that he called it a financial stability plan is an oxymoron, italics intended.) In short, Geithner’s $1.5 trillion program aims to combat the financial crisis through a collaboration of public and private investments and a consumer and business lending initiative.

February 12, 2009

Stimulus vote and the GOP

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 10:54 am

Whatever else you might want to say about the stimulus — and there’s plenty to say — the Republicans completely blew it with an idiotic “hard line” stand against the Obama administration’s plan.

A quick sample from the WSJ:

Many of the business tax provisions were added to the stimulus legislation in the Senate in an effort to attract Republican votes. President Barack Obama wants bipartisan support for the plan and was dealt a setback when no Republicans voted for the House version of the plan two weeks ago.

But when only three Republican senators voted for the Senate version of the bill Tuesday, Democrats slashed the business tax proposals in an effort to bring the total cost of the bill under $789 billion.

See what happened there? When the GOP thumbed its collective nose at the entire process and decided now is the time to take that long, long overdue fiscal stand, it found its ideas left in the bag. When you don’t participate in the conversation, it’s hard to complain when your input gets dumped.

This is not a winning strategy.

Here’s David Frum at NewMajority on the topic.

From the link:

The stimulus bill has passed Congress with almost no Republican votes: 3 in the Senate, 0 in the House.

Republicans hung tough, and the result is a bill that reflects Democratic goals – and pays off Democratic constituencies.

Probably that was the way the bill was going to turn out no matter what. If so, Republicans did not pay a big price for shunning the process.

But there’s a difference between “not paying a big price” and “winning an actual victory.”

These kinds of party line fights may energize Republicans in Congress and mobilize the dwindling Republican base. But in the aftermath, there is nothing but loss.

Between the changes to unemployment compensation – and Medicaid – and welfare – this bill adds up to the most important reshaping of the American welfare state since the middle 1960s. Republican views were not represented, Republican voices went unheard.

In consequence, some of the changes turned out worse than they had to (especially welfare) – and those changes that were positive (a federal subsidy to help laid-off workers continue to buy private-sector health insurance) are received by voters as purely Democratic achievements.

February 5, 2009

Cato Institute on the stimulus plan

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 6:57 pm

A bunch of Cato-related links from the inbox today:

Stimulus Debate Heats up in Senate

President Obama’s stimulus bill moved to the Senate this week where it is facing stiff opposition from Republicans. In its current form, the bill still lacks enough votes to make it to the president’s desk.

The Cato Institute placed a full page ad in newspapers nationwide showing that there is no consensus among economists about the stimulus plan. The ad features a statement signed by more than 200 economists, including Nobel laureates and other leading scholars who agree that the best way to boost economic growth is to lessen the burden of government. Each day, more economists continue to add their names to the online version of the ad. On Monday, a new version of the ad with more names will run in The Wall Street Journal.

Read Chris Edwards and Ike Brannon’s recent article in the National Post, “Barack Obama’s Keynesian Mistake,” to learn more about the economic principles underlying the stimulus plan.

You can also watch senior fellow Alan Reynolds discuss the stimulus plan on CNN, Fox News and listen to his latest interview on the false consensus for stimulus.

If you think the word “stimulus” is a misnomer given the actual contents of the bill, then you’re not alone. Cato executive vice president David Boaz and senior fellow Daniel J. Mitchell discuss why the plan should not be termed a “stimulus.”

If you run a blog or Web site and want to take a stand against this massive government intervention plan, go to cato.org/fiscalreality and click “Spread the word.” We have created an online widget that you can post on your Web site that will show your readers that you do not agree with the stimulus plan.