Linkfest – Stimulus Edition

I stole introduced the idea of a linkfest several months ago and then promptly abandoned it for no valid reason other than laziness. That was dumb; my aggregator is out of control. So here we go again.

LINK: I’m on record as opposing any stimulus package that Congress will inevitably pass. With that out of the way, almost any opportunity for politicians to grab power via an ever-expanding government will pass. If we’re getting a waste of money shoved down our throats, it might as well be something good. I’d argue for tax reform mislabeled as stimulus. Not targeted tax cuts, not tax credits, not gimmicks. Real reform should address two goals: simplifying and flattening the tax code. It took us a long time to put ourselves in this precarious position. We will be undoing this mess for a long time. Any plan that pretends there’s a quick fix will cost us more than the superficial appearance of improvement we will claim.

That’s not what will happen, so I’m left to judge the merits of proposals like this from a Seattle small business owner:

A better choice would be something Americans are likely to spend, and without huge logistical headaches: a gift card. By sending every taxpayer a $2,000 debit card, the government stimulates spending directly. The card doesn’t get deposited with a bank, a step that greatly reduced the use of last year’s rebate checks for new spending, and with a defined expiration time, perhaps a year, the program could help precisely while other programs get underway.

In the context of bad ideas, it’s less bad. But then it leads to the appearance of sanity, or worse, as the author’s conclusion suggests:

I would be grateful for such a card, and I imagine that the owners of any of my remaining local restaurants would be as proud to receive such a card as I would be to use it.

I would feel a lot things if that idea comes to fruition, but pride would not be on the list.

For a better perspective, economist Jeffrey Miron outlines a smart stimulus reform plan.

LINK: I didn’t blog about President Obama’s inaugural address because I was apathetic. Still, his speech made me angry because he tried to marginalize anyone who would challenge the idea of a Dear Leader. I will never apologize for staking out a principle when challenged by what is popular. Fifty-percent-plus-one is not the same as winning the debate. So, in place of what I would’ve expressed several weeks ago, I’ll point you to Will Wilkinson’s essay, “We need cynics:

“Trash the cynic” is a stock tactic of popular politicians, used to weaken remaining resistance to their agenda. The admiring public gets a warm sense of cohesive uplift while the loyal opposition is cast in an unflattering light: outmoded, small-spirited, irrelevant. Those who would argue are made to look petty—whether or not they have a good point. Obama is a master of this game. And George W. Bush was no slouch when he, too, had a gale of popular opinion at his back and a mandate to “do something” in a season of crisis.

I started as a skeptic. I’ve always believed in the right of the individual to his liberty. Government could not legitimately revoke that liberty, and even its good intentions ended in damage. But experience with government turned me into a cynic. Government is, at best, oblivious to unintended negative consequences or complaints about intended preferential consequences. What is obvious is dismissed, often in the way Obama sought to marginalize opposition. As Mr. Wilkinson states:

One needn’t be a “cynic” to be wary of surging popular passions or unchecked executive power. This caution is built into our Constitution. The American system of government was designed to moderate ambition and thwart big plans. Checks and balances do embody skepticism of unregulated power, but that skepticism is the soul of good government, not its nemesis. Yes, the bottlenecks in the system aggravate crusading popular presidents, which is why so many have chipped away at their constraints. That’s why the system no longer checks nor balances as it should. That’s why Obama entered the Oval Office with unprecedented executive power.

LINK: Demonstrating concisely why I’m a cynic on the craptacular stimulus idea in general and President Obama’s fear-mongering in particular, Mr. Wilkinson delivers a line that explains how spending solves a debt problem. I wish I’d written it.

This may seem a bit like dumping gas on a person on fire so that they can more easily burn through the wall standing between them and the lake.

The rest of his blog entry is worth reading.

5 thoughts on “Linkfest – Stimulus Edition”

  1. I’ll settle for calling my idea of a national gift card “less bad,” considering the alternative.
    Of course, we have different aims, despite some similar perspectives. Like you, I appreciate a simplified tax code, and I support some tax reductions proposed in this week’s stimulus debate, including the expanded exemptions from the Alternative Minimum Tax.
    But I don’t like them masquerading as stimulus, however useful they may be for other things. When your house is on fire, there are steps that come before choosing a new sprinkler system.
    Don’t underestimate the burning need. The 600,000 jobs lost last month are most remarkable in that they represent only one sixth of the the total losses since the start of the recession. We need relief now, while all other plans take root, including any tax reform.
    The $2,000 gift card isn’t meant to be a full solution. But it’s a tool we can put in the hands of every American, right now, this week.

  2. I definitely don’t underestimate the situation. I’m a consultant, my current project ended on Friday, and I have nothing going forward. The market is tough in a way that I understand.
    But Congress and President Obama are guessing to the point of faith. Evidence suggests that what they’re attempting won’t work and may make the situation worse. That doesn’t account for the portions of the stimulus designed clearly as a reward to special interests.
    Your gift card idea is interesting. Like I wrote, it’s less bad than what’s proposed, and I meant that as a compliment. I think Congress would place restrictions on them, and a secondary market would materialize, offering discounted cash for them. Imagine the outcry. But ultimately those cards will be spent. Based on the stated objective of the stimulus, that would be a success.
    However, spending is our problem, not the solution. We need certainty. That starts with certainty that government won’t tinker with the rules, that it won’t compete with the businesses it’s trying to save. Government spending crowds out private spending that would’ve taken its place. (Or the money would be used to rectify debt problems.)
    What if we don’t see a boost to the economy in whatever timeline the administration sets for determining success? Will it admit that it was wrong or argue that it didn’t spend enough? They’re selling fear rather than a rational approach. There is no criteria for how much is too much, so they always have an out if what they try fails. How much will this ultimately cost? “We didn’t do it big enough.” I don’t get tingly sensations of certainty from that.
    For example, how is incentivizing home ownership further a solution to what we currently face? Such incentives are a huge factor in the current situation. To be fair, the government is not entirely to blame for creating the bubble. Still, it helped it significantly. We need to reform our mistakes, not double down.
    But even if I assume the stimulus makes sense, funding it with debt does not. What happens to the annual interest burden when interest rates rise, as they will? If you or I ran our businesses with this kind of debt, we’d find ourselves in bankruptcy court rather quickly. The government is not too big to fail. Our politicians do not grasp that, yet we will all pay the consequences. That’s where this path leads.

  3. >That doesn’t account for the portions of the stimulus designed clearly as a reward to special interests.
    That’s a good point of caution, both in the traditional meaning of “special interest” and in the broad sense you discuss later on. Why should the government favor one sort of ownership over another? What if they choose poorly?
    Letting individuals choose where to put their money is a wiser course, hence the proposed Gift Card. Limited in cost, timely in application, and unrestricted in use.
    It won’t solve the underlying problems you’ve identified, but it can ease the many months needed for systemic change.

  4. I thought a little more on this and realized exactly what my problem is with gift cards. Like I said, I still think it’s better than what will pass, but for a large portion of Americans, a debit card would act as a replacement for what we’d spend. I’d use it to buy groceries, for example. The money I use to pay groceries would go into savings. There would be a lot of dead weight in such a stimulus, as there must be in any stimulus.

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