Monday, February 2, 2009
Stimulus Will Worsen Deep Recession
As President Barack Obama continues his digital blitz to win over John Q. Public to his stimulus plan, other voices are busy spreading the word that the package will be poison to the flagging economy.
“The economic crisis can seem overwhelming and complex to many, but you can help the people you know connect the recovery plan to their lives and learn more about why it’s so important by hosting a house meeting,” says his administration’s latest blanket emailing.
But not everyone’s in the mood for a house party.
“The United States appears headed toward a multi-trillion-dollar increase in publicly traded federal debt in just the next two years, with much more to come. Other nations appear to be following suit,” warns J. D. Foster of the Heritage Foundation.
“The near-term consequences of this debt bubble will be a deeper recession, a longer recession, and a weaker eventual recovery,” he concludes.
Where the Obama digital message tends to keep away from specifics, Foster is ready with the frightening details.
“By the end of 2008, the federal government had about $6.4 trillion in publicly traded debt -- the net accumulation of all debt issued by the government since the founding of the republic,” he advises.
Indeed, says Foster, the Congressional Budget Office (CBO) forecasts a deficit for 2009 of $1.2 trillion, excluding any effects of a stimulus bill or other new spending. The stimulus plan is still evolving, but the total under consideration at the moment is about $900 billion, some of which will be injected into the economy in 2009, some in 2010, and some in later years.
This statement of timeline seems to belie the Obama Internet pitch, which emphasizes that the American Recovery and Reinvestment Plan will put people back to work in the short term by ensuring that the money being invested “gets out the door immediately” – not dribbling out in 2010 and later.
Foster sees no light at the end of the tunnel if the plan as written gets to the President’s desk.
The Obama Administration appears intent on using the second $350 billion in Troubled Asset Relief Program (TARP) funds, he says.
“Combining the baseline deficit with expected stimulus spending and the TARP funds, total federal borrowing in 2009 will likely increase the national debt by at least $1.9 trillion to $8.3 trillion.
“While forecasting federal borrowing beyond 2009 is speculative, the combination of current law programs plus the stimulus -- and without any additional borrowings for additional financial market interventions or other new spending -- suggests at least another $1.6 trillion of new government debt, bringing the total of publicly traded federal debt to $9.9 trillion by the end of 2010,” he concludes.
Bottom line, according to Foster: The global economy is sliding into a deep and potentially prolonged recession. Not only will the stimulus bill developing in Congress be ineffective in helping the economy but it will actually further weaken the economy by putting additional upward pressure on interest rates.
The Obama digital pitch doesn’t address at all the bogeyman of huge government debt. Instead, simple talking points suggest that the plan:
Creates new jobs and saves the ones that are on the line;
Cuts taxes for the Middle Class;
Creates investments that ensure our long-term energy independence;
Reinvigorates our infrastructure while creating jobs and stimulating long term growth;
Demands transparency and accountability that guarantees taxpayer money is used
properly.
Sounds inviting, but Foster is having none of it:
“Congress and the President should do the opposite of what they apparently intend: They should cut taxes on productive activities, not increase them. They should cut spending, not increase it. And rather than increase entitlement spending as they intend with the SCHIP expansion, they should reduce future entitlement benefits to give credit markets some confidence that U.S. policymakers have not entirely abandoned fiscal discipline.”
As President Barack Obama continues his digital blitz to win over John Q. Public to his stimulus plan, other voices are busy spreading the word that the package will be poison to the flagging economy.
“The economic crisis can seem overwhelming and complex to many, but you can help the people you know connect the recovery plan to their lives and learn more about why it’s so important by hosting a house meeting,” says his administration’s latest blanket emailing.
But not everyone’s in the mood for a house party.
“The United States appears headed toward a multi-trillion-dollar increase in publicly traded federal debt in just the next two years, with much more to come. Other nations appear to be following suit,” warns J. D. Foster of the Heritage Foundation.
“The near-term consequences of this debt bubble will be a deeper recession, a longer recession, and a weaker eventual recovery,” he concludes.
Where the Obama digital message tends to keep away from specifics, Foster is ready with the frightening details.
“By the end of 2008, the federal government had about $6.4 trillion in publicly traded debt -- the net accumulation of all debt issued by the government since the founding of the republic,” he advises.
Indeed, says Foster, the Congressional Budget Office (CBO) forecasts a deficit for 2009 of $1.2 trillion, excluding any effects of a stimulus bill or other new spending. The stimulus plan is still evolving, but the total under consideration at the moment is about $900 billion, some of which will be injected into the economy in 2009, some in 2010, and some in later years.
This statement of timeline seems to belie the Obama Internet pitch, which emphasizes that the American Recovery and Reinvestment Plan will put people back to work in the short term by ensuring that the money being invested “gets out the door immediately” – not dribbling out in 2010 and later.
Foster sees no light at the end of the tunnel if the plan as written gets to the President’s desk.
The Obama Administration appears intent on using the second $350 billion in Troubled Asset Relief Program (TARP) funds, he says.
“Combining the baseline deficit with expected stimulus spending and the TARP funds, total federal borrowing in 2009 will likely increase the national debt by at least $1.9 trillion to $8.3 trillion.
“While forecasting federal borrowing beyond 2009 is speculative, the combination of current law programs plus the stimulus -- and without any additional borrowings for additional financial market interventions or other new spending -- suggests at least another $1.6 trillion of new government debt, bringing the total of publicly traded federal debt to $9.9 trillion by the end of 2010,” he concludes.
Bottom line, according to Foster: The global economy is sliding into a deep and potentially prolonged recession. Not only will the stimulus bill developing in Congress be ineffective in helping the economy but it will actually further weaken the economy by putting additional upward pressure on interest rates.
The Obama digital pitch doesn’t address at all the bogeyman of huge government debt. Instead, simple talking points suggest that the plan:
Creates new jobs and saves the ones that are on the line;
Cuts taxes for the Middle Class;
Creates investments that ensure our long-term energy independence;
Reinvigorates our infrastructure while creating jobs and stimulating long term growth;
Demands transparency and accountability that guarantees taxpayer money is used
properly.
Sounds inviting, but Foster is having none of it:
“Congress and the President should do the opposite of what they apparently intend: They should cut taxes on productive activities, not increase them. They should cut spending, not increase it. And rather than increase entitlement spending as they intend with the SCHIP expansion, they should reduce future entitlement benefits to give credit markets some confidence that U.S. policymakers have not entirely abandoned fiscal discipline.”
