Putting Keynes to the test - Obama's plan

30ashopper · #1 12-06-2008, 01:53 PM

Obama announces massive infrastructure spending plan, the likes of which we haven't seen since FDR -

Quote:

“When Congress reconvenes in January, I look forward to working with them to pass a plan immediately,” Obama says in the address. “We need to act with the urgency this moment demands to save or create at least two and a half million jobs so that the nearly two million Americans who’ve lost them know that they have a future. And that’s exactly what I intend to do as president of the United States.”

Obama had committed just before Thanksgiving to saving or creating 2.5 million jobs in the next two years, more than twice his campaign promise of 1 million new jobs over an unspecified period. But he didn’t say how he would do it. On Saturday, he began to spell it out, offering "five key parts" of his economic plan:

—ENERGY: “[W]e will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won’t just save you, the American taxpayer, billions of dollars each year. It will put people back to work.”

—ROADS AND BRIDGES: “[W]e will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s. We’ll invest your precious tax dollars in new and smarter ways, and we’ll set a simple rule – use it or lose it. If a state doesn’t act quickly to invest in roads and bridges in their communities, they’ll lose the money.”

—SCHOOLS: “[M]y economic recovery plan will launch the most sweeping effort to modernize and upgrade school buildings that this country has ever seen. We will repair broken schools, make them energy-efficient, and put new computers in our classrooms. Because to help our children compete in a 21st century economy, we need to send them to 21st century schools.”

—BROADBAND: “As we renew our schools and highways, we’ll also renew our information superhighway. It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online, and they’ll get that chance when I’m president – because that’s how we’ll strengthen America’s competitiveness in the world.”

(Incoming White House Chief of Staff Rahm Emanuel had talked about expanding broadband access, but this is the first time the transition has formally proposed it.)

—ELECTRONIC MEDICAL RECORDS: “In addition to connecting our libraries and schools to the Internet, we must also ensure that our hospitals are connected to each other through the Internet. That is why the economic recovery plan I’m proposing will help modernize our health care system – and that won’t just save jobs, it will save lives. We will make sure that every doctor’s office and hospital in this country is using cutting edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year.”

http://www.politico.com/news/stories/1208/16258.html

lerxst · #2 12-07-2008, 12:08 AM

Do you see this as good?

hnooe · #3 12-07-2008, 10:30 AM

...sound pretty aggressive, a massive understalking. Ok, I am on board Barack, what do you need me, hnooe, to do to help? Just tell us...we are ready.

No I don't have any kids, but I am close enough to a lot of 'em and am concerned about their future.

idlewind · #4 12-07-2008, 12:24 PM

Quote:

Originally Posted by hnooe

...sound pretty aggressive, a massive understalking. Ok, I am on board Barack, what do you need me, hnooe, to do to help? Just tell us...we are ready.

No I don't have any kids, but I am close enough to a lot of 'em and am concerned about their future.

Then perhaps you would like to share with the rest of us how we prevent our children/grandchildren from bearing the burden for all this spending?

traderx · #5 12-07-2008, 12:35 PM

Reports are that Obama sees himself as an FDR of sorts. What we got from FDR was a bunch of regulation and spending. We likely will see the same from Obama. Keynesians believe in deficit spending and Obama has surrounded himself with Keynes devotees like Larry Summers. I guess we will see if the US can spend its way out of this mess.

scooterbug44 · #6 12-07-2008, 01:14 PM

The government has already committed itself to spending $700 billion on the bailout - $350 of which has not yet been directed.

I would certainly much rather see that money go to employing people and improving our infrastructure than to enabling fat cats.

$350 billion/2.5 million = $175K, which could be 5 years of a $35k salary for each of those 2.5 million people. That's 2.5 million unemployed americans who are now paying income tax and SS, NOT collecting unemployment or welfare, and NOT using government aid programs.

That's enough people to keep unemployment rates low, keep us from having to bail out the auto industry etc.

We're all going to pay for these unemployed people in one way or another, might as well get something for our money.

poppy · #7 12-07-2008, 01:27 PM

Quote:

Originally Posted by idlewind

[/b]

Then perhaps you would like to share with the rest of us how we prevent our children/grandchildren from bearing the burden for all this spending?

My grandchildren were already in debt under "W".

singinchicken · #8 12-07-2008, 01:30 PM

I'm less concerned about making schools green than I am about getting them to the point where the kids who attend them actually learn something and making them less beholden to the teacher's unions.

Fix the education system, first, and then make them green.

I'm guessing his teleprompter was turned off when he said that...

traderx · #9 12-07-2008, 01:56 PM

Unfortunately, most attempts by the federal government to improve our schools, however well-intentioned, goes amuck. I wish the federal government would get out of the education business. Local funding and control typically leads to success.

30ashopper · #10 12-07-2008, 01:57 PM

Quote:

Originally Posted by scooterbug44

The government has already committed itself to spending $700 billion on the bailout - $350 of which has not yet been directed.

I would certainly much rather see that money go to employing people and improving our infrastructure than to enabling fat cats.

$350 billion/2.5 million = $175K, which could be 5 years of a $35k salary for each of those 2.5 million people. That's 2.5 million unemployed americans who are now paying income tax and SS, NOT collecting unemployment or welfare, and NOT using government aid programs.

That's enough people to keep unemployment rates low, keep us from having to bail out the auto industry etc.

We're all going to pay for these unemployed people in one way or another, might as well get something for our money.

FYI scooter, Obama's plan involves 700 billion in new spending in addition to the TARP for a total of 1.4 trillion.

30ashopper · #11 12-07-2008, 02:06 PM

Quote:

Originally Posted by traderx

Reports are that Obama sees himself as an FDR of sorts. What we got from FDR was a bunch of regulation and spending. We likely will see the same from Obama. Keynesians believe in deficit spending and Obama has surrounded himself with Keynes devotees like Larry Summers. I guess we will see if the US can spend its way out of this mess.

I'm interested in seeing the experiment play out. The success or failure of the approach during the depression was muddle by the war. This time around, we may get a clearer answer. It should be fascinating to see if the whole "crowding out" / short term solution hypothisis plays out. My guess is in four years we will still be in a period of economic malaise with high unemployment and a very high federal debt burden. I sense the federal government will reach a point where it will exhaust all that it can do with Obama powerless to do anything more.

singinchicken · #12 12-07-2008, 02:08 PM

Quote:

Originally Posted by traderx

Unfortunately, most attempts by the federal government to improve our schools, however well-intentioned, goes amuck. I wish the federal government would get out of the education business. Local funding and control typically leads to success.

Agreed! I'm a private school kid (pre-K through 12th grade), and I never realized how blessed I was for that until I went off to college!

scooterbug44 · #13 12-07-2008, 04:44 PM

Quote:

Originally Posted by 30ashopper

FYI scooter, Obama's plan involves 700 billion in new spending in addition to the TARP for a total of 1.4 trillion.

Yeah - that's why I'd like the use the "unused" bailout funds instead of committing even more $.

Where the hell are we going to GET this money?

I can see the need and realize he is trying to make lemonade from a whole lotta lemons, but seriously!!!

singinchicken · #14 12-07-2008, 05:35 PM

Quote:

Originally Posted by scooterbug44

Where the hell are we going to GET this money?

I'll give you three guesses, and the first two don't count!

BeachSiO2 · #15 12-07-2008, 05:36 PM

Quote:

Originally Posted by scooterbug44

Where the hell are we going to GET this money?

I guess you haven't been to DC lately. It smells like Mobile, AL. They have set up a paper mill on the Potomac and the printing presses are running 24/7.

30ashopper · #16 12-07-2008, 06:11 PM

Quote:

Originally Posted by scooterbug44

Yeah - that's why I'd like the use the "unused" bailout funds instead of committing even more $.

Where the hell are we going to GET this money?

I can see the need and realize he is trying to make lemonade from a whole lotta lemons, but seriously!!!

Borrow it by issuing government bonds. The Keynesian argument goes - government takes on massive debt and spends that on infrastructure and government jobs, which spur growth through demand for goods. The growth in turn generates more tax revenue, which pays for the debt.

The supply siders give the same revenue argument, but they approach the problem from a different angle.

traderx · #17 12-07-2008, 06:26 PM

The Keynesians believe in a big government approach to the economy. Deficit spending is advocated as a solution. As Nobel Krugman recently wrote, massive government deficit spending is better than reducing the cap gains tax.

wrobert · #18 12-07-2008, 07:10 PM

Quote:

Originally Posted by scooterbug44

$350 billion/2.5 million = $175K,

What brand calculator are you using?

scooterbug44 · #19 12-07-2008, 08:11 PM

Sorry, mistyped - I meant 2 million - the number of jobs Obama has pledged to create or save in his first 2 years.

2.5 million is 140K each, 2 million is 175K each

wrobert · #20 12-07-2008, 08:36 PM

Quote:

Originally Posted by scooterbug44

Sorry, mistyped - I meant 2 million - the number of jobs Obama has pledged to create or save in his first 2 years.

2.5 million is 140K each, 2 million is 175K each

Wow! I am not edumakated enough to deal with those big numbers, at least that is what I have been told.

idlewind · #21 12-07-2008, 09:00 PM

Quote:

Originally Posted by poppy

My grandchildren were already in debt under "W".

And I suppose that makes it ok for Obama to bury their children in debt?

What has happened in the past is done, it cannot be changed. We can change the behavior of tomorrow though.

idlewind · #22 12-07-2008, 09:02 PM

Quote:

Originally Posted by scooterbug44

The government has already committed itself to spending $700 billion on the bailout - $350 of which has not yet been directed.

I would certainly much rather see that money go to employing people and improving our infrastructure than to enabling fat cats.

$350 billion/2.5 million = $175K, which could be 5 years of a $35k salary for each of those 2.5 million people. That's 2.5 million unemployed americans who are now paying income tax and SS, NOT collecting unemployment or welfare, and NOT using government aid programs.

That's enough people to keep unemployment rates low, keep us from having to bail out the auto industry etc.

We're all going to pay for these unemployed people in one way or another, might as well get something for our money.

The bailouts are mistakes, pure and simple. The infrastructure improvements are an imporvement over giving the money away, but borrowing to do them is still a mistake, albeit a smaller one than the financial bailout.

idlewind · #23 12-07-2008, 09:03 PM

Quote:

Originally Posted by traderx

Unfortunately, most attempts by the federal government to improve our schools, however well-intentioned, goes amuck. I wish the federal government would get out of the education business. Local funding and control typically leads to success.

You are sooooooo correct.

30ashopper · #24 12-07-2008, 11:36 PM

Quote:

Originally Posted by scooterbug44

Sorry, mistyped - I meant 2 million - the number of jobs Obama has pledged to create or save in his first 2 years.

2.5 million is 140K each, 2 million is 175K each

2.5 million "created or preserved" over two years, according to O.

traderx · #25 12-08-2008, 12:53 PM

Amity Shlaes has received some rave reviews for her book, "The Forgotten Man". It is an historical account of the Great Depression. It is on my must-read list. She recently wrote an excellent article for the NY Times in which she counters Nobel Krugman's depression era Keynesian proposals.

Quote:

Why does all this matter today? Because lawmakers are considering new labor legislation containing "card check," which would strengthen organized labor and so its wage demands. Because employees continue to pressure firms to spend on health care, without considering they may be making the company unable to hire an unemployed friend. Piling on public-sector jobs or raising wages may take away jobs in the private sector, directly or indirectly.

What the new administration decides about marginal tax rates also matters. Mr. Obama said in a Thanksgiving talk that he wanted to "create or save 2.5 million new jobs." People who talk about saving new jobs are usually talking about the private-sector's capacity to generate jobs in the future -- not about the public sector alone. We know that the new administration is going to spend. But how? It can try to figure out a way to do that without hurting the private sector. Or it can just spend, Krugman-wise, and risk repeating the very depression we seek to avoid.

http://online.wsj.com/article/SB122792327402265913.html