This evening the House passed their Piggy Bank of Pet Projects.   The vote will be reported by the MSM, in a derisive way, as mostly party line.   As we’ve become accustomed to Republicans being the ones to cross the line I have to admit surprise to see that all House Republicans, along with 11 Democrats,  voted against laying nearly $1 trillion of additional debt on our children for the actual purpose of increasing the size, scope and run rate of the Federal beuracracy and budget!

This was a principled stance and one the Rs should have been following the past few years.   Who knows, if they had, the public may not have become enamored with what in only 8 short days, has proven to be anything but hopeful or change!

Hats off and thanks to all 188 who voted against this porker!

Now, off to the Senate.   What’s the over/under on the number of spines that will be displayed in that chamber?

When he was running for the election and again shortly after, President Obama made clear that he was going to be the person to bring fiscal responsibility back to Washington:

“That is why I will ask my new team to think anew and act anew to meet our new challenges…. We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way.”

Other than adding numerous zeros to the size of the numbers being used, can someone show me anything new or cost-effective about the ever growing, special interest laden stimulus bill?

Long before he was officially inaugurated, while he was still known simply as PEBO, President Obama was telling the country all the horrors of the current economic challenges.   Phrases like “never before” and “Great Depression” seemed to be spoken by PEBO in every media opportunity he had.   Of course he wasn’t just there to tell us how bad things were, and how much worse they were yet going to be, he also had the prescription for what ails us: stimulus.

Obama along with Democrats across the nation, have been planning and preparing  a stimulus package since before the election.   While Obama was initially focused on infrastructure that was “shovel ready,” the plan has taken a look of “anything goes”.   Expansion of abortion funding and perpetual expansions of medicaid and education spending are all now included in  the plan and I don’t see a shovel needed for any of those.

As the price tag grows, Obama and others continue to sound the sirens saying that only with this stimulus will we see a signs of a recovery anytime soon.

Um, no.

In a report  by the non partisan Congressional Budget Office (remember, these were the same folks that he Dems used to  think were geniuses  when they published reports about “Bush’s deficit” or spending in Iraq), less than 2/3rdsof the stimulus package will actually impact the economy before 2011.   In fact, if you back out the $208 billion of “tax cuts,” only about 1/2 of the “investment” stimulus will get to the economy in time to help.   As we run downhill with sharp knives towards the embrace of socialism,  don’t you believe the  government has the capability and wisdom to know when to “stimulate?”

Well, there’s always the jobs that the stimulus will be creating right?

Again, um, no.

In a paper  coauthored by President Obama’s  chair of the Council of Economic Advisors, Christina Romer, it was found that government attempts at using stimulus to “correct” recessions are ineffective.   The abstract of the paper “What Ends Recessions,” sums up her findings succinctly:

This paper analyzes the contributions of monetary and fiscal policy to postwar economic recoveries. We find that the Federal Reserve typically responds to downturns with prompt and large reductions in interest rates. Discretionary fiscal policy, in contrast, rarely reacts before the trough in economic activity, and even then the responses are usually small. Simulations using multipliers from both simple regressions and a large macroeconomic model show that the interest rate falls account for nearly all of the above-average growth that occurs early in recoveries. Our estimates also indicate that on several occasions expansionary policies have contributed substantially to above-normal growth outside of recoveries. Finally, the results suggest that the persistence of aggregate output movements is largely the result of the extreme persistence of the contribution of policy changes.   (emphasis mine)

One can only assume that his ignoring of this issue shows that he doesn’t listen to his personally selected advisors anymore than he does a Republican Congress person.

So let’s recap:

1. The “Stimulus” is not “Shovel Ready”
2. The number of jobs created is suspect
3. The “Stimulus” won’t be stimulating enough to put a tremor in Chris Matthews leg
4. Any stimulus that does come will likely come after a recovery has already started.

So why do the stimulus?   The answer is fairly simple and came from Rahm Emanuel:

"Never let a serious crisis go to waste"

President Obama and his BFFs Nancy and Harry are taking advantage of the economically gullible to increase their control and influence.   I don’t like what they’re doing but that’s a part of winning elections.   That said let’s be honest enough to quit calling this a stimulus and call it what it is:   a piggy bank of pet projects

News out today that Fiat has obtained a 35% interest in Chrysler.   They have an option to increase their stake to 55% although those terms weren’t disclosed.

Anyone buying a 35% in a rapidly failing company in a flailing industry is news.   Obtaining a 35% interest in a company while providing no cash remarkable.   Why would Chrysler give up 35% of what admittedly is a company that has nearly zero worth, for an agreement that brought no cash?

According to the published reports, the marriage makes sense for both companies.   Fiat has wanted to reenter the US market.   Via Chrysler, they have access to a dealer network and a lot of unused production capacity.   Chrysler is supposed to get access to Fiats design work which is supposed to be particularly good in mid and compact cars.   While the arguments for the combination make some sense, I saw a nearly throw away comment in the article that caught my eye:

“However,” he warned, “the deal does not provide Chrysler with any new liquidity commitments from Fiat, which could reflect a desire by Fiat to protect its investment under future downside scenarios for Chrysler.”

This is another lesson in the unintended consequences of government activity.

I have no doubt that both parties see benefits in their arrangement.       However, it’s clear from the statement in the article that the only real reason this relationship exists is because the government has provided $4 billion with the promise of much more to come.     That last bit is why Chrysler is willing to give away 35% of itself for little more than nothing.

Chrysler must present a plan to the Auto Czar by May 1st.   This plan needs to show how they will satisfy the shrill calls for greater fuel efficiency and make a profit.    How credible the plan is will weigh on the Czar’s decision not only to advance more funds, but  whether the already advanced $4 billion should be yanked backed.     Chrysler has ranked near the bottom of fleet fuel efficiency and have no magic beans to quickly grow something saleable in the efficiency market.   Additionally, Chrysler is sitting on a ton of excess capacity.   Capacity/overhead costs, that  will be a substantial drain on their ability to show profitability in any reasonable time.   Fiat provides answer to both of those questions.  

It’s pretty clear that Fiat has no interest in supporting Chrysler if they get no additional government funding.   If the government cuts Chrysler off, Fiat will just rip up their otherwise worthless contracts and look for another alternative, maybe even pick up some of the bankrupted assets on the cheap.

While you’ll hear lots of reports in the papers and even during follow up hearings, as the automakers beg for more money, about how much Fiat ♥ Chrysler, don’t be fooled.   There wouldn’t and won’t be any marriage if the government is holding a shotgun paid for by taxpayers money!

Update 1/21 – Dad29 pointed out that reports out this morning are saying that Fiat only   ♥ Chrysler if Chrysler brings an additiona $3 billion dowery.   Being right so often is a burden I gladly bear for NRE’s readers :)

As reported by the Agency who shall not be named and others, Hamas supporters spent the day celebrating the fact that even though they suffered numerous casualties and destruction, they weren’t wiped off the face of the earth.

I’m wondering if we should be taking notes.

The Hill.com is reporting today that a “stimulus bill” of $1 trillion is not even enough for some Democrats:

"Some of us are saying we need a stimulus of 1.2 or 1.3 or 1.4 trillion to prevent a depression, rather than just slow our descent into a depression," said Rep. Jerrold Nadler (D-N.Y.).

Hamas is partying after losing and suffering economic damage of a paltry $2 billion.   Think of how big our party will be after Congress flushes $4 trillion ($2 trillion Treasury won’t tell what they spent it on, $700 Billion TARP and the stimulus plan), and have nothing more to show for it than “We aren’t dead yet!”  

Now that I think of it, wouldn’t we all have a lot more fun and probably stimulate the economy just as much,  if instead of waiting until the $4 trillion is spent, we take it and put it all towards a party now?

The New York Times is reporting that President elect Barack Obama may have found a way to get   the remaining $350 billion of TARP money…he’s going to promise to use it properly.   Already Republicans are starting to cave:

South Dakota Republican Sen. John Thune  said a public statement might be helpful in easing the concerns of some Republicans and South Carolina Republican Sen. Jim DeMint said he believed such a statement would be made by Obama’s team.

As of this point, no one can tell us how the first $350 billion was used.   No one can tell us what benefit it provided.   Further, Treasury is still fighting lawsuits to release information on  how they used $2 trillion.   Finally, we’ve got Obama continuing to negotiate an increasing stimulus package, now reported to be $850 billion, with no real detail but cries of “it’s not big enough.”

With what we’ve seen on how all of the various “bailouts” have been handled to date, we’re now supposed to believe that an “assurance” from Obama will  cause transparency and integrity to shoot forth from this next tranche?

It’s  more and more obvious  that some of the Senate Republicans are out of touch with the world outside of the beltway.   If they were paying attention they would know that all of Obama’s commitments have all been determined to have an expiration date  on them.   It seems that the day from statement to expiration is decreasing along with the days to Obama’s inauguration.

While the Senate Republicans may get bamboozled by:

reassurances the money would be focused on trying to fix the financial industry crisis that has also left millions of families experiencing home foreclosures,

you’ll pardon me if I don’t hold my breath to see it happen, even if it’s only for just five more days!

President elect Barck Obama and team have put out what passes for “detail” in the Obama administration, about Obama’s planned stimulus plan.   You can read the plan here.

I have to give Obama and his team credit.   When Paulson came screaming that the world was coming to and end unless he got $750 billion, he only had 3 pages to outline his plan.   Obama and team, screaming that the world will come to an end unless they get $775 billion,  have managed to use an entire 14 pages to outline their plan.   Well, unless you take out the title page, table of contents and extra white space…then you’re probably down to just 9 or 10 pages.   Even so, Obama has managed to double the number of pages explaining his $775 billion plan.   I guess the extra $25 billion does buy something!

Christina Romer, Obama’s nominee for chair of the Council of Economic Advisors is one of the authors of the plan/document.  

In a paper that Romer published in 2007, she concluded that tax cuts stimulate the economy 3x the amount of the tax cut.   In other words, for ever dollar of tax cut the economy grows by $3.   In Obama’s plan however, Romer and her coauthor argue that “tax cuts” will generate less than $1 of economic stimulus for each $1 of “tax cut.”   How can those be reconciled?

The reconciliation is pretty simple; Obama’s plan has no tax cuts.   Tax cuts are permanent tax reductions.   Rather, what the plan offers is a rebate similar to what was done last year.   They are being called “tax cuts” only because the mechanism proposed to effect them is tied to taxes so as give Republicans and some fiscal conservative Democrats, cover to agree to mortgage our children’s future.

Romer  is a well known and respected economist.   That last fact she allows permanent tax cuts and one time credits to be conflated in this plan is at best, disingenuous and at worse political dishonesty.   In either event, obvious manipulation and misuse of accepted terms as these, calls wholly into question the integrity and accuracy of a plan that even according to its authors is fraught with:

uncertainty (that) is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.

Republicans in Congress ought to be smarter than to fall for a one time credit that is called a “tax cut.”   They ought to be, we’ll have to see if they are.