How is this Obama's fault when the opposition has been very clear that they have and will continue to do anything to safeguard highearners and their money and sacifice working class people? While there are valid criticisms of the Obama Admin and the Democratic Party, the GOP has been openly hostile to truly stimulative spending, like unemployment benefits, while fighting hard for expensive tax cuts that aren't stimulative.
Both parties at fault because 'stimulative spending'. Same monetary policy
After 16 Types Of Stimulus Failed, What Can The US Government Try Next?
After 16 Types Of Stimulus Failed, What Can The US Government Try Next?
Mike "Mish" Shedlock|August 08, 2011|
Is there any kind of stimulus the US did not try in the last 10 years?
1 We had 1% interest rates from Greenspan fueling housing.
2 We had wars from Bush and Obama fueling defense industry employment.
3 We had two rounds of Quantitative easing from the Fed.
4 We had cash-for-clunkers.
5 We had two housing tax credit packages.
6 We had an $800 billion stimulus package from Congress for "shovel-ready" projects.
7 We had stimulus kickbacks to states.
8 We had HAMP (Home Affordable Mortgage Program).
9 We had bank bailouts out the wazoo to stimulate lending.
10 We had Small Business lending programs.
11 We had central bank liquidity swaps.
12 We had Maiden Lane, Maiden Lane II, and Maiden Lane III
13 We had Single Tranche Repurchase agreements
14 We had the Citi Asset Guarantee
15 We had TALF, TARP, TAF, CPFF, TSLF, MMIFF, TLGP, AMLF, PPIP, and PDCF
16 We had so many programs the Fed must have run out of letters because they were not given an acronym.
That is a partial list. Other than bailing out bondholders what exactly do we have to show for any of it? The one-word answer is
"debt".
Decade of Stimulus Yields Nothing But Debt
Caroline Baum wrote an excellent article on this theme. It was so good I asked if I could reproduce it in entirety.
With permission please consider
Decade of Stimulus Yields Nothing but Debt: Caroline Baum
When George W. Bush took up residence in the White House in January 2001, total U.S. debt stood at $5.95 trillion. Last week it was $14.3 trillion, with $2.4 trillion freshly authorized by Congress Tuesday.
Ten years and $8.35 trillion later, what do we have to show for this decade of deficit spending? A glut of unoccupied homes, unemployment exceeding 9 percent, a stalled economy and a huge mountain of debt. Real gross domestic product growth averaged 1.6 percent from the first quarter of 2001 through the second quarter of 2011.
It doesn’t sound like a very good trade-off. And now Keynesians are whining about discretionary spending cuts of $21 billion next year? That’s one-half of one percent. And it qualifies as a “cut” only in the fanciful world of government accounting.
The Budget Control Act of 2011 will save $917 billion over 10 years relative to the Congressional Budget Office’s baseline. It leaves the tough work to a bipartisan congressional committee of 12, to be appointed by the leadership in each house. If this supercommittee fails to agree on a minimum of $1.2 trillion of additional savings over 10 years, automatic spending cuts -- evenly divided between defense and nondefense -- will kick in.
Is there any reason to think the same folks who couldn’t agree on a grand bargain this past month will join hands and find commonality in the next three, with one month off for vacation?
Rosy Scenario
Even if the committee agrees on the prescribed savings by Nov. 23 and Congress enacts them by Dec. 23, as required, laws passed today aren’t binding on future congresses.
Throw in the fact that revenue and budget forecasts tend to be overly optimistic, and there’s even less reason to think Congress has put the U.S. on a sound fiscal path.
In a July 2011 working paper for the National Bureau of Economic Research, Harvard economist Jeffrey Frankel identified a pattern of over-optimism in official forecasts, a bias that gets bigger in outer years. (Who can forget the CBO’s 2001 estimate of a 10-year, $5.7 trillion budget surplus?) A fixed budget rule, such as the euro area’s Stability and Growth Pact with its mandated deficit-to-GDP ratios, only exacerbates the tendency.
“Political leaders meet their target by adjusting their forecasts rather than by adjusting their policies,” Frankel writes.
First Installment
The deal hashed out in Washington at the eleventh hour this week does nothing to curb the unsustainable growth of entitlement spending -- on programs such as Medicare, Medicaid and Social Security. Medicare outlays have risen 9 percent a year for the last 30 years in a period of stable demographics, according to Steven Wieting, U.S. economist at Citigroup Inc. The automatic spending cuts outlined in the budget act would limit reductions in Medicare expenditures to no more than 2 percent a year.
By the end of 2012 or start of 2013, the federal government will be back at the trough with a request for additional borrowing authority. The debt will keep rising, and the ratio of publicly held debt to GDP will increase from 62 percent last year to as much as 90 percent in 2021, according to some private estimates, depending on what Congress does about the expiring tax cuts, the Medicare “doc fix” and the alternative minimum tax.
The CBO’s estimate of $2.1 trillion in savings over 10 years is well short of the $4 trillion Standard & Poor’s says is necessary to stabilize the debt and avoid a rating downgrade.
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