Even Marty Hates The Tax Cuts in The Stimulus Bill

Marty Feldstein is a conservative economist, and self-identifies as such. So when he came out for a stimlus bill, it was a shock. Now he is trashing the Obama tax cuts in no uncertain terms. He's also unhappy with the speed that infrastructure projects will come on line, and with the grants to states. His preferred solution, as you would expect from a big government conservative, is military spending, on the grounds that it can bulk up fast.

It is entirely possible to ramp up civilian spending at a speed comparable to military spending, indeed, education, a large component of the stimulus bill, does exactly that. More over, education delivers more GDP for less inflationary pressure that military infrastructure.

However, the tax cuts in the stimulus bill were sold as bi-partisan and something that had support across the spectrum. It is pretty clear that that isn't the case, both from the polls, and from data points like this one, which suggest instead that the whole "give everyone a free pizza a week" style tax prebates - we are, after all, borrowing the momey - aren't really worth the trouble.

Stirling Newberry January 29, 2009 - 12:15pm

Stirling Newberry's diary | printer friendly version |

( categories: Economics: USA | Global Financial Crisis )

Tax cuts and military spending

Obama holds that the tax cuts are in response to his promise to deliver a middle class tax cut right way. I'm willing to give him this instead of presuming the obvious, that it was a bone thrown to the GOP. However, even if it was his idea, it seems to be a case of poor judgment, since this is not a tax reform package but a stimulus package and tax cuts are not stimulative at this juncture, any more than zero % interest.

Military spending is another issue. Obama was wiser than to try for increased military spending in the stimulus package, but that doesn't mean that he won't be asking for increased military spending separately. Given his agenda, he is going to have to, although it will be masked with some cuts to military spending also. But on balance, military spending is going to rise rather than be cut.

tjfxh January 29, 2009 - 12:44pm

joy. tax cuts for the unemployed.

I know you're making $0, but now you owe the government 5% less of that $0!

--
http://bexhuff.com
Of COURSE you can trust the US Government! Just ask the Indians.

bex January 29, 2009 - 1:33pm

nice

If rapid spending on things that need to be done is a criterion of choice, the plan should include higher defense outlays, including replacing and repairing supplies and equipment, needed after five years of fighting. The military can increase its level of procurement very rapidly. Yet the proposed spending plan includes less than $5 billion for defense, only about one-half of 1 percent of the total package.

Infrastructure spending on domestic military bases can also proceed more rapidly than infrastructure spending in the civilian economy. And military procurement overwhelmingly involves American-made products. Since much of this military spending will have to be done eventually, it makes sense to do it now, when there is substantial excess capacity in the manufacturing sector. In addition, a temporary increase in military recruiting and training would reduce unemployment directly, create a more skilled civilian workforce and expand the military reserves.

Talk about chutzpah. "will have to be done eventually" ... ahh the fine eschatology of military industrial keynesianism. a more skilled civilian workforce = fat guys in aviators with contractor access cards. what could be better than another $123XYZ billion for Booz Allen Hamilton to spy on us some more? Un-freakin-believable. sorry to be redundant here, but rlly we need a strong counter message to this, such as "our global empire of bases is a colossal waste of money that is bankrupting America, and the contractors have been great at pocketing the cash so far."

KBR just settled an amazingly huge bribery kickback case. When do people like this guy have to account for the staggering billions in graft, or is that part of the 'velocity' of currency that must be increased!?
--
Hongpong.com

HongPong January 29, 2009 - 3:11pm

The GOP

walked over a cliff in unison like the bunch of lemmings they are. Good riddance. The Senate is even now stripping out the crap that was put in the stimulus bill that the Republican Congress members wanted. Why keep it in there? F&%k em.

I like the ad campaigns being put together in all fifty states as well. They are identifying specifically how the stimulus helps the constituents in each state, district by district, and then noting that your repub rejected the help.

All the stats I've been watching indicates another ten seat loss in the house and three seats in the Senate. They keep playing the Party of NO and it will be more than that.

Scotjen61 January 29, 2009 - 3:15pm

meanwhile you can buyout losing banks for tax writeoff

hat tip to cryptogon.com - via a Treasury administrative ruling, they borked the tax law setup in 1986 (presumably to curb Iran-contra/Savings & Loan intentional-collapse shell games) - now Wells Fargo Et Al get to scurry off with zillions of bux.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/09/AR2008110902155_pf.html
It never ends!!!
--
Hongpong.com

HongPong January 29, 2009 - 3:20pm

Civilian vs Military Spending

Civilian Spending = Investment (We get something for our money)
Military Spending = Expense (We get nothing, except carbox dioxide, for our money)

Synoia January 30, 2009 - 2:29am

Well, you get cheap gas.

I doubt that this relationship between military spending and cheap gas is lost on many Americans, or they are incredibly stupid.

I mean, did anyone ever doubt that Iraq was about oil?

tjfxh January 30, 2009 - 12:25pm

Call Me Stupid...,

I never for a minute thought Georgie rushed us to war in Iraq over oil. The rush to war was for one..., and only one..., reason. To get the economy going before the next election. Georgie saw what happened to his Daddy after Desert Storm. The economy started to kick in too late to save Daddy..., and Bill Clinton reaped the reward when he took office. If this war was about oil or revenge or anything else we could have waited six months and gone in well prepared and well planned. But Georgie and his team fabricated blatant lies and spouted "Mushroom clouds on the horizon" to sell the rush to war. If we hadn't gone to war when we did the economy would not have revived before the election and Georgie would have been a one term president like his Daddy. George E. is the epitome of Evil.

Scott R. January 31, 2009 - 12:49pm

Ill-informed?

Most people were ill-informed. The right had been agitating for a take-over of Iraq for some time, pretty much since we had to get our troops out of Saudi Arabia after the Gulf War for religious reasons.

Iraq was the obvious place to go because it has the largest known untapped oil reserves on the planet, estimated to be worth about 15 trillion at the time, and you had two oilmen running the country, both salivating over it.

The idea was to established permanent bases in Iraq to control the ME oil reserves and secure Iraq oil for US companies. The 14 permanent bases are in place, sitting right above the oil fields right now. You can bet that there will be a "residual" force in Iraq as long as the US has leverage.

BTW, the war was perfectly planned and executed in Rummie's estimation, and he ran it. He was just wrong about the aftermath. The US won the Iraq War handily in record time. Rummie and the neocons just totally blew it on the occupation.

But the war are a great success, and it was a dire warning to US enemies about the high-tech army that they would face if they thought of going up against the US. Putin was so impressed, it told W that if the US went into Georgia, he would have to employ tactical nukes, which were already deployed.

tjfxh January 31, 2009 - 2:11pm

What Was the Hurry Then?

And if it was about oil we would have stayed there after Desert Storm when the real oil man was president. It was the timing that tells the story.

Scott R. January 31, 2009 - 2:24pm

The problem lies in looking for one single reason,

whereas the forces that stormed the White House were always a coalition of movements with different goals.

Iraq happened because it represented an unfortunate overlap of the completely separate (and even antithetical) goals of the bulk of the disparate parts of that coalition.

In that sense, Iraq was about oil, and it was about economics, and it was about Christian belief, and it was about misguided revenge for 9/11 and Daddy, and it was about aging Cold Warriors blowing their one-note flutes about Russia and China, and it was about a lot of other things too, some of them even more twisted and psychological.

"The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential."

- Dietrich Bonhoeffer

Escher Sketch January 31, 2009 - 3:41pm

Reasons

The problem lies in looking for one single reason,
whereas the forces that stormed the White House were always a coalition of movements with different goals.

But all the goals were focused on dominating the ME. Why? There is only one strategic reason to commit that level of resources there. Petroleum. It's a strategic resource, and as the world's sole superpower, the US HAS to control its supply to retain power. The US economy also runs on cheap energy, so the petroleum must be cheap and plentiful.

The policy is simple. Military and economic dominance. The mission is obvious. Control petro resources necessary for continued economic and military dominance. The strategic goals may be numerous, such as setting up favorable governments and toppling unfriendly régimes.

tjfxh January 31, 2009 - 4:03pm

G. H. W. Bush knew better what it would take.

if it was about oil we would have stayed there after Desert Storm

GHWB was a coalition guy, W was a go-it-aloner — and he got slammed for it. Cheney and Rummie weren't running GHW like they were W.

Many of GHW's other people were not for it.

Plus, a good example in NK. They actually were getting nukes, and not Saddam. No oil there though, so no big deal. We can always obliterate them anytime.

tjfxh January 31, 2009 - 3:54pm

Thanks...,

for helping me make my point. If it was about occupying and controlling the oil..., they would have planned for that. They didn't. They didn't even have proper body armor for troops or Hummvies. They RUSHED to war for one objective..., to make sure the money dumped on it had time to trickle through the economy before the next election. The war went too well and didn't last long enough to genrate the kind of capital needed..., so we stayed and the focus was changed to "nation building". I will certainly buy the premise that "nation building" means insuring our supply of oil now..., but not at the outset. And it certainly hasn't kept the price of oil cheap. It will be back up there once the scorched earth of the current economic crisis has burned off.

To illustrate how strongly I feel about this I will risk incurring the wrath of everyone here..., and tell you that I have only voted in one presidential election in my 30 years of eligibility. That was to vote against George Evil Bush. I have never called in sick to work when I was wasn't really sick..., until the day after that election. Maybe I should say I have still never called in sick when I wasn't.

Scott R. February 1, 2009 - 3:37pm

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Even Marty Hates The Tax Cuts in The Stimulus Bill

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