According to Economic Experts, Porkulus Maximus Is a Dog That Won't Hunt

 

 

 

There's No Stimulus Free Lunch -- It's hard to spend wise and spend fast.


http://online.wsj.com/article/SB123423402552366409.html

February 10, 2009 | by Gary S. Becker and Kevin M. Murphy

 

How much will the stimulus package moving in Congress really stimulate the economy?

The evaluations to date have been incomplete, so we looked at the likely stimulative effect from the spending parts of the House and Senate bills -- over $500 billion -- and assessed the quantitative effects of four basic factors.

[Commentary] Corbis

1) How much increase in Gross Domestic Product (GDP) can be expected from the stimulus package?

In a full-employment situation, increased government spending would largely replace private spending, so the net stimulus to GDP would likely be quite small. In the present environment, however, with growing unemployment of both labor and capital, the net stimulus would be larger since the additional government spending would put some unemployed resources to work.

For example, if the government spent money to build new homes with unemployed labor, the stimulus to GDP might be close to, even larger than, the amount spent. However, given the present housing glut, that hardly seems to be a wise policy, although it is a small part of both the House and Senate stimulus packages.

In fact, much of the proposed spending would be in sectors and on programs where the government would mainly have to draw resources away from other uses. This type of spending includes adding broadband to rural areas, spending more on health coverage, encouraging scientific innovations, developing renewable energy, as well as many other things.

As President Barack Obama recently said, "This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education." Such spending may encourage long-term growth, but it will have little short-term effect on GDP.

So our conclusion is that the net stimulus to short-term GDP will not be zero, and will be positive, but the stimulus is likely to be modest in magnitude. Some economists have assumed that every $1 billion spent by the government through the stimulus package would raise short-term GDP by $1.5 billion. Or, in economics jargon, that the multiplier is 1.5.

That seems too optimistic given the nature of the spending programs being proposed. We believe a multiplier well below one seems much more likely.

2) The increased government spending in the stimulus package is supposed to be only temporary, until the economy returns to a full employment level, but probably won't be.

The evidence of past expansions of government programs is just the opposite. Once created they tend to survive and grow over time, even when the increases initially were said to be temporary. The underlying reason for this is that interest groups develop around new and expanded programs, and they lobby to keep and expand those programs.

This implies that the spending programs in the stimulus package will continue to some extent after the economy has returned to full employment. The multiplier at that time will surely be much closer to zero. Looking several years ahead, then, the average stimulus from the expansion in government spending will be smaller, perhaps much smaller, than the short-term stimulus.

3) The effects on consumers and businesses of the stimulus package depend not only on the stimulus to short-term GDP, but also on how valuable the spending is.

Whatever the merits of other government spending, the spending in this package is likely to have less value. A very large amount of money will be spent quickly over a two-year period: $500 billion amounts to about one-quarter of the total federal government annual spending of $2 trillion. It is extremely difficult for any group, private as well as public, to spend such a large sum wisely in a short period of time.

In addition, although politics play an important part in determining all government spending, political considerations are especially important in a spending package adopted quickly while the economy is reeling, and just after a popular president took office. Many Democrats saw the stimulus bill as a golden opportunity to enact spending items they've long desired. For this reason, various components of the package are unlikely to pass any reasonably stringent cost-benefit test.

4) There are no free lunches in spending, public or private.

The increased federal debt caused by this stimulus package has to be paid for eventually by higher taxes on households and businesses. Higher income and business taxes generally discourage effort and investments, and result in a larger social burden than the actual level of the tax revenue needed to finance the greater debt. The burden from higher taxes down the road has to be deducted both from any short-term stimulus provided by the spending program, and from its long-run effects on the economy.

We believe that it is incumbent on both supporters and opponents of the bill to thoughtfully evaluate each of these four factors. We recognize that how individuals will come out in their own evaluation of these factors will determine their attitude toward the stimulus package, and that there is considerable ground for reasonable differences of opinion.

Our own view is that the short-term stimulus from the legislation before Congress will be smaller per dollar spent than is expected by many others because the package tries to combine short-term stimulus with long-term benefits to the economy. Unfortunately, short-term and long-term gains are in considerable conflict with each other. Moreover, it is very hard to spend wisely large sums in short periods of time. Nor can one ever forget that spending is not free, and ultimately it has to be financed by higher taxes.

 

Mr. Becker, the 1992 Nobel economics laureate, is professor of economics at the University of Chicago and senior fellow at the Hoover Institution. Mr. Murphy, a MacArthur Fellow, is an economics professor at the University of Chicago and a senior fellow at the Hoover Institution.

Josie06 Josie06
56-60, F
52 Responses Feb 10, 2009

reesethebeast, you do what ever you want. It's your prerogative.<br />
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I work daily, I'm out there making money to keep a roof over my familys head, clothes on their back and food on the table. You go cry in tou spilt milk! Sorry if I offend, it happens when someone ASSUMES too much. As you have.<br />
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I am not totally against a bailout. I am against it in it's monstrosity that the government has presented it. I am definitely against the PORKULUS spending bill which accompanies it.<br />
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Government does have a role. Not the majority role. Not the majority shareholder in any businesses. And not definitely not in creating Socialism in America to the extent it is doing it now.<br />
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Sorry if I offend anyone. But these are my thoughts. Mine alone. I've read all yours and I still can not see buying into a rampaging government creating a new corporate welfare system to aid their buddies. This Administration is more of a disaster than the last one.

i will comment on this when you actulay study on it to learn why he had the bail out and what it is for until then do more work and less crying thank you

The method the President and Congress have chosen to stimulate the economy is Keynesian. However good the theory sounds, it has a rather glaring logical fallacy. It overlooks the fact that, in the real world, government can’t inject money into the economy without first taking money out of the economy.<br />
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Real-world evidence confirms ... the Herbert Hoover Presidency. He increased taxes dramatically (a boost in the top tax rate from 25% to 63%.; imposed harsh protectionist policies; significantly increased intervention in private markets; and, boosted government spending by 47 percent in just four years. Not very successful since growth went down and unemployment went up.<br />
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FDR followed and used the same approach. The top tax rate was boosted to 79 percent and government intervention more pervasive and government spending skyrocketed.<br />
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Gerald Ford tried it to ... with the same dismal results. Japan used the same strategy in the 1990s with the same results ... economy remained stagnant.<br />
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Keynesianism economic theory does not work in fighting/recovering from a recession or depression.<br />
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Tax cuts only boost the economy if they reduce the tax penalty on work, saving, and investment — i.e., lower tax rates, not gimmicks. Lower interest rates will provide some help to economies in recession.<br />
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How does the government finance any spending? (1) Borrowing from the citizen through taxation ... with no intention of ever paying it back and (2) Print it ... and thereby devalue the money already in circulation.<br />
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Milton Friedman said that inflation is "always and everywhere a monetary phenomenon". That means that higher prices follow an expansion in the money supply. The Federal government is doing just this now.<br />
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Injecting this new money into the economy has an inevitable effect of not only raises prices of goods, but also destroys the value of the currency.<br />
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~~~~~~~~~~<br />
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A Story: The Effects of Stimulus and the Burglar<br />
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Burglar brakes into your home. Your stimulus plan is your trusty shotgun. You know it will provide the stimulus for him to leave. You also know to effect that the stimulus must be applied correctly or there might be repercussions.<br />
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Stimulus works = you and family and possessions saved: When you shot him you hit him. Enough to scare him into running out or leaving him lying on the floor till the police arrive. <br />
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Stimulus doesn't work = you and family and possessions not saved: When you shot him you miss him. He is now p*ssed and is going to kick your *ss or worse.<br />
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i hope the current Stimulus Plan is not in the later category, but fear it may miss the mark. Miss the mark in that it does not address economic situation directly, only tangentially and in some ways not at all.

So that's the impasse... we each think the other is foolish, for different reasons. <br />
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You think I'm foolish for thinking there's a difference between Obama and Bush. <br />
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I think you're foolish for NOT thinking there's a difference. <br />
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For all of our sakes, I hope you are the one that is wrong.

i'm not saying SOME intervention by the government might not be needed.<br />
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When government becomes involved it should be limited and directed squarely at the problem. This Stimulus Bill is not.<br />
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You have more faith than even the VP as he pegged it success at about 30% chance.<br />
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i hope i'm wrong ... but having seem the jack-a-lopes in DC for decades ... i am very very doubtful. Their meddling only creates bigger problems.<br />
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Grandiose ideas of elites ... no plan to verify just shovel money out the door. We'll talk about sound plans for verification after the moneys spend and the records are gone. That's their PLAN.

Well I have tried to show you why I believe government intervention, in this current case at least, is necessary. I have knowledge of the mortgage and RV financial industries, and I tried to share that. Perhaps it was a waste of typing, perhaps not. <br />
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I have reasons to believe that Obama's stimulus plan will be more successful than Paulson's (despite having to water it down with tax cuts to get the necessary republican votes) It's sad that it had to be watered down to almost 40% tax cuts vs 60% spending, when it is proven that tax cuts are less effective at stimulating the economy than forms of spending like infrastructure and food stamps. Despite that, I still believe that Obama's disclosure of where the TARP funds are going will be free to the public to watch, and that his caps on executive pay and bonuses for companies receiving aid will reduce the # of companies coming to the government for a bailout. <br />
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So I guess your opposition to the stimulus bill means you hope it will fail to improve our economy so that you can say you were right. That's unfortunate.

Then, if it is not designed to stimulate the economy ... why the h* double hockey sticks is it in the Stimulus Bill?<br />
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It's there because "I/We a won the election and are in charge!"<br />
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This is not new, cause former President Bush felt and said the same.<br />
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But it doesn't make it right. Take care of the problem of the economy. Add your Pork into next years budget in the fall or pass a supplemental ... then debate it.<br />
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Congress can't debate this bill. i watched the interviews, the majority of Congress and Senate never read the bill.

What you guys really seem to be pissed about is that items that would normally go into the annual budget is going into this spending bill. It's not on accident. No, family planning isn't the most overwhelming and efficient market stimulus, but it is stimulus nevertheless. You guys are throwing out the baby with the bath water.

They are good arguments for what is happening.<br><br />
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SECTREAS Whomever (Pubbie or Dem) will have the same agenda ... take care of friends and contributors.<br><br />
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This bailout will miss too cause it's a scatter gun effect with all the PORK loaded into the shell casing.<br />
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This is payback for winning ... aka The Great American Giveaway.<br />
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It is not, nor was it designed to be, a laser beam on affected areas and problems.

Those are all very good arguments against creating a central bank. Good thing we aren't doing that. <br />
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Now if Paulson had his way, then yes, Goldman Sachs his former employer would have become the central bank. <br />
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Remember my comments, I explained what the first $350 Billion went to, and why it didn't "work". It's because it was misused in order to facilitate mergers and acquisitions, which leads to bigger, more centralized banks. I agree with you and Thomas and Alexander. That's bad. <br />
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We are trying to use money to lift the deadweight mortgages off their books, which would allow them to start the exchange of debt that our monetary system is built on. That is what the first bailout should have done, if it wasn't blatantly misused. Unfortunately, it was, and we're all pissed about it.

oomph ... doesn't come as free needles and condoms and government supervision of health care and family planning to name four.<br />
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Unless we are talking population control ... limit the numbers of citizens to care for ... aka population control Sounds more like other countries.

Hello - we are there! The Founding Fathers did speak on the subject.<br />
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Quote by Thomas Jefferson “If a Central Bank is ever created in America - Through Inflation and Deflation the “Bankers” will Rob The Americans”<br />
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"I sincerely believe... that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor, 1816.<br />
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"Treasury notes of small as well as high denomination, bottomed on a tax which would redeem them in ten years, would place at our disposal the whole circulating medium of the United States... The public... ought never more to permit its being filched from them by private speculators and disorganizers of the circulation." --Thomas Jefferson to William H. Crawford, 1815.<br />
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"To emit an unfunded paper as the sign of value ought not to continue a formal part of the Constitution, nor even hereafter to be employed; being, in its nature, pregnant with abuses, and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people." ~ Alexander Hamilton<br />
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"If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations. ~ Andrew Jackson (i know not a Founding Father ... but sage advice)

you are right...<br />
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see, we now agree on two things!<br />
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Take care.

It's Poe's law. Without a blatant signal that a statement is a joke like a smiley face, it's impossible to tell whether someone is joking or not when it comes to crazy beliefs. <br />
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Now that I see that you were joking, it is pretty cute.

it is if one is easily embarrassed...<br />
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Again, it was a JOKE...meant to lighten things up abit.<br />
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People can disagree and still be civil. That is not what is happening on this site. I am sure we will never agree on much, but I bet you can crack a joke and a smile every now and then.

I'm quite sure they had no knowledge of nuclear reactions, so no, they didn't know what the sun was. <br />
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They were very good in astronomy for a primitive people. That's not saying much. It's embarrassing that there are so many threads on this website obsessing over the Mayan calendar.

lighten up will ya? it was a JOKE.<br />
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They did indeed know what the sun was and were very good in astronomy.

The Mayans were a primitive people that did not even know what the sun was. I don't see why anyone would put any stock into their superstitious predictions.

maybe that is the age of enlightenment the Mayans predicted for 2012?

The founding fathers did not warn us this would happen. That statement is a stunning simplification of what has happened. Like huh? <br />
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They didn't warn us that if we encouraged banks to make sub prime loans and bundle them together and sell the securities that they could poison the world's economy, that the credit markets would freeze, that a weakened dollar paired with lowered consumption would stall credit card companies, that our continued monetary policy under Bush of lowering the interest rates (thru Greenspan) would ***** us of one of our controlling mechanisms of the economy. <br />
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Wanting a situation to be very simple doesn't make it so. <br />
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And Josie, the government here IS acting as the spender of last resort, just as you describe. What else is left besides Gov't intervention? Just because an incompetent and slimy pairing of Bush and Paulson proved unequal to the task, why are you so quick to assume that Obama is the same? He has already pledged that every American will be able to see where every dime of the package is going, it is all going to be on the white house website. Full disclosure, full transparency, full oversight. <br />
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So quit crying and give him a chance to prove himself. He has just gone on the record saying that if this fails and we don't see a recovery, that everyone can blame him. He's taking full responsibility for this, and says if he fails then we can replace him in 2012. It takes tremendous character and courage to make such a bold statement, we never hear anyone make statements like that in politics these days.

With gov'ts past mixed bag history i don't want the intervention.<br />
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i could accept some if there were real safeguards in place. Real accounting to the penny of what is given, how it is spend and what is returned.<br />
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i just don't have the faith in gov't, our gov't, to do that. All of them have been there long enough to know their track record on that.<br />
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And promises are not showing up in the text of the bill. Giving should come with the stipulations attached ... not brought up at a later date.<br />
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Governments cause recession by their policy and financial actions. Consumers cause recessions cause they buy less. Business cause it due to cut-backs and can occur before the consumer cuts-back.<br />
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Gov't should always be the spender of last resort. Cutting interest rates is great for people who have variable-rate debt but it sucks for people who have cash. Higher government spending is all well and good for those who build roads or grow corn, but doesn't mean much for the guy who runs a bakery or works at a video store (except, eventually, higher taxes).<br />
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Gov't action and inaction cause problems in the economy. Gov't ineptitude (like repealing provisions in the Community Reinvestment Act on sound lending and repelling Smoot-Hawley) lead to this problem we no find ourselves deeply emmeshed in.<br />
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Tax cuts and additional spending--especially deficit spending--tend to increase business activity, but even that can cause problems.<br />
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i'm willing to bet his best intentions will be screwed by Congress, the jack-a-lopes we've elected to the House and Senate.

If government were the answer there is no reason why we are here are why the rest of the world is. We are on the boat with them because our governemnt wanted to ride along. The founding fathers warned us against just what has happened if we allowed the government to be in charge.

And if you read my posts I illustrate why the GOVERNMENT is the only entity that can turn a stagflating economy around. It's a vicious whirlpool what feeds off itself.

Ok, so you admit you are so philosophically against government intervention that you will not accept any scenario under which it can be successful or helpful. Thankfully, the majority of Americans disagree, as they will gladly take government intervention and inflation over accelerating job losses and continued stagflation. I have described to you why the first portion of the bailout did not unfreeze the credit markets. <br />
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Obama is making many promises on the oversight of this money and requirements such as pay caps and no golden parachutes. Perhaps everything he says is a lie as people like Rush and Hannity would have you believe. I am willing to bet that he will do a much better job of helping the economy than Bush and Paulson did.

if you read many of Josie's and my stories you will find we were against bailouts for anyone from the begining. It has nothing to do with Obama and everything to do with GOVERNMENT not doing it's job per the consitution.

1. Foreign banks and/or companies should never recieve US dollars through a government bailout.<br><br />
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2. History of U.S. Gov't Bailouts (http://www.propublica.org/special/government-bailouts). <br><br />
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3. What Happens After a U.S. Gov't Bailout? (http://www.propublica.org/special/bailout-aftermaths#franklin) - mixed bag. Billions in losses still outstanding.<br><br />
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There is till no oversight nor will there be any enforced.<br><br />
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The same causation that brought about all the scandals and bailouts in recent US Congressional history.<br />
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Also, why would VP Biden say it has only a 30% change of success? (some ABC interview i saw)

1. Foreign banks and/or companies should never recieve US dollars through a government bailout.<br />
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2. History of U.S. Gov't Bailouts (http://www.propublica.org/special/government-bailouts). <br />
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3. What Happens After a U.S. Gov't Bailout? (http://www.propublica.org/special/bailout-aftermaths#franklin) - mixed bag. Billions in losses still outstanding.<br />
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There is till no oversight nor will there be any enforced.<br />
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The same causation that brought about all the scandals and bailouts in recent US Congressional history.

The original $700B was split into two parts. Bush and Paulson doled out $350B to a handful of big banks, without requirements on what the banks would do with it. The banks used that money for acquisitions. They bought up other banks and consolidated. They did squat to deal with the credit market. That is why the CEOs of 8 major banks were getting grilled by congress today. People are pissed, and rightly so. <br />
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Paulson first came forward with his 3 page proposal (LOL!) which actually had the ball$ to say that after the money is spent, no one would have the ability to question the way it got spent. Congress managed to shape this package a little bit, but there was nowhere near enough oversight on what the money was going to do once the banks got it. <br />
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The original intent of the money was to buy up the troubled mortgage assets. After the money was handed over, Paulson changed his mind and said they decided to go a different direction. They started purchasing stock and infusing money directly to the banks, which they then used to buy up smaller banks. Nothing to do with the credit market, so we were no better off. <br />
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Now Obama is set to spend the other $350B and people are pissed. They should be, but not at him. Blame Bush and Paulson for paying off their friends at Goldman Sachs and other big a$$ banks that took the taxpayer funds, paid themselves $18 B in BONUSES and left the credit market and troubled assets to rot. <br />
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This is what has happened. And now Obama is facing stiff resistance because of George's parting gift of a middle finger to the American people. And you're not correct about the government loans never getting returns. The Savings and loan debacle ended up returning a profit to the taxpayers.

ok, I read everything. bottom line. we need to go back to the gold standard, get rid of the federal reserve, cut the capital gains tax, get rid of the market to market acounting of the bad assets so that they will have a value, cut the business tax at least in half, make the tax code simple (if the declaration of independence could be one page and start a country we should be able to get a tax code down to just a few pages). If families and companies have to live within budgets then so should the government. The government needs to abide by the Consitution, our leaders need to understand they work for the American People and that we are thier boss. Many Apericans are takeing cuts in pay and less hours to keep thier jobs. It's time those in Washington took big cuts in pay as well.<br />
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If a spending bill must be shoved up my *** then I want to have a say in what is in it. the 30billion for a rat study for Polisi's home town needs to come out.<br />
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There are many many things that can be done to turn the economy around, create jobs and for a "real change" not be money out of our pockets.

My question whattup: Banks are receiving money in this bailout. Banks are in the business of loaning money. Where is the influx of bailout money going? <br />
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Banks are not turning it around and loaning it to the consumers. At least not 100% of what they are receiving. <br />
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Plus many now have as stockholders the US Government as shares (preferred shares) were given in return for the bailout money.<br />
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The federal government has never made a return on it's loans and i don't foresee them doing so now.

SaratogaGirl, you maybe interested in this study/report too:<br />
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Sunday, November 16, 2008<br />
FDR lengthened the Great Depression<br />
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Some works have taken a revisionist approach to point out that FDR's economic policy errors hurt our economy. Books like The Forgotten Man, Rethinking the Great Depression, and FDR Folly are three works that make the case that FDR made errors that lengthened the Great Depression. FDR's Folly has the following liner note endorsement:<br />
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"Admirers of FDR credit his New Deal with restoring the American economy after the disastrous contraction of 1929—33. Truth to tell–as Powell demonstrates without a shadow of a doubt–the New Deal hampered recovery from the contraction, prolonged and added to unemployment, and set the stage for ever more intrusive and costly government."<br />
–Milton Friedman, Nobel Laureate, Hoover Institution<br />
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Via Parapundit, we learn that UCLA economists (http://www.newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx) calculate FDR lengthened the depression by 7 years:<br />
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Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.<br />
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After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.<br />
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"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."<br />
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In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.<br />
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"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."<br />
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This is stunning but unsurprising work. If you study the economic history of many nations, you can see how socialism has created poverty and hurt economic growth in many situations. But the Great Depression remains a misunderstood era, due to that 'popular' history written by liberals; they wrote the history without asking the question of whether the "New Deal" policies actually worked (or assuming they did work). But the verdict now is clear: The New Deal was an economic failure for the United States, even if it was a political success.

There are many reasons the credit markets are frozen, but its not because people don't have the cash to spend. The people who are unemployed obviously can't qualify for loans, but what I'm talking about are the employed people who 2 years ago would have no problem getting financing but now cannot. Businesses are not getting the loans they need to keep operating. As a result, their only way to survive is to cut costs (lay off workers). <br />
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I think you are still underestimated the scope of this problem. I work in the RV finance field, and I've seen the restrictions around me.

Alarming ... yes. Credit market are frozen cause people as consumers don't have the cash to spend. Business is getting it all and frankly not getting back to the people.<br />
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i'm not trying to down play it. i firmly believe that government is not the answer.<br />
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FDR, as all President do, have their good points and their bad points. FDR has a sufficient number of both.

Josie... <br />
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From The Guardian... Michael Tomasky's blog for that newspaper:<br />
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Unemployment in the 30s: the real story<br />
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We're enduring a lot of spin these days from conservatives about how the New Deal did nothing to alleviate jobs. It wasn't until World War II, they say, that the Depression ended and unemployment went down. The idea, of course, is that government spending won't do a thing to alleviate our problem or create jobs.<br />
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They're getting their talking points from Amity Shlaes, the American conservative who wrote an attack on New Deal economic policy a while back that the right just eats up. Texas GOP Senator Kay Bailey Hutchison trotted this horse out in an op-ed yesterday in the Austin American-Statesman. Hutchison, and Shlaes and conservatives generally, are wrong.<br />
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There is some degree of truth to the notion that that economic stagnation didn't really get turned around until the war. That is, it wasn't until the US economy was placed on full-throttle war footing in 1942 (remember, your WWII started in fall 1939, but ours didn't start til December 1941) that unemployment went down to the normal range of around 6-7%.<br />
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But that doesn't mean that unemployment didn't change at all in the 1930s.<br />
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The distinguished economist James K. Galbraith rebuts Hutchison in a letter to the editor he wrote that the paper now has in its possession. Galbraith writes: "With respect to Senator Kay Bailey Hutchinson, [FDR's treasury secretary] Henry Morgenthau was not correct to write in 1939 that there was "as much unemployment as when we started" the New Deal. In 1933 the civilian unemployment rate was 25 percent. In 1939 it was less than half that, and had been below 10 percent before Roosevelt tried to balance the budget in 1937."<br />
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They both can't be right, and of course Galbraith is. Read this for an authoritative accounting. In sum, the unemployment rate was indeed about 25% in 1933, when FDR took office. The official numbers have unemployment sliding steadily down to just below 15% by 1937, then bumping back up during the 1938 recession to 19%, then sliding down again, finally getting into single digits during wartime.<br />
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The population of the United States in the 1930s grew during the course of the decade but was something around 127 million. That means that, using the official numbers, unemployment decreased by around 12 million from 1933 to 1937. That ain't a kick in the head, as Dean Martin used to say. But the actual numbers tell an even more impressive story.<br />
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As the page linked above explains, in 1976, an economist named Michael Darby brought out the fact that the official unemployment numbers from the 1930s did not include Americans given emergency relief work by the government. If you helped build the dam in the Tennessee Valley or performed any job under the auspices of the Works Progress Administration, you weren't included in the official count, I suppose because the jobs were considered not to have been generated by the "real" economy.<br />
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But even so, these jobs did represent people who were getting up in the morning and going to work. And getting paid. And consuming and saving etc.<br />
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As the web page notes, this practice was precisely the opposite of both Nazi Germany and the USSR. In those places, they counted "government employment" (forced work) in their statistics. Lovely thought, eh? If you were in Buchenwald, not only was your arbeit machting you frei, but you had the satisfaction of knowing that you were contributing to the German economy!<br />
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So, let's reexamine the 1930s in the US through this lens – counting government employment. The 1933 unemployment figure taking government employment into account was around 22%. By 1937 it was, as Galbraith says, below 10%. It bumped back up near 13% in 1938 and then went back down to 10% by 1940.<br />
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That's a reduction of more than half – and in raw numbers, about 15.5 million jobs created or saved from 1933 to 1938. In addition, as Galbraith notes, "the years from 1933 through 1936 brought the highest peacetime growth rates on record, as output and job growth responded to Roosevelt's action programs. FDR's overwhelming reelection in 1936 would not have happened otherwise." (I'm sorry there's no link to his letter, and won't be until the paper publishes it; I am using it with his permission and quoting from it accurately, although obviously I can't control whether the paper will publish it and what it might edit out).<br />
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So the New Deal worked pretty doggone well. It didn't solve every problem. Yes, there are other legitimate criticisms to be made of Roosevelt. But the New Deal kept millions from starving and gave them jobs. And it generated economic activity – rural electrification, for example – that brought society tremendous benefit. And how might only tax cuts or doing nothing have done?<br />
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I can't believe we have to reargue these points. It's not that the Republicans don't know anything about economics. It's that they don't want to know anything about economics, and don't want to reckon with evidence. They have their ideology, chiseled into Pharaoh's obelisk, impervious to fact. How does one erase it?"

I am not a fan of using scare tactics. I grew weary of the scare tactics used by republicans in the War on "Terror" and their daily 'elevated' terrorist attack warnings and color coded system by the DHS. <br />
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However, what we have happening right now is a very alarming accelerating of bad economic news. Those who want to do something about it wouldn't mind the news amplified, while those that oppose Obama would like the economic figures muted. Which of these actions is worse? <br />
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Given that the credit markets are still frozen and credit card companies are now stockpiled with debt they cannot sell, the people that are downplaying the economic crisis are guilty of the far greater crime. This isn't going to fix itself. <br />
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I'm glad you mention FDR's bank holiday, at least I know you're not one of the mindless trolls spouting their anti-FDR slop. Too much of the press today is yammering away this revisionist history about how FDR didn't do anything right and only succeeded in extended the Great Depression. Listening to the news today and many of the posters on this website, you'd get the idea that he literally didn't do anything right. Propaganda.

i didn't say or even mean to imply that the rebates and cuts were sufficient on their own.<br />
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i question government being the majority spender in this equation. There may be short-term benefit but there will be long-term 'buyers remorse' in the form of debt.<br />
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Depression Era Unemployment Statistics (DOL)<br />
1929 -3.14%<br />
1930 - 8.67%<br />
1931 - 15.82<br />
1932 - 23.53%<br />
1933 - 24.75%<br />
1934 - 21.6%<br />
1935 - 19.97%<br />
1936 - 16.8%<br />
1937 - 14.18%<br />
1938 - 18.91%<br />
1939 - 17.05%<br />
1940 - 14.45%<br />
1941 - 9.66%<br />
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[Source: U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D.C., 1960), p.70.]<br />
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Trying to scare people is not the way to fight a recession and job loss. <br />
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Last year approximately 2.5 million Americans lost their jobs, and (legal/visa's) 1.5 million foreigners were imported to replace them. This doesn't touch the illegal aliens who take jobs. Illegal immigration skews, complicates and screws the American citizen and the job market.<br />
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FDR declared a "bank holiday" the day after his inauguration. Roosevelt did that to stop any further damage to the system. President Obama has the power to do the same by a stroke of the pen as an Executive Order. Stopping foreclosures and job looses.<br />
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Trillions of dollars of private wealth (individual and corporate) will leave the country over the next several years to more favorable places.

dollar value will decline, as it has been declining for most of recent history. I'm not saying that isn't a big deal, it is. What I am saying is that inflation is much more preferable to spiking unemployment and underemployment rates. <br />
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There are many different aspects to employment like you point out, due to seasonal changes etc. What those numbers you posted don't reflect is underemployment. The past few decades we have lost about 90% of our manufacturing power as we have become a service economy. We've traded steel worker jobs for Wal-mart greeter jobs. Technically they are both jobs and so they equally contribute to the overall unemployment rate, which doesn't look that much different from the recent past. <br />
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Part of the country, however, are beginning to show alarming trends. The millions of jobs being cut in the past year means less families have money to spend, which reduces revenue for all business and stockpiles inventory, and which leads to further job cuts. This is a vicious cycle. Before Obama's press conference he spoke in Elkhart, Indiana. They have watched their local unemployment rate go from 4.7% to over 15% this past year. <br />
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Like I pointed out in my last post, just giving tax rebates to people and companies isn't going to stimulate the economy, because people are going to hoard that money since they see so many of their neighbors getting laid off. <br />
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As for that graph I posted, it comes from the Bureau of Labor Statistics, not Pelosi. You can see the breakdowns you mention by going to their website. The point of putting out a general graph of job losses is to show the net effect being applied all across the board. All industries are stuggling, the aggregate is that alarming graph. Does it scare? Yes. The numbers are accelerating, people SHOULD be scared.

The chart makes it look like we have gone to H*ll in a hand basket. However it says nothing as to how the figures were obtained. What are the figures 'total underemployment', non-farm', institutional', 'job losers', average of weeks', 'youth', male', 'female', 'race' ... what? Unknown. Just 'Job losses', i would not assume anything from that chart without the accompanying text that explains it. On it's own it just tends to scare and i bet that why Speaker Pelosi put it out. <br />
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The US Unemployment Rate - by Year<br />
1992 7.49 7.49 Bush, G.H.W.<br />
1993 6.91 6.91 Clinton<br />
1994 6.10 6.1 <br />
1995 5.59 5.59 <br />
1996 5.41 5.41 <br />
1997 4.94 4.94 <br />
1998 4.50 4.5 <br />
1999 4.22 4.22 <br />
2000 3.97 3.97 <br />
2001 4.76 4.76 Bush, G.W.<br />
2002 5.78 5.78 <br />
2003 5.99 5.99 <br />
2004 5.53 5.525 <br />
2005 5.08 5.08333333333333 <br />
2006 4.63 4.63333333333333 <br />
2007 4.61 4.60833333333333 <br />
2008 5.76<br />
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Everyone seems to want to argue so that since we perceive it to be the worst crisis since the Great Depression and that normal circumstances would not necessarily apply. Therefore we could possibly see unemployment rates as high as 10-11%. Again, i must stress that is speculation on the part of many based on very rough assumptions.<br />
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Are we having a bad time ... yes. Are we in a Great Depression ... No.<br />
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Further the best way to have this turn around is put money in the hands of consumers to save or spend.<br />
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By the FED printing more money they are not increasing anyone's purchasing/savings power ... they are just redistributing it and cutting it value.<br />
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More money ... dollar value declines.

I'm not interested in blame. <br />
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Dems blame the last administration and their stupid tax cuts for the wealthy, Republicans blame Frank and Todd for pushing for more mortgage lending, others blame the Reagan revolution of trickle down economics and the reduction of tariffs which screwed our trade policy, others blame Clinton for NAFTA/CAFTA, still others blame Wall street companies and execs which took far too many risks with far too risky assets, still others blame the banks for doing the same thing, still others blame Greenspan and the FED for continually reducing rates... the list is endless. The result is that no one is clean, and there's plenty of blame to go around. Who cares?<br />
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I'm interested in suggestions. Is your position to simply let the free market fix itself? If so, at what point is some action required? For the people who think the economy is not that bad, please comment on this graph which compares our current recession with the previous two recessions: http://www.speaker.gov/img/jobsrecessions.jpg

GRANDSTANDING to Pass the bill. Nothing else. No real talk about finding a way out. They are finding a way into deeper debt ... for our children.<br />
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Americans will still be jobless if government allows the hiring of illegal aliens for any jobs created. Government does not create the kind of jobs we need ... business creates those jobs. A bloated government bureaucracy isn't job creation.<br />
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Congress created the atmosphere with deregulation and thereby created the problem. One thing we do not need is more government employees determining what citizens can have and what they can be paid.

Hmm, so the last few weeks that this has been the biggest news story around, no one has been talking about it in congress? Huh? I have seen many republicans grandstand about what a travesty this bill is, but like I said before, I have yet to hear a single suggestion. All complaints and blockage, and no suggestions. <br />
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It's true that the democrats were the ones that came up with the original spending bill. The democrats, you may have noticed, have significant majorities in both houses of congress. What is odd about that? They control the committees. As our brilliant ex-president has said, "elections have consequences". <br />
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I do have suggestions, we shouldn't include so many tax cuts in this package. Right now it's made up of 40% tax cuts and 60% spending. (strange that it mirrors the representation of dems to republicans in the senate, hmmmm). Tax cuts, ESPECIALLY in a severe recession such as the one we are in, have very little stimulus effect on the economy. Why? Because in this environment if you hand everyone $1000 they aren't going to spend it, they are going to save it or pay down debt. Guaranteed. It's the logical thing to do in such a severe recession, and it will not do anything to stop this spiral our economy is in. This is the worst recession since the great depression. We've lost over 3 million jobs in the last few months, 600,000 in January. It is bad and accelerating.

whattup ... that is because Congress didn't want discussion. They wanted to spend. Congress didn't hold hearings or anything to determine the real problem or how to react/correct it. They wanted to spend.<br />
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i guess since you have no suggestions, you agree with whatever Congress wants and think about it no more.<br />
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My one suggestion would be to have let the free market economy make corrections as was done many times in the past. But no one, possibly even you would, listen or agree with that suggestion.<br />
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Some industries should not have been included. Any bailout should have been limited. <br />
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As i quoted in an earlier comment post:<br />
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FDR’s Treasury secretary (and close friend) Henry Morgenthau Jr. acknowledged that the New Deal had proved to be an economic disaster.<br />
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"We have tried spending money; we are spending more than we have ever spent before and it does not work," he told senior congressional Democrats. "I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . . After eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt to boot!"<br />
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We never learn. Politicians never learn ... they only want to accrue more power to themselves.<br />
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Compalianing on food stamps .... No! Complaing on inclusion in a so-called Stimulus Bill ... Yes!<br />
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Food stamps are an entitlement that government has created for people. Ordinarily they belong in a budget bill (as they always have been) and should have been done as such now. Normal operating costs of big government doing business.

Again, we're waiting for any other suggestions instead of more complaining... I have not heard a single republican suggestion from anyone besides "increase and extend tax cuts"... you know, kind of like what we've been doing for the last 8 years. It's worked wonderfully. <br />
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The complaining about the food stamps was also odd. Food stamps are the most stimulative thing that we know of. That's because people who get food stamps spend food stamps, without fail. This pumps money directly into the economy.

GM Is Using $1 Billion of Its Bailout Money In Brazil<br />
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General Motors to Invest $1 Billion in Brazil Operations -- Money to Come from U.S. Rescue Program<br />
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By Russ Dallen<br />
Latin American Herald Tribune staff<br />
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SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.<br />
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http://www.laht.com/article.asp?CategoryId=12396&Article...

This bill will be passed and because it is moving so fast no one is taking the time to take it line by line to know what it really says. This is really scary.

This Stimulus Bill also had buried in it:<br />
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Key quotes:<br />
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- the bill calls for all Americans' medical records to be computerized by 2014<br />
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- HIT will provide "appropriate information to help guide medical decisions."<br />
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- the goal of the new program is "to reduce costs and 'guide' your doctor's decisions."<br />
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The New Administration's and Congress's attempt to move toward Socialized Medicine and Universal Health Care?

Pelosi already intimated in press interviews that the original House Bill was back on the table. The bigger $$$$ one.

So on the news this morning it is annouced that the committee to take both bills and come up with one is about ready and the hope is that they can bring it to the floor for a vote tomorrow night. WTF<br />
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Guess who the committe members are, Pelosi, Reaid and the three Republicans that got the spending bill to pass; Susan Collins, Olympia Snowe, and Arlen Specter. How nice. I can't wait to see what combined bill these five come out with.

The bill, which passed is flawed.<br />
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$650M for DTV Conversion Coupons<br />
$335M to prevent the spread of Sexually Transmitted Diseases<br />
$50M for new funding for the National Endowment for the Arts<br />
$462M for the construction/renovation of the facilities for CDC<br />
$600M for new cars for government workers<br />
$400M for Global Warming Research<br />
$150M to repair Smithsonian Facilities<br />
$5.2M for Neighborhood Stabilization Programs (read ACORN)<br />
$200M for Family Planning Services (condoms & abortion = less people less cost?)<br />
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$20B for Food Stamps - BILLION <br />
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This does not stimulate the growth of the economy. This are regular government expense of doing business.<br />
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STIMULUS of the economy was the reason ... not pet projects and PORK.<br />
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Yes, the economy needs stimulated. However the American people can not afford to rescue the Banking Industry and the Auto Industry and the Mortgage Industry and all the others lining up ... **** Industry, State Government, Local Government ad infinitum. <br />
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Of the jobs created they are only temporary ... once the project or restoration or whatever is over they are done. GONE. Short term short ...<br />
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FDR’s Treasury secretary (and close friend) Henry Morgenthau Jr. acknowledged that the New Deal had proved to be an economic disaster.<br />
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"We have tried spending money; we are spending more than we have ever spent before and it does not work," he told senior congressional Democrats. "I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . . After eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt to boot!"<br />
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We never learn. Politicians never learn ... they only want to accrue more power to themselves.<br />
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You have the rich on both sides of this - 'Country Club Conservatives' and 'Limousine Liberals'. Both sides are heavily invested in the Press, Institutions of Higher Learning and more. The Industries that we are bailing out.<br />
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This massive debt was, IMHO, engineered by those wanting to cause panic and spend money. By Dems, Pubbies - including former president Bush's and current President Obama's backers. If you look many, many are the same folks.<br />
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Congress and politicians never allowed the free market to make any corrections ... the Bailout was touted as the only, i stress only, answer. No others were ever looked at. Just the Bush Bailout Bill and the Obama Bailout Bill.<br />
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The Mortgage Industry problem goes to poor lending practices aided and forced on business by Congress in order to get more lower income people into homes. Bad decisions by business - do not need to be rewarded ... even when following Government mandates.<br />
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The Bailout is their reward. A true bailout to gain consumer confidence would be a tax cut in order that they might save it or spend it ... thus adding to the GNP.<br />
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John F. Kennedy cut tax rates during the 1960s, tax revenues went up. Ronald Reagan did it in the 1980s, tax revenues went up. George Bush did it in early 2000s, and tax revenues went up. Makes perfect sense if you understand the Laffer Curve. <br />
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Income tax cuts apply to income, not wealth. Stop that BS please.<br />
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Recessions do hurt, however recessions can be compounded with huge government growth that hurts worse. So much worse that they will turn into a depression, due to government excess.<br />
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We have options ... we never explored them.

Re-election and the draining of every American's pocketbook.

Obama and his clowns want more and more people dependent on the government for their daily needs. This will ensure the re-election of the clowns already there and a way to get new clowns in so that the circus is complete.

It's not the best available ... that's the problem.<br />
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i'm not saying that something didn't need to be done. i'n not saying sit back and wait forever.<br />
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These stimulus bills (Bush's and Obama's) were not needed at this time. HHS, the FED had sufficient power and authority to act ... without the additional powers.<br />
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Private enterprises create jobs and GNP ... not the federal government.<br />
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It is loaded with other items like ... regulating health car for one. It gives monies to projects and entities that do not create sustainable jobs.<br />
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The stimulus is debtors prison for our children and grandchildren.