The Big Bill: Debt and Developed Countries

share save 171 16 The Big Bill: Debt and Developed Countries tagged federal budget economy

The current cover of The Economist is awfully on-point, with a giant ball and chain attached to a crawling baby. It is, of course, the debt bill faced by the developed world, which is the biggest in history.

The entire associated article is empirical, direct, and highly worth reading.

via The Big Bill: Debt and Developed Countries By Paul Kedrosky · Saturday, June 13, 2009 as quoting from The Economist print edition via Government debt: The big sweat | The Economist.

The cover says it all

2009 06 13 1027 thumb The Big Bill: Debt and Developed Countries tagged federal budget economy

And for those who like data, the chart is pretty graphic as well!

cbb594 The Big Bill: Debt and Developed Countries tagged federal budget economy

Read the full article in The Economist and then call your Senators and Congressmen and implore them to find a way to put the brakes on with the spending spree.

American Thinker: The Top Ten Reasons Obamanomics Won’t Work

share save 171 16 American Thinker: The Top Ten Reasons Obamanomics Wont Work tagged taxes stimulus politics federal budget economy

Following is an intro to an interesting piece on “obamanomics” that includes some very thoughtful analysis.  View this without a political agenda and just ask yourself whether there is economic reality in the current federal monetary policy and what is intended as an approach to stimulate an economy perceived to be weak.

The comments following the full article are quite pithy and worth reading.

A brute inflationary monetary policy of the kind we are experiencing today can hardly avoid leading to a growth in GDP that, after all, is largely a record of consumer spending. But we cannot judge an economic policy to be “working” simply by detecting such an increase in GDP. Nor may we say policy has “succeeded” just from increases in government jobs or government-subsidized jobs. An economy’s success, properly speaking, is one that increases long-term levels of production with robust private sector employment. In short, inflation and public sector growth do not mean a policy has “worked.” As the essence of Obamanomics is easy money and government aggrandizement, ther

via American Thinker: The Top Ten Reasons Obamanomics Won’t Work.

Alex Tabarrok on how ideas trump crises | Video on TED.com

share save 171 16 Alex Tabarrok on how ideas trump crises | Video on TED.com tagged TED.com economy

Alex Tabarrok: How ideas trump economic crises — a surprising lesson from 1929

via Alex Tabarrok on how ideas trump crises | Video on TED.com.

About this talk

The “dismal science” truly shines in this optimistic talk, as economist Alex Tabarrok argues free trade and globalization are shaping our once-divided world into a community of idea-sharing more healthy, happy and prosperous than anyone’s predictions.

Almost as good as the talk, which is embedded below, are the comments. At the moment my mind is open to his premise, but I worry that his economic globalization parallels the troubling “one world order” that is a continuing undercurrent in America’s national and international policy.

[ted id=525]

From a Republic to Oligarchy

share save 171 16 From a Republic to Oligarchy tagged taxes stimulus politics history economy congress bailout

Are we there? Note some definitions of an oligarchy:

ol·i·gar·chy (ŏl’ĭ-gär’kē, ō’lĭ-) n. pl. ol·i·gar·chies
Government by a few, especially by a small faction of persons or families.
“oligarchy.” The American Heritage® Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. 27 Apr. 2009. <Dictionary.com http://dictionary.reference.com/browse/oligarchy>.

OR

Oligarchy (Greek Ὀλιγαρχία, Oligarkhía) is a form of government where political power effectively rests with a small elite segment of society distinguished by royalty, wealth, family, military powers or occult spiritual hegemony. …
en.wikipedia.org/wiki/Oligarchy

There is a very interesting article in the May 2009 edition of “The Atlantic” which is introduced with the following premise

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises.

America was founded as a representative republic (not a pure democracy, although most people unfortunately blur this most important distinction). Citizens were to go to the seat of a limited government and, especially in the House of Representatives, serve a short while and return home. The notion was they were close to the people, would represent the people’s best interest, and return to their communities. Accountability was automatic.

Now we have professional politicians, people who not only have made governing their life’s occupation and many of whom have known no other calling for the majority of their adult life. They don’t return to their communities in any real sense of the word. Accountability is difficult, almost nonexistent if you think of the recent hue and cry of the people against bailouts and incurring debt to solve a problem created by excessive debt. “They” live by rules far different from those imposed upon the people they were sent to Washington to represent.

Read the article:  Simon Johnson, The Quiet Coup – The Atlantic (May 2009).

The author was economist (see bio snippet below) at the International Monetary Fund — the entity that makes loans to struggling third world countries and emerging markets. What does that have to do with the current conditions in the United States you ask? The author describes desperate debt-laden counties with political systems that increasingly allow the foolish and risk-taking components of the economy to push their problems onto the public section — the people, you and me — due to their political interconnectivity.

Sound familiar?

The argument can be made that while Congress has 535 members, it and the Executive, in concert with critical influences in our economy, have become a small governing group and America has become

a form of government where political power effectively rests with a small elite segment of society distinguished by royalty, wealth, family, …

In other words:  an oligarchy. Consider the following quote

“Well, Doctor, what have we got—a Republic or a Monarchy?”
“A Republic, if you can keep it.”

Benjamin Franklin (1706–90).

The response is attributed to BENJAMIN FRANKLIN—at the close of the Constitutional Convention of 1787, when queried as he left Independence Hall on the final day of deliberation—in the notes of Dr. James McHenry, one of Maryland’s delegates to the Convention.

via 1593. Benjamin Franklin (1706-90). Respectfully Quoted: A Dictionary of Quotations. 1989.

Can we keep it? Or have we already lost it?

Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008. He blogs about the financial crisis at baselinescenario.com, along with James Kwak, who also contributed to this essay.

Understanding terms: deficit and debt

share save 171 16 Understanding terms: deficit and debt tagged taxes federal budget economy

Talk about federal budgets can be confusing. Most states (including Texas, thankfully) have constitutional requirements for balanced budgets each year. Therefore, states don’t go into debt like the federal government does. The feds can run deficit budgets and therefore increase debt, and that is what happens year after year. A budget, and the resulting deficit, is a one-year-at-a-time proposition, yet we often hear people use the term deficit and national debt interchangeably — which they are not. The national debt is a cumulative figure and, sadly, often ignored in the discussion.

The debt figure is important for the fact that it accrues interest — increasingly payble to the Chinese and other foreign governments — and is an ever-increasing burden building into the future. Here are two charts that demonstrate (a) the medium term effect of current deficit budget proposals and (b) the effect on the resulting debt from the deficits. Frame those for your children and grandchildren.

obama+deficits Understanding terms: deficit and debt tagged taxes federal budget economy

Medium-term deficit projections

obama+budget+debt Understanding terms: deficit and debt tagged taxes federal budget economy

... and here is the resulting debt ...

50% off Sale — First Raise the Prices — Your Fiscal Policy at Work

share save 171 16 50% off Sale    First Raise the Prices    Your Fiscal Policy at Work tagged taxes federal budget economy

The problem is not just the spending supposedly needed for the current economic emergency. Obama claims that he will cut the deficit in half, to $533 billion, by the end of his first term. Two problems: 1) The Congressional Budget Office says the more likely number is $672 billion, and 2) that is 46 percent more than the deficit in 2008. Worse yet, the CBO says the deficit will then resume its upward trajectory, reaching $1 trillion by 2018 and nearly doubling the national debt over the next decade.

via Steve Chapman : The Truths Behind the Tea Parties – Townhall.com.

Scary thoughts indeed. The writer first makes a point that is encouraging about the real meaning of the ‘tax day tea parties’ which I hope is true.

So why did people rally across the country when they should have been planning how to spend their tax refunds? Because their true dismay is about the mushrooming of federal outlays, which the demonstrators regard as a future tax increase in the making. Which, of course, it is.

Power Line – Is the stimulus bill unconstitutional?

share save 171 16 Power Line   Is the stimulus bill unconstitutional? tagged stimulus economy constitution congress

This is big. Not only for the fact that it may portend a constitutional crisis but for yet one more demonstration of (a) the arrogance of the current Congress and (b) the lengths and depths to which this Congress and Administration will go to expand welfare and unemployment programs, each of which will surely hasten the destruction of the greatest country the world has known. Not only is this scary, but it is indeed simply, sad. America was built through hard work and entrepreneurship — not by motivating people to look for handouts!

From Powerline:

Is the stimulus bill unconstitutional?

March 15, 2009 Posted by Scott at 7:28 AM

Professor Ronald Rotunda is the prominent constitutional law expert now at Chapman Law School. In the column “Some strings attached” for today’s Chicago Tribune, Professor Rotunda looks under the hood of the so-called stimulus bill. In part the stimulus bill is calculated to expand welfare and unemployment programs. These provisions have prompted a few governors to reject the related funds.

Professor Rotunda points out that Congress anticipated these governors. Seeking to bypass such uncooperative governors, Congress added a unique provision to the bill (in section 1607(b)): “If funds provided to any State in any division of this Act are not accepted for use by the Governor, then acceptance by the State legislature, by means of the adoption of a concurrent resolution, shall be sufficient to provide funding to such State.”

Professor Rotunda asks: If state law does not give the state legislature the right to bypass the governor, how can Congress just change that law?

via Power Line – Is the stimulus bill unconstitutional?.

If we could but measure the matter, I fear that very soon, if not already, the numbers of people receiving what much of our society has come to regard as “entitlements” will outnumber the productive members of society.  And by “productive” I don’t refer to entrepreneurs or investors solely, but any person who puts in a fair day’s work for a fair day’s wage — whatever that may be.

In 2006 (the most current figures available) the bottom 50% of taxpayers pay only 2.99% of total taxes and the top 5% pay about 60% — see chart below. How can that possibly continue, especially in the times of economic downturns such as the 08-09 recession? It can’t.

As the top 2% makes less money, which is now occurring, then the 80% slice of tax generation will decline. What would be done then — raise taxes?  A bit of math will demonstrate that once the top tier is earning substantially less income, then even at a 100% tax rate the federal budget will not be funded. Exactly where that cross-over point is, I don’t claim to know. But what I do know is that we’re headed that direction — a direction which is a recipe for disaster.

And don’t assume it’s the “wealthy” who are paying the taxes: as seen from the chart below, the top 25% pays 86% of the total taxes and that includes taxpapers making over just $64,702 Adjusted Gross Income! That includes a lot of families simply working hard at honest jobs for a wage. Not “fat cats.”

Here is the chart from the National Taxpayers Union which attributes the figures to the IRS:

Percentiles Ranked by AGI

AGI Threshold on Percentiles

Percentage of Federal Personal Income Tax Paid

Top 1%

$388,806

39.89

Top 5%

$153,542

60.14

Top 10%

$108,904

70.79

Top 25%

$64,702

86.27

Top 50%

$31,987

97.01

Bottom 50%

<$31,987

2.99

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

There IS a breaking point. Do we want to push to the very edge and find out where it is? I think not.

Chuck Schumer, the American People DO Care

share save 171 16 Chuck Schumer, the American People DO Care tagged stimulus politics economy congress

The arrogance of Sen. Schumer is almost beyond belief. In case you missed it, he said

And let me say this, to all of the chattering class, that so much focuses on those little, tiny — yes, porky — amendments: The American people really don’t care.

and to really understand the arrogance, here’s the video:

Let’s put into perspective just what he’s talking about when referring to “those little, tiny — yes, porky — amendments ….”

Maybe when you’re a member of the political elite in charge of the nation’s massive budget you lose perspective of what is and is not tiny, but I’m looking at the list of pork projects included in the “stimulus” and they don’t see so tiny to me.  Here’s one list Ed Morrissey put together:

$2 billion earmark for FutureGen near zero emissions powerplant in Mattoon, IL
$39 billion slush fund for “state fiscal stabilization” bailout
$5.5 billion for making federal buildings “green” (including $448 million for DHS HQ)
$200 million for workplace safety in USDA facilities
$275 million for flood prevention
$65 million for watershed rehabilitation
$200 million for public computer centers at community colleges and libraries
$650 million for the DTV transition coupon program
$307 million for constructing NIST office buildings
$1 billion for administrative costs and construction of NOAA office buildings
$100 million for constructing U.S. Marshalls office buildings
$300 million for constructing FBI office buildings
$800 million for constructing Federal Prison System buildings and facilities
$10 million to fight Mexican gunrunners
$1.3 billion for NASA (including $450 million for “science” at NASA)
$100 million to clean up sites used in early U.S. atomic energy program
$10 million for urban canals
$2 billion for manufacturing advanced batteries for hybrid cars
$1.5 billion for carbon capture projects under sec. 703 of P.L. 110-140 (though section only authorizes $1 billion for five years)
$300 million for hybrid and electric cars for federal employees
$198 million to design and furnish the DHS headquarters
$255 million for “priority procurements” at Coast Guard (polar ice breaker)
$500 million for State and local fire stations
$180 million for construction of Bureau of Land Management facilities
$500 million for wildland fire management
$110 million for construction for the U.S. Fish and Wildlife Service
$522 million for construction for the Bureau of Indian Affairs
$650 million for abandoned mine sites
$75 million for the Smithsonian Institution
$1.2 billion for summer jobs for youth
$412 million for CDC headquarters
$500 million earmark for NIH facilities in Bethesda, MD
$160 million for “volunteers” at the Corp. for National and Community Service
$750 earmark for the National Computer Center in MD
$224 million for International Boundary and Water Commission – U.S. and Mexico
$850 million for Amtrak
$100 million for lead paint hazard reduction

A few hundred million here, a few billion there, and pretty soon we’re talking about real money.  And you can find much, much more at StimulusWatch.org.

From the Say Anything blog (accessed 2/11/09)

We’re not talking about little or tiny, but it IS pork.

It is clear from our founding fathers construction of this representative republic that the intent was that regular people, citizens with a stake in the county, would serve in Congress for a short time. This was especially true in the House of Representatives and perhaps less so in the Senate, but that was nevertheless the intent. That is, that we had citizen-representation and not professional politicians — yet that’s what we have today.

What’s wrong with that? They lose touch with the people and become totally out of touch with reality. The polls indicated what, that around 75% of the American public did not want the bailout?

Yes, Chuck, they DO care.

The PostCivility era

share save 171 16 The PostCivility era tagged society integrity economy

Our present era is often tagged as the “Post Modern” era, i.e. following the era of “Modernism” in the 20th century described in one encyclopeia as

to relate to the culture of capitalism as it has developed since the 1960s. In general, the postmodern view is cool, ironic, and accepting of the fragmentation of contemporary existence. It tends to concentrate on surfaces rather than depths, to blur the distinctions between high and low culture, and as a whole to challenge a wide variety of traditional cultural values.

via postmodern definition of postmodern in the Free Online Encyclopedia..

or

Postmodernism (sometimes abbreviated Pomo) was originally a reaction to modernism (not necessarily “post” in the purely temporal sense of “after”). Largely influenced by the disillusionment induced by the Second World War, postmodernism tends to refer to a cultural, intellectual, or artistic state lacking a clear central hierarchy or organizing principle and embodying extreme complexity, contradiction, ambiguity, diversity, and interconnectedness or interreferentiality.

via postmodern – encyclopedia article about postmodern..

So, whether you consider the postmodern era to be “post” as in “after” temporally or as a reaction to modernism, that begs the question of the proper appellation for our current era.  Neither construct gives this era a tag of its own, so here’s one:  PostCivility.

I’ve written separately on the death of statesmanship, but it has occurred to me that it’s not simply statesmanship that has waned and that event is but symptomatic of a larger social disease, that of an era where much that we do in all of our interactions, social, moral and political, is punctuated with — and indeed driven by — a lack of civility.

Individuals lack civility in their personal relationships with spouses, siblings, children, co-workers, and casual acquaintences. Do I have an empirical study to demonstrate this? No, nor do I or you need one — we see it every day. Is this phenomenon worse than in days past, of course it is and we don’t need a $million study to prove it. We see and feel it. We experience it.

Anti-authority outbursts occur from the 3rd grade classroom to the juvenile court and into the criminal justice system. Politicians scream at each other in legislative bodies instead of debating. Assaults on police officers are commonplace.

Blame is sought in every corner for every thing — large or small — that goes wrong in personal lives and in the life of the nation. It seems that at every level of society and government we’ve lost the ability to simply agree to disagree. Instead, we seek to defeat, and even to conquer and vanquish anyone with a differing opinion.

I lay much of this at the feet of the Instant Gratification Generation — unfortunately, it’s a phenomenan that is not limited to one generation but rather afflicts us all. It even explains a lot of the economic woes with which we are now beset. Let me enlarge on that notion.

In all that we do, we want it now. And I mean “right now.” Let’s talk the automobile industry as an example of how this instant gratification has contributed to its downfall. And if not a cause of the downfall, it will certainly have placed roadblocks in its recovery.

Ever drive by a dealership and wonder how they can afford to have so many cars, new cars, just sitting on the lot? Acres of cars. Every model, color, and accessory package you can imagine just waiting for your choosing. The manufacturers and dealers have catered to our need for instant gratification and have spread the table with every possible choice because they know if they don’t have the one you are looking for, a dealer down the road will!

And so the entire system of manufacturing, shipping, stocking at dealers, arranging instant financing and delivering the car is built around our need for instant gratification in making what for many people is the single largest purchase they will ever make. That huge infrastructure (read capital cost and overhead) is geared to serve the large and demanding appetite for instant gratification. I recall when people when to the dealer and ordered the car the way they wanted it, and actually waited with gleeful anticipation for its birthing and delivery.

And now that the economy has tanked, that huge infrastructure cannot be quickly undone and, therefore, we have become victims of this lust for instant gratification.

What does this have to do with civility, and the decline thereof? Whether it’s a car, another purchase, or another thing or act we desire that does not come through — we tend to react with utter incivility to the situation or the person we deem responsible. We want our way, and we want it now, and we can no longer cope with disappointment, even of a minor nature. The future probably portends a lot more of that disappointment and, probably, further decrease in civility.

I’ve use the royal “we” but I include myself on more than a few occasions. Can you own up to the same? Let’s all examine our ability and inclination — yea, even the necessity — to be civil.

The stimulus plan: bad policy, merely disguised spending

share save 171 16 The stimulus plan: bad policy, merely disguised spending tagged politics economy

The conclusion

It’s just a spending bill with an extremely small amount of current stimulus effect.

Farther down the page is an outstanding analysis (not bare opinion) on the stimulus plan and what is wrong with it. It’s heavily footnoted to what appear to be thoughtful and authoritative sources for each point. One needs to look no farther than his point #4, based on data from the Congressional Budget Office — a neutral and objective (we hope) source — to see why this is not about stimulating the current economy:

4) An initial CBO analysis found that a mere $26 billion out of $274 billion in infrastructure spending, just 7 percent, would be delivered into the economy by next fall. An update determined that just 64 percent of the stimulus would reach the economy by 2011.

The entire article is repeated below. Read on.

About the spending … “stop economic starvation”

So if not to stimulate the current economic malaise back into life, what’s it about? An article from CNSNews reveals in the comments of Senator Claire McCaskill just what it’s about:

“I do think that there was some spending in the bill that was makeup for a starvation diet under the Bush administration, some important priorities of our party; frankly, of the American people,” said McCaskill.

Some spending … makeup? Starvation diet? As CNSNews points out

In 2000, the year before President George W. Bush took office, total federal expenditures were $1.78 trillion, according to the White House Office of Management and Budget. This year, the last budget approved under Bush–total federal expenditures are expected to be $3.1 trillion—not counting whatever amount the Congress approves for a stimulus package.

Under the “starvation diet” imposed by the Bush Administration, the annual federal budget grew by 1.32 trillion.

In 1989, when President Reagan left office, according to the OMB, all federal expenditures equaled only $1.14 trillion.

From Federal Spending Was on ‘Starvation Diet’ During Bush Years, Says Democratic Senator
Monday, February 09, 2009
By Terence P. Jeffrey, Editor-in-Chief. http://www.cnsnews.com/public/content/article.aspx?RsrcID=43227

So the plan is to make up for this “economic starvation” with the likes of the pork and non-stimulating spending as laid out in another purloined article discussed elsewhere in these Musings.

Now for the objective analysis on policy

10 Reasons to Whack Obama’s Stimulus Plan

January 27, 2009 02:10 PM ET

Some people are going to oppose President Obama’s ginormous stimulus package just because they’re on a different political team. But when you look at the economic evidence, it sure seems like an economic recovery package that’s heavy on government spending and light on tax cuts is just the opposite of what we should be doing right now. Try this closing argument on for size:

via 10 Reasons to Whack Obama’s Stimulus Plan – Capital Commerce (usnews.com).

Here is the rest of the article:

1) A 2005 study by Andrew Mountford and Harald Uhlig “analyzed three types of policy shocks: a deficit-financed spending increase, a balanced budget spending increase (financed with higher taxes) and a deficit-financed tax cut, in which revenues increase but government spending stays unchanged. We found that a deficit-spending shock stimulates the economy for the first 4 quarters but only weakly compared to that for a deficit-financed tax cut.” In other words, FDR vs. Clinton vs. Reagan, Reagan wins.

2) Harvard economist Robert Barro looked at the multiplier effect of World War II military spending — supposedly the Mother of All Stimulus Plans and found that “wartime production siphoned off resources from other economic uses — there was a dampener, rather than a multiplier.” Barro prefers eliminating the corporate income tax to massive government spending.

3) Alberto Alesina of Harvard and Luigi Zingales of the University of Chicago want to adress the fear and confidence issue by creating “the incentive for people to take more risk and move their savings from government bonds to risky assets. There is no better way to encourage this than a temporary elimination of the capital-gains tax for all the investments begun during 2009 and held for at least two years.”

4) An initial CBO analysis found that a mere $26 billion out of $274 billion in infrastructure spending, just 7 percent, would be delivered into the economy by next fall. An update determined that just 64 percent of the stimulus would reach the economy by 2011.

5) University of Chicago economist and Nobel laureate Gary Becker doubts whether all this stimulus spending will do much to lower unemployment: “For one thing, the true value of these government programs may be limited because they will be put together hastily, and are likely to contain a lot of political pork and other inefficiencies. For another thing, with unemployment at 7% to 8% of the labor force, it is impossible to target effective spending programs that primarily utilize unemployed workers, or underemployed capital. Spending on infrastructure, and especially on health, energy, and education, will mainly attract employed persons from other activities to the activities stimulated by the government spending. The net job creation from these and related spending is likely to be rather small. In addition, if the private activities crowded out are more valuable than the activities hastily stimulated by this plan, the value of the increase in employment and GDP could be very small, even negative.”

6) Christina Romer, the new head of the Council of Economic Advisers, coauthored a paper in which the following was written about taxes: “Tax increases appear to have a very large, sustained, and highly significant negative impact on output. Since most of our exogenous tax changes are in fact reductions, the more intuitive way to express this result is that tax cuts have very large and persistent positive output effects.” And former Bush economic adviser Lawrence Lindsey tack on this addendum: “The macroeconomic benefits of tax cuts can be two to three times larger than common estimates of the benefits related to spending increases. The relative advantage of tax cuts over spending is even clearer when the recession is centered on the household balance sheet.”

7) Economists Susan Woodward and Robert Hall find that the multiplier effect from infrastructure spending maybe just 1-for-1, less than that 3-to-1 ratio for tax cuts that Romer found: “We believe that the one-for-one rule derived from wartime increases in military spending would also apply to increases in infrastructure spending in a stimulus package. We should not count on any inducement of higher consumption from the infrastructure stimulus.”
icon cool The stimulus plan: bad policy, merely disguised spending tagged politics economy Economist John Taylor thinks it better to let the Federal Reserve deal with the short-term problems in the economy, while fiscal policy should attend to long-term issues: “In the current context of the U.S. economy, it seems best to let fiscal policy have its main countercyclical impact through the automatic stabilizer … It seems hard to improve on this performance with a more active discretionary fiscal policy, and an activist discretionary fiscal policy might even make the job of monetary authorities more difficult. It would be appropriate in the present American context, for discretionary fiscal policy to be saved explicitly for longer-term issues, requiring less frequent changes. Examples of such a longer-term focus include fiscal policy proposals to balance the non-Social Security budget over the next ten years, to reduce marginal tax rates for long run economic efficiency, or even to reform the tax system and Social Security.”

9) Massive stimulus didn’t work in the Great Depression. As this Heritage Foundation study notes: “After the stock market collapse in 1929, the Hoover Administration increased federal spending by 47 percent over the following three years. As a result, federal spending increased from 3.4 percent of GDP in 1930 to 6.9 percent in 1932 and reached 9.8 percent by 1940. That same year– 10 years into the Great Depression–America’s unemployment rate stood at 14.6 percent.” Same goes for Japan and its Great Stagnation of the 1990s.

10) Olivier Blanchard, the chief economist of the International Monetary Fund, coauthored a paper which found “that both increases in taxes and increases in government spending have a strong negative effect on private investment spending.”

Bottom line: There is another model out there. One that worked in 2003, 1997 and 1981. But will America use it?

Sources:

1) http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2005-039.pdf

2) http://online.wsj.com/article/SB123258618204604599.html

3) http://online.wsj.com/article/SB123249646698200289.html

4) http://cboblog.cbo.gov/

5)http://www.becker-posner-blog.com/archives/2009/01/on_the_obama_st.htm

6)http://www.econ.berkeley.edu/~cromer/RomerDraft307.pdf

7)http://woodwardhall.wordpress.com/2008/12/11/measuring-the-effect-of-infrastructure-spending-on-gdp/
icon cool The stimulus plan: bad policy, merely disguised spending tagged politics economy http://www.stanford.edu/~johntayl/Papers/Reassessing+Revised.pdf

9) http://www.heritage.org/research/economy/bg2222.cf

10) http://www.mitpressjournals.org/doi/abs/10.1162/003355302320935043?cookieSet=1&journalCode=qjec

11) http://www.weeklystandard.com/Content/Public/Articles/000/000/015/951hvyxc.asp?pg=2