Obama, Congress made the stimulus ineffective as stimulus

July 8, 2009

Dan Clifton of Strategas Research makes some great points on the choices the Obamacrats made when constructing the stimulus plan:

We believe it’s not a question of the simulus being too small. The real issue is that it was designed very inefficiently, focused on longer term projects with long lags in distribution, and not focused on remedying US economic problems.

At the end of the legislative process, three major provisions were scaled back to ensure the stimulus had very little impact in the near term: 1) Income tax cuts were reduced in size and scope, 2) The housing tax credit conditions made the provision meaningless and 3) The Net Operating Loss impacted very few companies. If these provisions survived in their original form, it would not matter much that the spending won’t really start having an impact by 2010.

But now that spending is the focus of the package, by its very nature it will take time to be spent and then actually impact jobs. Which begs the question, if another stimulus is put forth, is it just additional spending on top of what is approved?

My spin: When people say, “It’s Obama’s economy now,” this is what they mean.

2 comments

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A second taxpayer funded stimulus would be great! After all, the CEO’s, bank executives, investment managers, insurance executives and all of their cronies need more bonus money because they have obviously already spent the billions they awarded themselves after the last stimulus package was dumped in their laps. And, don’t forget that the remainder of the stimulus money is somehow unaccounted for, and lost in oblivion. Actually, what’s happening with the handling of the economy is just exactly what the vast majority of Americans want, or else they would change it in a heartbeat.

Posted by Frank | Report as abusive

What a waste. Is the government only capable of spending money inefficiently? How can Obama and Co. claim that they are committed to reducing the deficit & debt, when they are so eager to add additional spending that is not guaranteed to accomplish anything? It won’t be a stimulus, it will just be another feeding trough.

This brings up another point, regarding taxes. Obviously, the tax rebate and housing credit were ineffective, and the net-operating loss provision too narrow. So why don’t we take a different tax approach? We need an actively modulated corporate tax policy, that is specifically tailored to an economic climate, and takes into consideration sector strength.

Instead of credits, the IRS should vary corporate tax rates quarterly, based on macroeconomic conditions & net profits. This would then reduce the tax burden on struggling companies, but maintain or increase the rate on successful companies. When times are good the rate goes up, but when times are bad, the rate goes down. Currently, companies have a higher tax burden during recessions versus booms. This makes recovery even more difficult.

Posted by Greg | Report as abusive