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Economist: more borrowing a wrong way to go

February 6, 2009 by  

Economists question the stimulus packageAs President Obama presses Congress to pass a nearly $900 billion stimulus plans, some experts question the fundamental elements of the package.

In particular, the plan for massive new borrowing to stimulate the faltering economy has raised one of the biggest objections on the right side of the economic debate

"President Barack Obama and top congressional democrats are leading the world toward a new global government debt bubble," writes J.D. Foster, a senior fellow at The Heritage Foundation, who believes that this path will only push interest rates higher and the economy into an even deeper recession.

Instead, Foster advocates spending and tax cuts as well as a reduction in entitlements.

Adding nuance to this argument, Jeffrey A. Miron, a senior lecturer in economics at Harvard University, stresses steps such as expanding legal immigration and free trade, withdrawing from Iraq and Afghanistan, and reducing bailouts as the surest way to boost productivity and stop the drain on resources.

In a commentary written for CNN.com, he stops short of calling for spending cuts, opting instead for "elimination of wasteful spending," including agricultural subsidies, ineffective weapons systems, or subsidies for Amtrak and the Post Office.

President Obama’s economic stimulus package contains provisions for multibillion dollar government investment in infrastructure, healthcare, IT technology, and environment.

According to the Congressional Budget Office, U.S. federal budget deficit will rise to a post-WWII record of $1.2 trillion in 2009.
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  • http://none Caryl Galligani

    Obama, Is still wet behind the ears and He is not a citizen of the United States…
    He should have his pants taken down and horse wh ipped…

  • s c mailen, jr.

    BO [or BHO] is a novice in more ways than one. Unfortunately, he caters to that Washingtonian Mary Poppins/Peter Pan mentality, where fantasy is reality, and everything is beautiful (if you just believe). You can get away with that in Hollywood.
    What we are witnessing is a surrender to payback, pork, lies, N O transparency, failed Keynesian economics and 4 years of ‘unintended’ disasters.
    Most likely, the cure will be worse than the disease. The best BO [BHO] can do for now is say he ‘screwed-up.’ I wonder how comforting that will be when Americans – and the economy – have had to endure his “change-o-nomics” for 4 years.

  • Bob Livingston

    Apparently in the modern world of fiat the thing to do when the economy is collapsing is to add more fiat. Reminds me of a bleeding soldier at a time when doctors would bleed them more as “therapy,” the result of which was to set up shock and kill the patient. It is possible that this massive paper syndrome called “bailout” will cover things over for a while creating the workings of a hyperinflationary bubble down the road.

    Now if they take this fiat and get to work on infrastructure in a substantial way nationwide, it could be a shot for a sick patient that will show up on the horizon for all Americans to see. It’s hard to put a lot of faith in the people who are carrying out this bailout because they are the very same people who caused the problem in the first place. Can’t see how they would have the wisdom to do the right thing now.

    • Rocky

      Our current leadership are more focused on power than common sense. They are like criminals. They steal our money, think only of themselves, their goal is total control (I bet they can’t control themselves) and they reject Jesus!

  • Robin from Indiana

    I wish I knew how to stop this. I do not believe this is going to accomplish anything. For running on a platform where he (BO) insisted that lobbyists would not be catered to, it sure seems like a lot of pork was added to this ‘bailout’. My husbands hours have been cut. We are barely afloat. How is spending all this money going to help us? Nobody even knows where to go for help, unless you are in Congress or a lobbyist!

    • Carol

      A lot of this money is going to go to ACCORN (sp) and they are involved with illegal doings.
      This whole package scares me this will have to paid for for so many years that we will never get out debt. Can you imagine how many generations to come will pay for something that do nothing for anyone but the people that are already rich.
      I think just as we voted for the President the population should be able to vote for something that just won’t work but unfortunately that is not the way it works.

      All we can do is pray it doens’t happen and I think GOD will listen.
      Don’t you?

      Carol

  • Barry

    This stimilus package heading through the senate is the wrong way to go. It will put the nation in to such a debt that our great grand children will still be paying for.

    I do not like this Birth of the United States Socialist Republic (USSR) that Obama and his left leaning Congress is creating.

  • Rick

    How about an idea that might work…

    Energy; The U.S. dependence on foreign oil has put us in a very bad place. The immoral practices of wall street’s commodity traders aside, the transfer of billions of American dollars to businesses and governments outside the U.S. was critical to our current situation. We need to shut this down. I’d like to offer an idea to share and debate with you – natural gas for vehicles! Not a new idea but one that has been slow to come in America. Here are some of the drivers;
    1. The transportation sector accounts for a huge percentage of oil consumption
    2. The U.S. is oil short and natural gas long – we have a huge supply of natural gas right here at home.
    3. On a cost per mile driven basis, natural gas is 30-50% less expensive than gasoline.
    4. The domestic auto industry is struggling for a niche to give them competitive advantage over foreign companies AND they are in the process, with the help of bailout funds, of retooling their factories and products. There is no better time to make a move to natural gas for vehicles.
    5. Ford and GM already sell CNG vehicles but mostly in Europe.
    6. CNG (compressed natural gas for vehicles) is not a new or emerging technology. Fleets of CNG cars have been running in Egypt since the early 90′s – the first CNG for Vehicles company was started in 1994.
    7. Even though natural gas burns much cleaner than gasoline, the EPA is a major hurdle. I have recently tried to convert my pickup and Bronco to CNG and was told it can’t be done with current regulations. I fear this is more a power thing than a concern for the environment. CNG could be a major lever to meet the new law passed to allow individual states to set emission standards.
    8. LNG has a role; Liquified natural gas is being imported into the U.S. at a rate of c. 800mmcfd (~140,000 barrels of oil equivalent per day)! It takes a lot of energy (and cost) to convert natural gas to a liquid state to enable marine shipping. It takes additional energy (and cost) to “regas” the liquid for transportation in the domestic natural gas pipeline grid. The costs and wasteful energy consumption associated with regas could possible be avoided with the right infrastructure where LNG is pumped directly into vehicle tanks and regas’d using the waste heat generated by the vehicles engine!

    Summary; Natural gas for vehicles could be a step-change in America’s energy policy. Natural gas is available domestically. Dollars spent to buy natural gas are paid to American companies who employ American workers and pay American taxes. Natural gas is GREEN. Emissions are reduced. Miles per equivalent gallon go up. LNG receiving terminals must be built as part of the transportation infrastructure. I certainly don’t have all the answers, however, many of the right drivers are in place for this idea to be seriously considered. I’m certain with the right focus, priority, and team of passionate engineers this could be made a reality. The result would be a stronger domestic auto industry, a drastic drop in dollars sent overseas, a huge step toward the green agenda, and most importantly, a restatement of self-reliance for Americans. We get our pride back.

    I thank you in advance for the time taken from your schedule to consider my thoughts and input. You have my email if you’d like more information or details from me. We need change alright. But more importantly, we need ACTION not words. I look forward to your feedback.

  • Jacques Moore

    I am a diabetic that has been fighting for the last 4 years to keep my left foot & three weeks ago my foot healed up ,but only after $250.000.00 later . I do not know how anyone else feels about this but , I am just glad that I had good DR’S & many prayers from my friends. I only hope & pray that OBAMA, does not fool around & do away with the part of Mecicar that allowed me to keep my foot . It looks like they may do away with this part of Medicar & that would be a shame, I am 67 years old & I hope to go back to work & help repay part of my Medicar bill, I cant pay it all but maby I can pay some of it back , I worked 47 years in the OIL FIELDS of Texas & NM.
    In the 4 years I fought to keep my foot , there was many a person who lost there fight
    & there life to Diabetes ….
    I know that this bill is a bad bill, but I do not think that we have people that has the know how to save our economy anyother way ? They do not seam to have the ability to follow Ronald Reagn’s plan that pulled us out of a much worse rescission than this one ??

  • Charles

    I’m not sure if lending more money to the failed financial institutions is the way to go. Expanding legal immigration as suggested by Jeffrey A. Miron (moron) is nonsense. Opening our border to cheaper immigrant labor will not benefit the growing number of unemployed American workers. I have no idea if BHO’s plan will work. Great minds make arguments for and against it. It’s clear that the GOP has no effective strategy to solve the crisis. Their support for the catastrophic war spending helped to create this problem. The same type of military excess that toppled the USSR now appears to be our downfall. I do agree with Miron on one solution, GET OUT OF IRAQ and AFGHANISTAN NOW, we can’t afford it.

  • TeresaE

    Here is the rub. A big part of our current disaster is due to over borrowing to pay for previously obtained debt. Many Americans used home “equity” up to and over the inflated appraisal values of their homes to pay down credit card debt, or buy Chinese made toys we don’t need.

    Acquiring massive debt to get us out of debt is foolhardy at best. You cannot borrow your way out of debt.

    And, let’s be honest here, investors are getting tired of massive debt loads with no assets/security to back them up. Germany last week was unable to sell all the government bonds needed to fuel their stimulus. And Germany is the most stable and largest economy in Europe.

    The debt payments on this one plan ALONE will indenture our children, without even touching the principal.

    Every day the news abounds with American companies firing the world’s best customers through “layoffs”. Insanity continues.

    Many of the plans in this bill are just paybacks & thank yous, to China-$600mm digital converter boxes-no American jobs there, billions to buy foreign made cars, millions to the Philippines for WW!! vets (not our vets), big labor gets kissed with union only work requirements, yet the “buy American” can’t make it through for steel. Even though nearly all other countries stimulus packages contain “protection” for their own countries workers.

    It is now obvious to me how Hitler rose to power so easily. I always wondered how otherwise good people could turn their backs on the truth and allow his rise to power. Now I know. Planned financial devastation, starvation, demonization of selected enemies and then “hope and change”. Any of this sound familiar?

    And it is already happening here. Good luck to us all.

  • ONTIME

    The POTUS aka BOTUS is a marketed and manufactured bogus person and not only is he inexperienced he is simply a mouth piece for what is to come. His speeches of time and low expectation as well as inadequate results are a set up and premeditated excuses to soften the failure of poor policy. This silver tongued saleman is just a butt boy for those who want to retain power and dictate the future of this country.

  • Sherry H

    My husband and I understand everyone’s frustration about this economy and this porkulus package. There’s NO easy or quick solution, but dumping BILLIONS of
    taxpayer money on the problem is not the answer. A turd wrapped in silk is still a turd.
    And this one stinks…BAD! BO is not a businessman and has no comprehension of
    what it takes to run a business or a country. But now that he’s in office, and has
    made repeated references to the fact that ” I won”, the American public needs to
    quit listening to the biased media and their Obama worship and speak out about
    how this manure fest is ticking us off. Get some people like Mitt Romney, Bill Gates
    and Warren Buffet to show them what their doing wrong.

  • Doug

    Barry “I Screwed Up” Obama blamed the current crisis on the failed policies of the last eight years. Well, the failed policy of the last eight years was deficit spending. So, his solution is to continue and even increase the deficit spending. Kind of like trying to put out a fire with gasoline.

  • Linda

    We all feel helpless and frustrated, but there ARE things we can do to demonstrate that we still believe in basic American values:

    Take care of yourself and start getting away from agribusiness. Plant a garden, for starters. The exercise will do you good and there is nothing quite like the first time you eat something you grew yourself, even if you just harvest a handful of fresh herbs, make garlic butter, and spread the result on good sourdough bread. Buy a bread machine and follow the easy recipes. Don’t buy mixes, and don’t buy three dollar plastic bread, either. Make your own sourdough starter (follow easy directions on a yeast packet.) If your HOA or city fathers will allow it, get half a dozen pullets which will lay more eggs than most families can eat, one each 26 hours…and the best eggs you ever ate! The deeper the depression goes–and we’ve barely started–the more vital producing any sort of food yourself will be. Don’t start too big, just get started. You can grow a wealth of food in pots, under full spectrum lights if need be. When your potatoes, onions, and garlic start to sprout, stick them in the ground. If necessary, you can live healthily forever on omelets–the scare about eggs was NEVER true, an more than that about animal fats and salt is. Eggs and fresh milk that has not been altered in any way are the most nutritious foods known to man. Since you cannot buy milk that has not been abused by pasteurization and homogenization, if you have any land at all, get a dairy goat. She’ll produce at least a gallon of milk a day for at least eight months, the best milk you ever drank. Your dogs and chickens will like anything that is left over, and grown goats like it too!
    Jump on bandwagons! There are THREE “new” ones that can really help turn this country around, the demand for States’ Rights (20 states coming on board), the demand for gold-backed currency (three states), and Newt Gingrich’s 12 Point Plan. Remember Newt? Bad hair and the worst politician in the world, but a brilliant thinker and a remarkable historian. (Why else do you think the Liberals have mocked and attacked him so?) If we had followed through on his Contract with America WE would control DC now. Five states have strong secessionist movements! When 10% of the states want out, and 40% are fed up with DC, while 60% of the population disapproves of Congress, the support of the Silent Majority will start to weigh with those who want a totally socialistic nation.

    States Rights are about throwing the federal government out of our daily lives, although we still have to control our local governments. Go to city council meetings and speak out against ever more intrusive bans and demands. You won’t win, but when enough of us get involved, we will.

    “Metal,” as we say in the business, is about locking in relative value. You won’t ever make a “profit” in gold or silver, but you WILL have something that will always sell for the current exchange rate in terms of what you paid for it. Gold is STILL “worth” what its price in 1913 would buy! Silver (classic ratio in price is 30:1 with gold) is easier for most of us to accumulate. Bear in mind that “spot,” the “official” price for metals, is not actually what you can buy it for; there are always mintage or fabrication fees, and some coins store historical value, as well. Your best bet is tableware! It’s purity is guaranteed, governments confiscate and outlaw gold but rarely silver, and you can send it to the melting pot without running afoul of the law. You can even eat with it…

    One of my sayings is, “They ain’t no lib’ruls in feed stores!” They ain’t no lib’ruls in small town barber shops, and they ain’t no lib’ruls in honky tonks ‘ceptin’ th’ Dixie Chicks. We are controlled by large voting blocks from the cities…the 14% of hard core left wingers, the unions, and government employees. (Are you aware that over 40% of the population works for government in some capacity or other?!) They are organized, they are ruthless, and they don’t play fair. However, we outnumber them, if we just get our acts together.

    Buy a gun and ammunition while you can, and learn how to use it. “When guns are outlawed only outlaws will have guns” is more than a bumper sticker; it is a hard fact of life, as Australia has just discovered. The government destroyed all of the guns they could grab, and every other weapon down to and including slingshots…and crime is soaring, as history shows invariably happens. Obama proposes to stigmatize ALL guns which use magazines, AKA “clips,” down to a lousy 10-shot 22 rifle, as “assault” weapons! The plan is to have “encoded” ammunition (which will be reformulated to have a shelf life, just as gasoline does, now), and to demand that ALL ammunition currently in our possession be destroyed in less than two years! “In time of war nothing is as comforting as a good supply of toilet paper,” but a good supply of ammo is very nice, too. It can always be used to barter with.

    Prepare for a barter society. The policy of “just in time” inventory is in the process of being lowered from three day to half that time. ANY glitch in transportation (oil wars, rationing, price, strikes) and the grocery store shelves will be empty in very short order. At a bare minimum you need to have three months’ supply of food–and not those ludicrously expensive freeze dried “meals” that wouldn’t begin to provide the number of servings they say. Is YOUR idea of dinner a cup of beans with two small wienies made out of the least nutritious and palatable parts of assorted critters? Look for sales and stock up. Fill your freezers, and find a traditional locker plant if you can.

    Traditional barter goods are alcohol, tobacco, coffee, tea, soap, sugar, salt, and ammunition.

    Remember, too, that every dime you turn into durable goods is one that won’t be worth a nickle when the “stimulus” plans and bailouts trigger soaring inflation, as they cannot fail to do. Get several packages of EAS protein powder, the best I can find in terms of nutrition, taste, and cost. (I have NO affiliation with the company, and I no longer own a single stock.) Particularly if you have your own eggs and milk, EAS will provide complete nutrition for a dollar a meal. (Throw out the egg white, and just put the egg yolks in your drink. Egg whites contain Avidin, a substance that destroys the B vitamin, Biotin, and should never be eaten raw.)

    Remember that if you see it in the newspaper it almost certainly isn’t true! Remember that the FDA is controlled by affiliates of the big “food” companies, and it is in their interest to set the RDA ludicrously low in order to make their bizarre concoctions appear more nutritious. You will DIE without salt. The salt scare was the result of lifting one “fact” out of a report. The truth is that only 7% of hypertensives–which most of us aren’t–benefited from salt reduction, but that the stress of doing without salt was worse than eating the salt! ALAR wasn’t true. There IS no global warming or global cooling or man-caused climate change, and the hole in the ozone layer has ALWAYS been there and is supposed to be there. The famous Framingham report showed that those MOST at risk of heart attack were men with cholesterol BELOW 170! Cholesterol is good stuff when it is nourishing your brain and seeing to your sexual health; it just isn’t good when sticking to the lining of your arteries. If you remove ALL cholesterol from your diet, on average your body will useless priceless ingredients it needs for other purposes to manufacture 2000 mg of cholesterol a day. Eggs contain lecithin, which emulsifies cholesterol so that it does not form clumps in your arteries.

    Use every scrap of information you have or can acquire to become more self-sufficient, and start NOW to reduce consumption and increase inventory. Best of luck to all of you.

  • Ron E

    I’m confused. We were told that spending money we didn’t have caused our present economic troubles. How can we spend more money that we don’t have to solve our economic troubles? It will not work no matter how much money we spend that we don’t have! Case closed!

  • Jacques Moore

    I have found out that most on her does not remember what took place in 1994 , most of you were going to school , but some here are old enough to remember that it was Wild Willy or better knowen as Bill Clinton that put us into this mess , I get a kick out of people that want to blame Georg Bush for it all , but it just ant so , old BILL stuck his folks in the head jobs @ Fanny & Freddy & they started letting folks have loans that could not pay them back , then Bush sold out our Military ,big time so he could balance the budget, Then Good old GEORG came along & with a unemployment rate @ 8.2% , he took office in 2008 & then 9/11 hit him in the but , & we said that we would never forget & over the next 8 years we fought a WAR that old BILL left behind
    & bush got the blame for that just like he is taking the blame for all the rest of BILL CLINTON ‘s mess, but No one will be able to see what is about to take PLACE , BECAUSE They will be to busy blaming BUSH for all of this mess, but no one will see that it was wild BILL All along ………….

  • sal

    obama isnt the dumb one – it’s the american people who are so dumb they elected him. years ago a talk show host claimed that america was becoming a third worl nation. we are now there with this slime ball as president.

  • andrea

    WOW Linda! You are right on, you go girl! Great info, hope more people read and remember it.

  • Mike Purnell

    The Stimulus Scam is pure theft. Clear and Simple! Theft from this generation from forthcoming inflation. Without Revolution it is theft from the next 2 generations to also pay, because we, here and now, didn’t learn about government and how to protect ourselves and our posterity from it. Nothing, absolutely nothing, justifies this theft.

    “It is now obvious to me how Hitler rose to power so easily. I always wondered how otherwise good people could turn their backs on the truth and allow his rise to power. Now I know. Planned financial devastation, starvation ‘from hyper-inflation,’ demonization of selected enemies and then “hope and change”. Any of this sound familiar? And it is already happening here.

    I prognosticate here on February 19, 2009, that due to nuclear weapons, Amerika will remove Nazi Germany and Stalinist Russia from serious historical consideration as “the scourge against mankind.” I am so sick at heart that I am continuously praying that Jesus protect us from ourselves.

    Nothing, absolutely nothing, justifies this theft.

  • harry L.

    Hillary Clinton once famously said that:- ” Every village needs an idiot !”
    Well that ‘idiot’ is now in charge of the entire Congressional Village of idiots in Washington DC, and has been elevated to the status of a ‘Socialist Messiah’, wlthough correctly Islamized, he should be lauded as the new ‘Mahdi’- actually the Second coming of Mohammed.- but in Marxist Form.

  • s c

    It’s going on three years now since Obummer lusted after that lunatic, half-baked, ‘they’ll believe anything’ stimulus package ghost.
    Anybody in their right mind think Obummer should be considering another . . . and another . . . and another?
    In the real world, we call this behavior fraud, and people get tossed into prison for trying such asinine panaceas.

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