Saturday, September 10, 2011

Obama's Unaffordable and Harmful New 'Stimulus'

by Hans Bader

President Obama wants Congress to pass a $447 billion proposal called the “American Jobs Act,” a costly set of recycled stimulus plans that contains no new ideas about how to fix the economy. It contains more money for the long-term unemployed, more infrastructure spending, and funds for hiring laid-off teachers. It also would extend a cut in the portion of payroll taxes paid by employees. The measures would be financed mostly by deficit spending, but partly by raising taxes on the so-called “rich” — a category that includes most of the small business owners who actually hire people — and by eliminating what the administration refers to as “tax loopholes” — which are not really tax loopholes at all, but rather provisions that allow industries disfavored by the administration to benefit from the same tax code provisions as other industries.

(What is a tax “loophole” to the Obama administration is actually evenhanded non-discriminatory treatment of different industries, according to The Washington Examiner‘s Tim Carney and other observers. For example, to Obama, letting the petroleum industry receive the benefits of tax code provisions that also apply to other energy or resource-extraction industries like mining qualifies a “loophole,” as does treating the oil companies the same as farmers or timber companies; while giving tax credits solely to a politically-favored industry or manufacturer, such as a politically-connected “green-jobs” firm, or a taxpayer-subsidized ethanol manufacturer, is not a tax loophole to Obama).

Even the least-bad of Obama’s proposals will not grow the economy. Aid for the long-term unemployed will reduce the size of the economy by encouraging some people to not accept jobs that pay far less than they were accustomed to, even when those are the only jobs available to them. Obama’s proposed infrastructure spending will not grow the economy either, as Veronique de Rugy and others note, since it will be accompanied by costly Davis-Bacon mandates designed to favor unions (which raise the cost of transportation projects and exclude many small non-union contractors), and some of it will be wasted on rail boondoggles and pork rather than roads and bridges, or on Obama Administration pet projects, like energy efficiency, that require specialized skills that most unemployed construction workers lack. (Ironically, Obama removed most transportation spending from the original $800 billion stimulus package for political reasons, replacing it with more harmful welfare and social spending.)

By requiring above-market wages for the jobs it funds due to laws like Davis-Bacon, the Obama administration’s proposal virtually guarantees that it will end up siphoning off people who are already employed from other employers, rather than just hiring the jobless, who are more likely to be willing to work for modest wages. Only 42 percent of the people hired under the stimulus package, for example, were previously unemployed, partly due to the above-market wages paid by many of the government jobs it subsidized, which resulted in some private employers losing employees and having to spend costly sums training their replacements. As a result of the stimulus, grant recipients “poached workers from their competitors,” financially injuring those companies.

Meanwhile, by sucking money out of the private-sector economy, the stimulus wiped out a million private-sector jobs, even as other stimulus provisions outsourced American energy jobs to foreign countries, and wiped out jobs in America’s export sector, resulting in a net loss to the economy of 550,000 jobs, according to two economists. The Obama administration’s use of taxpayer money to subsidize above-market wages for government employees is at odds with what economists like Lord Keynes (the father of the Keynesian school of economics) counseled in past recessions, and what Franklin Roosevelt did in the Great Depression, when he hired people to do construction and transportation projects in the WPA but paid them only very modest wages, providing opportunities to the unemployed without siphoning off useful talent from private-sector businesses.

Continuing unemployment benefits at current levels for the long-term unemployed is a mistake. Generous unemployment benefits discourage people from taking lower-paying jobs, and sometimes result in people gaming the system. Giving people unemployment benefits for years on end, without scaling down those benefits, encourages people not to relocate in search of work, and not to take productive jobs that they think are beneath them, even if those jobs are the only jobs that they will realistically find once their jobless benefits come to an end, because of the disappearance of the type of job they once performed.

As the Heritage Foundation notes, “The consequences of extended unemployment benefits are some of the most conclusively established results in labor economic research. Extending either the amount or the duration of UI benefits increases the length of time that workers remain unemployed. UI benefits subsidize unemployment. They reduce the incentive unemployed workers have to search for new work and to make difficult choices–such as moving or switching industries–to begin a new job.”

The President’s proposed subsidies for laid-off teachers discriminate in favor of one occupation, without any legitimate reason for doing so: the unemployment rate among teachers is vastly lower than for many occupations, and lower than for most. It is best understood as the Administration pandering to the teachers’ unions. The proposed payroll tax cut will increase the deficit (which will increase debt-service costs in the long run, thus crowding out private investment over the long haul) while creating relatively few jobs. (The CBO similarly concluded that the $800 billion stimulus package would shrink the size of the economy over the long run by increasing the national debt and thus resulting in increased government spending on interest payments that will crowd out private investment).

SOURCE. (See the original for links)


Fascism by another name

The ever-increasing control over every aspect of people's lives that is driven by America's Left makes America more and more like a classic Fascist state. Since the Fascists were Leftists this is no surprise but it a worrisome direction for America to be travelling in. Great swathes of liberty have been lost and more losses are on the way

First, and this is key, we must look at the economic system. The liberals are proud to have had a role in creating its socially democratic elements. The conservatives are proud of America’s towering financial and military institutions. Republicans and Democrats all pretend America has a free enterprise system, attacking greedy profiteers while crediting themselves for the benefits of capitalism, blaming laissez faire for all our problems while dissonantly congratulating themselves for having supplanted it with sensible regulation and safety nets once and for all.

The dirty little secret is that there has been a bipartisan project of corporatism, the economic underpinning of fascism, for almost a century. The regulatory bureaus, the banking establishment, agricultural policy, telecommunications planning, even the welfare state all enrich corporate interests, but at the ultimate direction of the state. One could say this arrangement was foreshadowed in Lincoln or even Hamilton. But it was during the World Wars and New Deal that the nation embarked upon something decisively fascistic.

Hitler, Mussolini, and the other fascists all employed a general approach of co-opting the market through huge governmental takeovers of industry while maintaining the pretense of private property. Along with this came interventions that would be considered socialistic in other contexts. Lew Rockwell very nicely summed up the economic programs of Hitler, which mirror the great prides of Progressive politics of the 20th century:
He suspended the gold standard, embarked on huge public works programs like Autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national health care and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime's rejection of the market economy and its embrace of socialism in one country.

Much of this agenda was adopted in the United States during World War I, and then brought back to life in the New Deal. John T. Flynn, a leftist who initially supported Franklin Roosevelt then became disenchanted with the president’s program of central planning, described the 1930s atmosphere of political ideology in his seminal work, The Roosevelt Myth:
There was indeed a good deal of tolerance for the idea of planning our capitalist system even in the most conservative circles. And a man could support publicly and with vehemence this system of the Planned Economy without incurring the odium of being too much of a radical for polite and practical society.

There was only one trouble with it. This was what Mussolini had adopted – the Planned Capitalist State. And he gave it a name – fascism. Then came Hitler and adopted the same idea. His party was called the Nazi party, which was derived from the initials of its true name, but it was dedicated to fascism. . . .

Whatever it was, it was the direct opposite of liberalism. It was an attempt, somewhere between Communism and capitalism, to organize a stable society and to do it by setting up a State equipped with massive powers over the lives and fortunes of the citizens. . . . Yet this curiously un-American doctrine was being peddled in America as the bright flower of the liberals. Of course they did not call it fascism, because that had a bad name. . . . They called in the Planned economy. But it was and is fascism by whatever name it is known.

In specific, FDR’s National Recovery Administration was fashioned after the industrial policy of Mussolini. Flynn explains:
[Mussolini] organized each trade or industrial group or professional group into a state-supervised trade association. He called it a corporative. These corporatives operated under state supervision and could plan production, quality, prices, distribution, labor standards, etc. The NRA provided that in America each industry should be organized into a federally supervised trade association. It was not called a corporative. It was called a Code Authority. But it was essentially the same thing. These code authorities could regulate production, quantities, qualities, prices, distribution methods, etc., under the supervision of the NRA. This was fascism.

Such an analysis of the New Deal as fascism is not only found in the Old Right or their libertarian successors. Historian Thaddeus Russell’s great chapter "Behold a Dictator: Fascism and the New Deal" in his new book A Renegade History of the United States comes from a leftist perspective and arrives at much the same conclusions. Many of the greatest progressive intellectuals and business elites of Roosevelt’s time were especially enamored of Mussolini’s regime. "The men who made the New Deal were driven by dreams of a machinelike society, in which all members, from the leaders of government to the lowliest workers, would be parts designed, built, and employed entirely for their function within the whole apparatus. But to their dismay, these men found that most Americans rejected such dreams, except during times of crisis. The First World War was the first such crisis. . . . But then came the peace and prosperity of the 1920s, a long time of waiting for another national emergency that could make their fantasies of social order come true."

This mirrors Robert Higgs’s ratchet effect thesis and the insights found in his books Crisis and Leviathan and Depression, War, and Cold War, in regard both to the general expansion of state power during crises and the particular ways World War I and the New Deal solidified a state that Higgs has, with a nod to Charlotte Twight, referred to as "participatory fascism."

What makes FDR’s role in American fascism so insidious is that as the greatest 20th century liberal president who led America to war with the Nazis, he is often characterized as the prototypical U.S. anti-fascist. The great Smedley Butler, a brilliant critic of America’s merchants of death, was very concerned that reactionary forces along with the military came close to dethroning FDR and creating a fascist regime. But one must ask, could anyone tell the difference? What would the anti-FDR fascists do – wage total war? Nationalize the economy? Put American citizens into concentration camps based on race? Create a permanent military-corporate establishment? To discuss a possible fascist coup in the years of Franklin Roosevelt is to ignore that it in fact happened – a "revolution within the form," as Garet Garrett described it.

Also insidious is the great respect most Republicans have for FDR, whether it’s acknowledged or not. Reagan was a devout New Dealer who never abandoned this orientation when he became governor or president. George W. Bush’s entire economic program was also thoroughly Rooseveltian – expanding Medicare to the benefit of the pharmaceutical companies, an Ownership Society (how fascist does that sound!?) intended to shore up the real estate and finance sectors, an attempt to corporatize Social Security (thereby saving FDR’s domestic triumph, itself a copy from a Prussian program of the 19th century), the bipartisan bailouts of financial institutions, steel tariffs, further nationalization of education, and all the rest.

The Democrats, for their part, continue with the fascist economics they adopted four generations ago, and it leads to a good deal of confusion as they are the "liberal" party. Yet when Obama plans to force individuals to buy private health insurance, picks corporate giants to head up regulatory offices, schemes to create a phony market in carbon credits, and widens the revolving door between Wall Street and the Oval Office, he along with his party is only continuing down the road of their Mussolinian predecessors.

One of the most horrifying parts of fascist economics, autarky, has even been mimicked by all presidents since Nixon in their crazed calls for "energy independence." We also see it in the hysteria about jobs being oursourced. Today it often has an environmental spin, and there is not the beating on the podium and screaming of Lebensraum, but the protectionism and codependency between favored American businesses and the omnipotent state, all with a nationalist focus, are nevertheless there for anyone to see.

It could be countered that many other nations have corporate states as well. Perhaps they too have fascist tendencies. Yet there are a few corporatist features singular to the United States. As the holder of the world’s reserve currency, and given that money is half of most economic transactions, the United States boasts one of the most significant corporatist arrangements in the world in its alliance between the Federal Reserve and the big banks. The U.S. government, in absolute terms, claims the largest of all regressive welfare programs in the form of Social Security. It is likely the global leader in intellectual property enforcement, both in domestic and international terms, with most nations trailing considerably behind in this increasingly draconian form of corporate privilege. As the grandest leviathan preying over the world’s richest nation, the U.S. corporate state is in its own class.

Flynn’s insight that the economic structure of America’s planned economy is fascist whatever label we affix to it is echoed in a much more recent and popular authority. In an episode of South Park, Kyle the idiosyncratically precocious kid has this great exchange with his father:
Kyle’s dad: "You see Kyle, we live in a liberal-democratic society, and democrats make sexual harassment laws, these laws tell us what we can and can't say in the work place, and what we can and can't do in the work place."

Kyle: "Isn't that Fascism?"

Kyle’s dad: "No, because we don't call it Fascism."

Up and down the economy, at all levels of government, bureaucrats and planners dictate details in nearly all areas of economic behavior, with the principle that some sectors should simply be free of government intrusion having been totally discarded. If we have large swaths of economic liberty in America, and we do, this is by accident, or merely due to the state’s institutional limits in being able to run everything. The ideological thrust of U.S. economic policy is that we may live our commercial lives freer than in many places, but all upon the good graces of the state, its cartels, licensing boards, and regulatory apparatuses. Even our homes are private property only insofar as it serves the interest of the state, which claims the right to seize anything we own if it bolsters the tax receipts garnered through the state-business nexus. The business environment adheres to a rapidly expanding litany of commercial codes, many of them designed not even by legislature but by executive or judicial fiat. Taken together, this is the essence of economic fascism.



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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