Long Term Perspective

President Obama, March 3, 2009:

"What you're now seeing is profit [sic] and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."

End of the week news, March 6, 2009:

MARKET SNAPSHOT
Stocks look cheap, but they could get cheaper; By some measures, P/E ratios are near lows, though it depends how you slice it

By Laura Mandaro, MarketWatch
Last update: 4:45 p.m. EST March 6, 2009
SAN FRANCISCO (MarketWatch) -- Price-to-earnings ratios, a popular measure of how expensive stocks are by historical standards, have surpassed lows seen in recent recessions. But that's no guarantee they won't sink further.

"There's no doubt that people can look at market valuations and determine that stocks are relatively inexpensive -- but that doesn't mean they're going to quit going
down," said Michael Gibbs, director of equity strategy at Morgan Keegan & Co. in Memphis, Tenn.

The price-to-earnings ratio of stocks in the S&P 500 has sunk to 10.6 from nearly 17 at the end of 2007, says FactSet Research. That's based on the Thursday close of the S&P 500 compared to index members' past four quarters of operating earnings, or net income excluding what analysts consider to be extraordinary charges and gains.

Thomson Reuters, which publishes similar analysis, estimates the trailing P/E ratio for the S&P 500 is around 11.

Those numbers are well below the valuations reached during the market low of the 2001 recession, when the ratio stopped at 19. They're also lower than the P/E ratio of 13 touched at the market bottom during the 1990-1991 recession, says Morgan Keegan, which used data compiled by Yale University's Robert Shiller for its historical research.

But widen out the lens, and P/E ratios dropped even further in some earlier recessions. During the market low of the early 1980's recession, for example, stocks in the index were trading at a mere 8 times earnings. "There have been periods when the market multiple [P/E ratio] traded lower. And the economy is declining at a rapid pace, meaning earnings could fall more," Gibbs said.

We read this and we think, how can we use this sterile and unsurprising information to create an overwrought and emotional blog post. Let's try this:

Sydney Brillo Duodenum recently downloaded the iDie application for his iPhone. Essentially an actuarial table showing at any given moment your expected remaining lifespan, iDie finds that SBD has used up approximately 56 percent of his life. This little application has removed any and all sense of any "long-term perspective," as the President might describe it, on anything. It's all short term from here on out. In fact, it was during a highly productive part of that first 56 percent of his life that SBD maintained "a long term perspective" on things and it is that very thing which led him to be a good egg by directing a decent percentage of earnings into nest eggs. The result? A murder of crows has made off with almost half of SBD's little chicks and an unkindness of ravens has its eyes on the remaining little bastards. Living now only in the short term as SBD does, there simply isn't any long term opportunity to get back to break even.

Someone is to blame, of course.

First and foremost, SBD is to blame because he "bought into the system" as it were. His money is locked up in goodietwoshoes, government prescribed financial investment vehicles - 401(k), life insurance, 529, etc. - all designed to minimize taxes in addition to minimizing access to hard earned money. To get it out will cost money and penalties. And then what? Thus, SBD gave up his freedom for some kind of freedom in retirement. Short term advice to the next generation: never give up control of your money.

Second, Obama is most certainly to blame for our present condition. It is absurd and obtuse to claim that he "inherited" this "crisis." He blames out of control government spending, so-called lax regulatory oversight, and capitalist greed. It was Booooooosh that did it. We know that government spending got out of control paying for things President Obama himself is now promising full sized versions of: nationalized health care, education outlays, hidden welfare; bailouts for deadbeats, statist energy policy. And yes, there certainly was a great deal of regulatory blindness, especially the kinds that allow quasi-government entities - Fathead and Frannie Fuckface - to run amok in a vital area of the nation's economy and pysche. And while it's interesting and makes allowance for stern furrowed brow speeches, capitalist greed is what funded President Obama's break the bank presidential campaign. The regime was not built on drib and drab contributions from some hempclothed fat chick with hairy underarms living in a tent under a freeway in Portland, OR. Wall Street and James Bond-type villains paid for President Obama's campaign. It was Barack Obama's "philosophy" that brought us to where we are today. Government meddling and control over market forces, government policies that pervert human action and create moral hazard are to blame. In the past 40 some days, President Obama has promised a degree of government meddling, coercion, perversion, and disruption unseen in modern times. His policies and philosophy took us to where we are today. Falsely, they indict free market principles that have never been allowed to function. Obama is now in control and promising an explicit and accelerated application of his philosophy.

People need to understand that this will not blow over. People sometimes become trapped in their own circumstance, believing it to be global and paradigm altering when it really just an isolated squall in the wide ocean. Not this. This not melodrama or middle age heat or desk draw whiskey or even sour grapes talking. It's sober fear. America is in the grip - the clenched fist - of an egomaniacal academic charlatan.

Our republic is in great peril and there is not a goddamned thing that can be done about it. It must simply play itself out in the short term. Obama will get most of what he wants. In that sense he will succeed. He will create a government chatal class, incapable of ever being a Greatest Generation. Obama's success is national failure. The Republic is dying. SBD's "long term perspective" is that in the short term, he witnesses it die.

Ha Ha Har har hdfkjkfzzzzzzzzzzzzzzzzzzzzzzzzz

The Democratic National Commitee is holding a small competition targetting Rush Limbaugh. Come up with a witty slogan for a billboard that will be placed in West Palm Beach, FL, which the DNC believes is Rush's hometown, even though he lives on a beach front estate in Palm Beach, FL, about ten miles east; a billboard he will never see from his $480,000 Maybach or his private jet. Entries are limited to ten words or less.

SBD has put all his hopes into this entry:

Rush Limbaugh Drinks Obama's Milkshake.

It's not likely to win, but the competition is open to all, so why not participate? Several times.

SBD's other entries:

Operation Chaos Paid For This Sign

Rush Singles Out The President Using Fascist Big Media Ads

Rush's Cigar Offers More Stimulus Than the President

This Is How Democrats Spend Rubes' Money, Like Obama

Yes, the last one is lame.

The Enemies List

Rick Santelli, CNBC Commentator

Jim Cramer, CNBC Commentator and General Maniac

Rush Limbaugh, Chairman of the Board, Conservatives, Inc. and Radio Entertainer

Joe the Plumber, Bald Guy and Know Nothing

and

Sydney Brillo Duodenum, Anonymous Hack Blogger

Today's Rousing Rhetoric

Newt Gingrich:

We should have seen it coming. Way back in November, when the Obama team was still flush with victory in the election, Obama White House Chief of Staff Rahm Emmanuel laid out what he called "Rule One":"Never let a crisis go to waste."The Obama budget plan unveiled last week is proof that the goal of the administration is not economic recovery. The goal is an unprecedented shift of power to politicians and bureaucrats.

[...]

Ronald Reagan believed that at the center of American life was the individual. The entrepreneur. The worker. The doer. The family man and woman.The Obama budget reveals a very different vision of the men and women at the center of American life. They are the politicians. The bureaucrats. The interest groups that support an ever expanding government sector.And so the American people are presented with a real choice: Which America do we want?An America in which citizens and entrepreneurs are free and hold the power? Or an American in which politicians and bureaucrats dominate and are in charge?

[...]

Concentrating more power in Washington politicians and bureaucrats means government dictating what it deems are the "right" choices to individuals and businesses, rather than giving them the freedom and incentive to make their own choices.For example, in his address to the joint session of Congress last week,the President announced his intention to punish "corporations that ship our jobs overseas."The United States imposes the second highest business taxes of any industrialized nation in the world. While countries like Ireland tax corporations at 12.5%, and even our neighbor Canada is moving its national business tax rate to 15% (the lowest among the G-7 countries), the United States taxes businesses at a whopping 35%. And a number of states have corporate income taxes on top of that. Inevitably, high taxes in the U.S. cause some businesses to locate some or all of their business in lower tax countries overseas.

[...]

Now that President Obama has revealed the direction in which he wants to take the country, let's have a debate. Let's choose up teams.If you believe the best way to create jobs is to give more money to bureaucrats in Washington and more power to politicians in Congress, you have a team. If you think the best way to create jobs is to make life easier for people who want to work hard, take risks and create businesses and wealth, you have a team. If you think America should be a place where politics trumps economics and religion, you have a team. But if you think America is a place where freedom trumps it all, you have a team. Let's let the American people choose.

Which America do you want?

That Special Relationship

UK Prime Minister Gordon Brown is in town this week to be snubbed by His Royal Highhandedness BHO in order to ensure that no one is any longer under the impression that any kind of special relationship exists between the United States and Britain. Snubbing is the order of the day when it comes to HRH BHO and the United Kingdom. In a disgusting, amateurish, and petty maneuver, Churchill no longer broods over the Oval Office rug that so captivated Bill Clinton, his bust having been banished to the British Ambassador's residence on Massachusetts Ave, just down from Sheriff Joe's pork farm.

Before being treated like a breakfast banger on a plate in front of a Kings Cross chav, Brown had high hopes for his trip. What with Britain collapsing under the same stupidity afflicting America and with not even a pebble left in his arsenal to do anything about it, there was no better time for Brown to fly to Washington and cozy up with a fellow liberal fascist. After all, Brits "voted" for Barack Obama in droves, so a high profile meeting with HRH BHO could only help the actually-elected Brown's own political situation and improve his dismal chances for re-election. Also, seeing as how Britain is completely out of money (aren't we all!), Brown needs another kind of bailout and that HRH BHO fellow seems to have handle on about a trillion necessary things. Brown's problem is that HRH BHO has not yet gotten it into his head that it is his job to save the whole planet, not just the United States. Silly man, that's for the second 100 days.

Thus, we have two men who understand nothing of free markets, entrepreneurialism, individual freedom, constitutionalism, economics, and human nature, and know too much about government printing presses, glad handing about DC. It's a special relationship, indeed. One hopes Brown can stay for the Wednesday night cocktail party at the White House. We hear they are grand affairs. He may even catch a glimpse of HRH Michele's Michael Kors-framed guns.

Little does Brown understand that in addition to a severe resentment and anger at America, which enfolds his deep desire to see her brought low before he can "save" it, HRH BHO also has deep resentment and anger for the way the British Empire treated his ancestral homeland Kenya, home to the father that abandoned HRH BHO with his white mother in cowardly racist America. HRH BHO will do nothing for Brown but appear in pictures that raise questions about their dental hygiene and choice in footwear. Let's remember that Brown is Tony Blair's successor. Brown is not Britain's George Bush; he's not some Before Barack holdover; he's not a free market conservative or Thatcherite or some other hero from the past that HRH BHO has to meet to be nicey-nicey with to demonstrate his New Age Diplomacy but secretly hates because he represents the discredited philosophies of western civilization, parliamentary democracy and constitutional republicanism. Brown's a life long practitioner of HRH BHO's dark arts. He's lived the Agenda. He is one of its architects. He was Chancellor of the Exchequer under Blair, the Timmy Geithner of the British Cabinet; the wielder of the Red Budget Box. Like his boss before him, Brown has been quite lavish in his public spending and thus left the country with nothing to fight the global downturn. Brown is where HRH BHO, and by extension the rest of us, will be in four years. A deep dark hole of his own making with nobody to bail him out. HRH BHO does not want anyone to focus on Brown or Labour. Britain's present situation is an immediate indictment of everything HRH BHO has planned for the United States and thus Brown is a potential distraction and harbinger of the future.

What Britain needs and likely never have again is identified by Commentary's Peter Wehner:

On March 3, 1980, Thatcher (now Prime Minister) delivered an address whose main burden was placed on the role of the state and the right of the individual to freedom from state interference. “The first principle of this government… is to revive a sense of individual responsibility,” she said. She went on to say, “What we need is a strong state determined to maintain in good repair the frame which surrounds society. But the frame should not be so heavy or so elaborate as to dominate the whole picture. Ordinary men and women who are neither poor nor suffering should not look to the state as a universal provider.” And she then listed the layers of illusion that “has smothered our moral sense”:

The illusion that government can be a universal provider, and yet society still stay free and prosperous. The illusion that government can print money, and yet the nation still have sound money. The illusion that every loss can be covered by a subsidy. The illusion that we can break the link between reward and effort, and still get the reward.

This is the philosophy that President Obama and his team of propeller heads are seeking to discredit and reverse. The President, facing an economic crisis that demanded action (particularly in the realm of our financial system and credit flow), used this opportunity to attempt a staggering power grab by the federal government. His plans would enlarge its reach and scope beyond anything in our lifetime. And so Barack Obama — supremely ambitious, young, and new — has revived an age-old debate over how the economy works. He is casting his lot with collectivists and statists; his intent is to put us on a glide path to European-style socialism. Unless he is able to suspend the laws of economics, I rather doubt Obama will succeed. As a result, he may end up not repudiating Thatcherism and Reaganism, but revivifying them.

Unfortunately, socialist and fascist experiments rarely end quietly or well.

I Been Deputized!

Sydney Brillo Duodenum has been deputized by President Obama.

I'm also deputizing every single American to visit a new website called recovery.gov so you can see where your tax dollars are going and hold us accountable for results.

Interesting. It's the height of Big Brotherism and Fascism to ask "citizens" to call the FBI or DHS if they think their neighbor Ahmed's little project involving 2000 pounds of fertilizer for his 400 square foot lawn doesn't seem right, but it is now a duty - we've been deputized, afterall - to call foul on some faceless bureaucrat residing in a Brutalism building in Washington.

And who's the Sheriff?

To you, he's Mr. Vice President, but around the White House, we call him the Sheriff -- (laughter) -- because if you're misusing taxpayer money, you'll have to answer to him.

People misusing tax payers dollars will have to answer to a man who spent 36 years in the Senate?

The President also said this, and it is a true representation of the size of his giant, brass balls:

Now, we have another responsibility. Having inherited a trillion-dollar deficit that we're working to cut in half, we also need to ensure that tax dollars aren't wasted on projects that don't deliver results.

That would be very interesting and laudable if not for the fact that President Obama forgets the little matter of the trillions of dollars he himself will be adding to the deficit. So apparently, when Deputy SBD calls to complain about the waste of tax payer dollars, he's only referring to all the taxes collected to support George Bush's government programs - the ones Obama will cut in half, like prescription drugs for seniors and huge federal outlays for public schools and subsidies for farms.

43 Days

President Obama has been in office for 43 days.

43 days.

Let that sink in.

43 days.

That's right.

Now go change your underwear.

Today's Stolen Political Cartoon

H/T: http://directorblue.blogspot.com/

Note to the Wall Street Journal

Sydney Brillo Duodenum, after long and careful consideration, and taking into full account his spoiled nature and demand that all things be efficient, right and functional, and with complete understanding that "media" cannot stand still and certain age-proven models of information presentation need to be questioned and reshaped now and then, is of the firm opinion that the new Wall Street Journal web site sucks owl pellets. What was once the equivalent of Clint Eastwood in Gran Torrino - a wizened, experienced no nonsense man beating down punks with his simplicity and understanding of timelessness of certain human values has morphed into a fat, lethargic, overfed, Hawaiian shirt wearing guy from New Jersey standing in the middle of Main Street, Disney World, sucking on a soda while studying a map and making it difficult for everyone to get their fastpasses to their favorite ride and stake out a position on the parade route. Slow does not begin to describe this lumbering unresponsive over served beast, and network connections, user error, browser choice nor a generally dyspeptic cranky attitude explain the problem.

There is but one thing to be said: Fuck You, Rupert Murdoch. Other than this small quibble about the utility of one of the great tools of western civilization, you're doing a great job.

Today's Potshot

President Barack Obama furrowing his brow before Congress:

I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.

Byron York reporting in the DC Examiner:

It didn't make most of the papers or the TV newscasts, but Desiree Rogers, the new White House social secretary, caused a bit of a stir recently when she appeared at New York's Fashion Week shows, sitting next to Vogue Editor Anna Wintour as she took in the latest from designers Carolina Herrera and Donna Karan.

[...]

At first, it wasn't clear whether Rogers was hanging with the fashionistas as part of her official White House duties or not. Then New York magazine quoted a White House aide saying, "Desiree was in New York on a fact-finding mission. She's acting as a cultural liaison for the White House; she's researching fashion and music."

[...]

I asked whether the first lady considered Rogers' hitting the fashion shows a little frivolous, given the seriousness of our times. "I think you're assigning a value judgment to the fashion industry," I was told. "She doesn't think it is frivolous at all."

[...]

Rogers was also treated to lunch at the chic Four Seasons by the interior decorator Michael Smith. You might have heard Smith's name because he was the man chosen by the now-departed Merrill Lynch Chief Executive Officer John Thain to handle Thain’s notorious $1.2 million office redecoration project. President Barack Obama condemned that sort of excess, but then hired none other than Michael Smith to spruce up the White House. And then Smith honored Rogers at the Four Seasons.

Underdog

Sydney Brillo Duodenum has spent the better part of his lunch hour searching the web for any mention of Al Sharpton's outrage over this obviously racist, stereotypical treatment of President Obama during Germany's main Carnival celebration in Dusseldorf (?!?!). Perhaps the good reverend is en route to Dusseldorf to collect money from German Chancellor Angela Merkel for his protection services against race mongerers.

(SBD's initial reaction to the photo was that it was some kind of statement (racist, of course) about President Obama and House Speaker Nancy Pelosi).

Luxury Tax

Here we see Sydney Brillo Duodenum's newly acquired (or soon to be) yacht! Friends may be surprised to find that SBD is financially positioned to set sail at will, but these are new times. Of course, SBD does not have full ownership in this yacht. He has a fractional ownership, somewhat like that offered by those evildoers at NetJets. Unlike NetJets, SBD's use of the yacht will not cause the slow strangulation of the planet under a cloud of bilious carbon gases.

And you may ask, "SBD, how did you come into this fractional yacht ownership? Last we checked, your friends were picking up the tab for $200 bottles of wine at dinner parties you arranged!"

True enough, but in the new Omnibus spending bill, there is an earmark of $238,000 to the Polynesian Voyaging Society (Honolulu, HI). Earmarks are federal tax payer dollars. SBD is a federal tax payer. Hence, SBD is now a fractional owner in a Polynesian yacht.

Crystal Ball

This is not a picture of your host, but if the next four years are anything like the past month, then he and SBD shall be indistinguishable.

U.S. City Micro Review: Denver

Denver is really scorching hot in the summer. Downtown it’s really dirty. I don't like to eat so I don't know how the food is. They have a lot of avalanches in the mountains. And a lot of people are dying because they are skiing into trees. -

-- Saul Menowitz Jr., Age 8 and recent transplant to Denver

Celebrity Sighting!!!

Sydney Brillo Duodenum had occasion to be in New York City yesterday. While strolling about Columbus Circle, he spied none other than Dustin Hoffman, the Actor. Mr. Hoffman was hustling towards the Time Warner Complex. He gave a curt brush off to an autograph seeker (not your host). He was carrying a small white bag, the merchant unknown.

Strangely, he refused to turn around at the loud call of "Hey, Rainman, Rainman, how many bricks are there in the pavement of Columbus Circle!"

Photographic proof is displayed below.

Do Our Business In the Light of Day . . .

President Obama, Inaugural Address:

The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. Those of us who manage the public's dollars will be held to account — to spend wisely, reform bad habits, and do our business in the light of day — because only then can we restore the vital trust between a people and their government.

Washington Post:

Despite the brokered deal, confusion reigned in the Capitol's hallways. With no text circulating 30 hours after Reid's announcement, Senate Minority Leader Mitch McConnell's office sent out a half-joking e-mail to reporters last night making light of Democratic accusations that Republicans were blocking the legislation -- since none yet officially existed.

Lawmakers had warned of the complications involved in drafting such a large bill in such a short time. Earlier versions had nearly 800 pages. When House and Senate negotiators sat down Wednesday evening to formalize an agreement, their aides wheeled in drafts of the bill on a cart. That version was dated Feb. 9, before the Senate centrist compromise that gutted more than $100 billion from the legislation.

Piles of paper, bound by metal clips, sat next to the old drafts, representing the new versions of the legislation.

Guard Duty

This is what you get when your son asks you innocently if he can drill a few holes into one of his action figures; he borrows some Styrofoam from the trash; and he finds the craft paints.

A teachable moment, as the insufferable say?

Indeed. What do we know about guards? First, nobody really respects them. We mock private security guards. Other than our military volunteers, most Americans do not interact with Privates holding sentry. Hollywood has spared no celluloid in filling our minds with decades of lowly anonymous schmoes, some good, some bad, pulling guard duty. From the cookie cutter German guards in the Dirty Dozen movies to the strangely, identically dressed henchmen in the employ of SPECTRE in the Bond classics to man-of-the-future "red shirt" guys of Star Trek to the shlubs guarding the Nakatomi Plaza before Hans Gruber's similarly expendable employees tap them out with silenced rounds to the legions of black ops turncoats buckling at the hands of Jack Bauer on 24, they all have the following in common: cold, swift termination and barely a mention in the closing credits. Sometimes, they have to pay hard and will have their throats cut, kidneys punctured, or guts disemboweled, or all three as appears to be the case in the picture above.

One of the most important things that Sydney Brillo Duodenum can impart on Sydney Brillo Duodenum Junior is the understanding that he too will pull guard duty for some part of his life or for all of his life, and in either case he must avoid ending up like the guard in his diorama. Junior imagines he's the stealthy, albeit flashily dressed, Ninja, mercilessly dispatching the guard standing between him and the entrance to the secret government experimental nuclear Styrofoam laboratory. Few of us get to be Ninjas.

We all pull guard duty. Day after day, night after night, we watch over our jobs, our homes, our children, our little bank accounts and nest eggs, and our lawns. Guard duty is often tedious, unsung work; it can be soul crushing, but it's the mainstay of our society. We protect the entrances to the facilities that keep our society functioning. On any given night or day, that Ninja bastard may appear and simply take us out in a brief moment of befuddlement and stifled exhalation. All we can do is walk our lines, keep our eyes open, our safeties off, and constantly brush up on our grappling skills. Sometimes a guard is just too badass, like the ones guarding Area 51.

These days, too many of us have become distracted from our guard duties. We're wandering and complacent. The doors to the things we care most about are wide open because we decided to drop a deuce in the bushes at the wrong time. And, these days, the Ninjas are out in force.

Pictures That Explain What's About to Happen to Joe the Taxpayer and His Kids

In this picture, placed by destiny in this website for this very day, we see Chuck Connors playing the role of Big Government and we see some kid actor about to play the role of the little American taxpayer.




[H/T James Lileks]

Just What the Hell Do the Economists Think?

GMU Economics Professor Jim Boudreaux:

“Conventional wisdom in Washington is that we must do something regardless of how wise or prudent it is,” said Boudreaux, the keynote speaker at an economic recovery event cosponsored by Heritage and the Club for Growth. “It’s taken as a matter of course that we must spend wildly.”

Instead, Boudreaux said, history offers a lesson that shows massive spending programs, such as those advocated by President Franklin Delano Roosevelt as part of the New Deal, do not work. “FDR’s policies put the ‘great’ in Great Depression,” Boudreaux said. He cited unemployment, which never dipped below 14%, and comments made by FDR’s own treasury secretary, Henry Morgenthau, who lamented that spending didn’t work. Should the United States fall into a deeper recession or depression, Boudreaux said, it would be the result of economic policies like those Obama is pursuing as part of his stimulus proposal.

New York University Assistant Economics Professor Mario Rizzo:

New York University assistant economics professor Mario Rizzo kicks off the second morning panel “Market-Based Solution.” He begins by taking fire at the macroeconomists who are claiming they know exactly how many jobs each version of Obama’s Trillion Dollar Debt Plan will create.

Rizzo says:Unfortunately, much of the policy advice offered recently by commentators, including many economists, is shockingly superficial. It is reminiscent of the simple prime-the-pump ideas of the early Keynes and does not acknowledge Keynes’s own cautions and qualifications after the General Theory was published.” Rizzo then went onto stress that the microeconomic realities were the key to real economic recovery: “I wish to emphasize the resource allocation issues that characterize both the current situation and its underlying causes. The macroeconomic way of thinking ignores the complexity of our system and generates
policies that will not bring lasting recovery.”

Turning to solutions, Rizzo recommends: First, allow the market adjustments to take place. When economic agents are confident that prices will be allowed to equilibrate, they will begin to take action in both financial and economic areas. Second, the current atmosphere of uncertainty has created an increase in a reluctance to lend, borrow, invest, and consume. Neutral stimulation can do some good. The only way stimulation can be neutral is through tax cuts, because only they encourage economic activity in accordance with voluntary decisions of economic agents.

Temporary cuts like the one in Obama’s plan will not work just like the rebates in Bush’s 2001 tax cuts do not work. Permanent and across the board cuts are needed and a cut in the corporate tax rate would be the most helpful. But these tax cuts must come with credible commitments to cut back on future government spending or they stimulative effects will be canceled by expectations of future interest rates.

Economist Arnold Kling:

Kling begins somberly: “I think about the stimulus as an economist but I feel it as a father. Barack Obama is destroying my daughters’ future. It is like sitting there watching my house ransacked by a gang of thugs. That’s how I feel, now back to how I think.”

Kling says this is a big bill, but not a big stimulus. There is nothing timely, targeted, or temporary about it. It is a simple transfer of money from one set of people to favored interest groups of the Democratic Party.

If economists had designed a plan, instead of Democratic politicians, it would look a lot like Greg Mankiw’s plan which calls for an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax.

Kling stressed that profits are the key to economic recovery. Profits and losses are signals in a market economy. Huge losses in the financial sector signal that that sector needs to shrink. Instead Obama is talking about buying and insuring toxic assets. They think they can force the financial sector to lend. But if businesses are not profitable then it makes no sense to lend. Cuts in payroll tax would make businesses more profitable.

Heritage Institute Senior Fellow JD Foster:

JD also predicted that President Obama’s Trillion Dollar Debt Plan will only deepen the recession. The CBO has already said so, noting that “in the long run it will lower aggregate output (GDP) by 0.1 percent to 0.3 percent.” Foster believes it will actually be worse. He explains that the unprecedented levels of debt required to fund Obama’s spending binge will drive up interest rates across the board. It well send our debt to GDP ratio soaring by 25%-30%. This will in turn drive up interest rates by a full percentage point by 2010. This debt will be a millstone around our economic necks for years to come.

Finally, responding to a question from the audience, Foster said that it was insane that anyone could think an economy could recover while staring down the barrel of a 12-gauge tax hike … like the ones scheduled for 2010. Not to mention the ones needed to pay for all of Obama’s reckless borrowing.

Gary Becker (1992 Nobel economics laureate) and Kevin Murphy (University of Chitown Economics professor):

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.

[...]

[O]ur 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.

[...]

The evidence of past expansions of government programs is [that] [o]nce 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.

[...]

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.

[...]

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.

Heck of a job, Timmy!

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