Friday, February 6, 2009

Don't Bother Us With The Details

Congresswoman Cathy McMorris Rodgers sent out a newsletter concerning the stimulus plan. (Don't bother clicking on the "Read the latest e-newsletter" link on her web site. It hasn't been updated since last September.) But KHQ was kind enough to post it on their site.

My top priority as your representative in Congress is turning our economy around and helping hard working middle class families. Unfortunately, the stimulus bill is just another example of a big government, big bureaucracy, big political and big spending solution. During these very difficult times, we cannot afford another wasteful Washington spending spree that will do very little to create jobs and grow the economy.

Another wasteful Washington spending spree? One wonders where the good gentlewoman from the 5th District of the Great State of Washington has been during the past four years.

During this debate, I have offered common sense alternatives that would stimulate and grow the economy. Alternatives like stabilizing home values, more assistance for the unemployed and providing immediate tax relief for hard working families and small businesses.

More or the same tax cuts that helped get us where we are today. I imagine the 598,000 people who lost their jobs last month would love a tax cut on the salary they no longer receive.

Her newsletter includes a Link of the Week.

"President Obamas economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday."

Said link taking you to a news article. The letter being referenced in the article is here and a summary is here. When you read it, please look for the part where the CBO says the economic recovery package will actually hurt the the economy more in the long run than doing nothing. Couldn't find it? Me neither.

...CBO analyzed the macroeconomic effects of an initial Senate version of the stimulus legislation (the Inouye-Baucus amendment in the nature of a substitute to H.R. 1, which is the House stimulus bill). CBO estimates that the Senate legislation would raise output by between 1.4 percent and 4.1 percent by the fourth quarter of 2009; by between 1.2 percent and 3.6 percent by the fourth quarter of 2010; and by between 0.4 percent and 1.2 percent by the fourth quarter of 2011. CBO estimates that the legislation would raise employment by 0.9 million to 2.5 million at the end of 2009; 1.3 million to 3.9 million at the end of 2010; and 0.6 million to 1.9 million at the end of 2011. Those estimated effects are slightly greater than those of H.R. 1 (as introduced) in 2009 and 2010 (particularly in 2009), but lower in 2011, because more of the overall rise in spending and fall in revenues occurs in the first two years under the Senate legislation.

Most of the budgetary effects of the Senate legislation would occur over the next few years. Even if the fiscal stimulus persisted, however, the short-run effects on output that operate by increasing demand for goods and services would eventually fade away. In the long run, the economy produces close to its potential output on average, and that potential level is determined by the stock of productive capital, the supply of labor, and productivity. Short-run stimulative policies can affect long-run output by influencing those three factors, although such effects would generally be smaller than the short-run impact of those policies on demand.

In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to “crowd out” private investment—thus reducing the stock of private capital and the long-term potential output of the economy.

The negative effect of crowding out could be offset somewhat by a positive long-term effect on the economy of some provsions—such as funding for infrastructure spending, education programs, and investment incentives, which might increase economic output in the long run. CBO estimated that such provisions account for roughly one-quarter of the legislation’s budgetary cost. Including the effects of both crowding out of private investment (which would reduce output in the long run) and possibly productive government investment (which could increase output), CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.

So besides avoiding another depression there is a downside to increasing government debt.

Thank you, Congresswoman, for your grasp of the facts, respect for the truth, and clarity of vision. If only you had read the letter yourself.

No comments: