Friday, June 20, 2014

"Meaningful" government sector engaging...

In Tuesday's New York Times, the Editorial Board offered up its expert commentary on the Fed. Here's a snippet of that insightful commentary:
In a normal business cycle, low interest rates are usually enough to generate sufficient demand to boost economic growth to its historical average of roughly 3 percent. But there is nothing normal about the present cycle. The Fed has extracted about all the juice it can from low rates and continues to squeeze. It could also spur investment by tolerating higher inflation than its 2 percent target. But the basic problem --- spurring demand on the part of consumers and borrowers --- is outside its purview.

Only Congress can provide the extra dollars for that, but lawmakers have been unwilling or unable to take action, even just to provide basics like federal unemployment benefits or highway and bridge repair.

Given that failure to act, it is a wonder the economy has managed to grow at 2 percent. To assume that it will continue to do so or that it will fully recover without the government sector engaging in a meaningful way is to hope against evidence.

Oh my! What is "insightful" about that commentary is the insight it gives into the utter dearth of basic economic knowledge existing among the members of the NYT Editorial Board. 

I'll keep this very brief and simply pluck out what I pray exploded out as obvious malarkey to the majority of my readers. This notion that "only Congress" has the wherewithal to get the economy humming at historically-average speed---and that the government sector has not engaged---is the definition of ignorance, if not pure political pander, if not, well, malarkey.

Reality: Only "lawmakers" engaging with the private-sector can provide the uncertainty that would restrain capital investment while corporate balance sheets are flush with cash and interest rates are at record lows. The fact that the economy has managed to grow at 2 percent amid such government sector meddling is a wonder.

Here's a list, compiled back in August 2012 by Cato's Thomas Firey, of 15 government sector engagements ($2.4 trillion worth) that have occurred since 2008. Allow me to add TARP, The Affordable Care Act and, in terms of Fed-meddling, the trillions of dollars printed under the QE programs. Oh, and regarding "basics like federal unemployment benefits", count the number of unemployment benefits-related acts below:   

#NameStimulus (Billions)Became LawPublic LawNote
1.0Economic Stimulus Act of 2008 $1672/13/2008110-185A ”timely,” “targeted,” and “temporary” fiscal stimulus.
1.0.1Unemployment Compensation Extension Act of 2008 $5.711/21/2008110-449Extends unemployment insurance, using borrowed funds so as to provide stimulus.
2.0American Recovery and Reinvestment Act of 2009 $8192/17/2009111-16This package of public works projects, tax breaks, unemployment insurance extension, and other spending would keep unemployment below 8%.
2.0.1Cash for Clunkers Extension $28/7/2009111-47Continues the subsidy for new car purchases that was first enacted as part of ARRA.
2.1Worker, Homeownership and Business Assistance Act of 2009 $44.711/6/2009111-92Extends and expands the homebuyer tax credit program.
2.2Temporary Extension Act of 2010 $8.13/2/2010111-144Extends unemployment insurance, using borrowed funds so as to provide stimulus.
2.3Hiring Incentives to Restore Employment Act $17.63/18/2010111-147AKA the “Jobs for Main Street Act,” this “jobs bill” would ”spur job growth and strengthen the private sector.”
2.4Continuing Extension Act of 2010 $18.14/15/2010111-157Extends unemployment insurance, using borrowed funds so as to provide stimulus.
2.5Homebuyer Assistance and Improvement Act of 2010 $1457/2/2010111-198Extends the deadline for submitting paperwork for homebuyer credit.
2.6Unemployment Compensation Extension Act of 2010 $33.97/22/2010111-205Extends unemployment insurance, using borrowed funds so as to provide stimulus.
2.6.1United States Manufacturing Enhancement Act of 2010 $38/11/2010111-227Reduces or suspends various import duties.
2.7Small Business Jobs Act of 2010 $85.49/27/2010111-240Expands SBA loan programs and provides other small business assistance.
3.0Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 $916.812/17/2010111-312A package of tax breaks, including a cut in the Social Security payroll tax, an extension of the Bush income tax rates, and an extension of unemployment insurance.
3.1Temporary Payroll Tax Cut Continuation Act of 2011 N/A12/23/2011112-78Extends the Social Security payroll tax cut, extends unemployment insurance, and other provisions.
4.0Middle Class Tax Relief and Job Creation Act of 2012 $167.62/22/2012112-96Extends the Social Security payroll tax cut, among other provisions.
SUM:  $2,433.9   

No comments:

Post a Comment