Tuesday, March 9, 2010

Another $148 Billion of Federal Money Works its Way Through Congress

I am not going to make a statement on the pros and cons of this bill, since frankly if not for the social safety nets expanded the past 2 years, I believe we'd have some very dire situations (i.e. soup lines and social disorder) happening.  [Nov 29, 2009: 1 in 4 Children, and 1 in 8 Americans Now on Food Stamps]  I do wish federal government would hire one type of worker en masse - auditors - because while these programs are a lifeline to many people, there are other people who make this government assistance a "way of life". 

That said, while the $15B "jobs bill" - which is a complete joke in my opinion - received all the press, here is another program worth almost 10x as must national treasure; not being discussed much at all.  We often speak of cost benefit analysis - market players only seem to focus on benefit benefit analysis...they stand in awe at certain economic figures "improving" without commenting that the federal government has thrown some $2 Trillion+ (TARP and 2009's stimulus $1.5T alone) into the economy, while measures the Federal Reserve have done I would count almost as immeasurable (what is the benefit of "nearly free money in the short run?)... but easily in the trillions (Mortgage Purchase program alone is $1.25Trillion).  [Jun 3, 2009: A Country that Cannot Function Without Easy Money] [May 19, 2009: Paper Printing Prosperity Defined] If you throw enough trillions at an economy you can make any economic figure sing... in fact, we should argue it is stunning the data has not been much better considered all the liabilities we have pushed onto future generations for the benefit of the current.  Instead we stand and clap at all the things we can buy on a credit card... and then pretend the credit card does not exist.  This allows us to reach around and pat ourselves on the back while talking up how dynamic the US economy is .....while smirking at the backwards economies of Europe.  Dogma baby.   The amount of stealing assistance that continues to pour into the economy is mind boggling in scope; generational arbitrage is alive and well.... and without end in the United States of Borrowing.

Either way, here is another $148 Billion program winding through Congress - surely doing some good for some needy people, but also surely full of special interest handouts.  (why do we not break these bills into their sub components so we can vote on each individually? rhetorical question of course)  The larger question as a society is what are we going to do with the structurally long term unemployed in America?  We have much excess labor with no major job drivers to sop it up... at some point the nearly 9M newly unemployed of the past few years will drop to 6-7M and then we will ask "now what"?  . [Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?]  Permanent assistance?

  • Legislation extending unemployment insurance for the long-term jobless appears poised to clear a key hurdle in the Senate Tuesday, its momentum helped by about 60 popular tax breaks for individuals and businesses that expired at the end of last year.  (what happened to PAYGO?  More expenses incurred while concurrently extending tax cutsSenator Bunning was right... we cannot even find $10B in offsets, so how are we ever going to get serious about the real large numbers)
  • The measure also prevents doctors from absorbing a crippling cut in Medicare payments (kick the can #1) extends health insurance subsidies for the unemployed and gives cash-starved states help with Medicaid (kick the can #2)  the federal-state program providing health care to the poor and disabled.  (again this is not an argument pro or con, but you can see the absurdity of it all... decisions were made to move costs from one spot to another... but then the federal government just comes in with money to fill the hole... so what's the point of the action in the first place?  There is none... its just accounting gimmicks)
  • At a gross cost of about $148 billion, Tuesday's measure illustrates the extraordinary cost of the unemployment safety net as the economy inches out of the recession. (surely by the time it comes out of committee and every Congress person attaches their pet projects to it, it will be more than $148B)  The measure closes $29 billion of tax loopholes to help defray its cost.  (I guess that is the new paradigm PAYGO, pay for 20%- kick the can for the other 80%)  The bill would extend the tax breaks through 2010, at a cost of about $26 billion. (oops there goes that money right back out the door)
  • The unemployment insurance alone — to provide weekly unemployment checks averaging above $300 to people whose core 26-week benefit package has run out — will cost $66 billion through December. In some states people are eligible to receive benefits for up to 99 weeks.
  • It doesn't include new ideas for boosting jobs, but instead reprises elements of last year's $862 billion economic stimulus bill, which is earning mixed reviews from voters. Simply extending those provisions has produced a far more expensive measure than a separate so-called jobs bill that Democrats hope to soon send to President Barack Obama. (and this is why I have been saying we will continue to get yearly stimulus plans - we have structural problems no one wishes to discuss so rather than do a pomp and circumstance $800B program, we have another program that is huge in it's own scope... but without a fancy label.  And we'll have another in 2011.  And another in 2012....)

Oh yes, when it's not convenient for budget purposes.... put a special label on it.  It's an 'emergency'... even though 'emergency' spending is now an annual event.  Kind of like those wars... just push them off to their own balance sheet, they don't count as a real expense. (throw Fannie and Freddie over there too - they are an 'emergency')  Off balance sheet accounting worked for Enron and our oligarchs in the banking industry the past decade... as a best practice it is smart than the federal government repeats those acts.
  • Democrats have labeled most of the bill an emergency measure, exempting it from stricter budget rules enacted just last month.
Again the same pattern as we saw above... create rules, but exempt yourselves from them.  Keep moving the money from under 1 shell to another.  Smile.  Strive for re-election.  Keep head under sand.  Kick can down road.  Rinse. Wash. Repeat.

Don't forget *these* stories each time CNBC hosts foam at the mouth at the 'extraordinary' recovery.... it's an economy fully on government support. A government that is broke itself.  But as speculators I suppose we can only benefit because we only live in the here and now, and all this money brought forward from the future is great for us.  Benefit-benefit analysis is our thing; let those under the age of 12 deal with the costs.

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