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Stimulus Stimulating Miracles

"Don't expect miracles" ran one headline, referring to the Obama administration's comments about their massive stimulus experiment. Apparently the Obama team wants to lower Americans' expectations of the bill that Obama has pledged to sign tomorrow.

The truth is, I demand a miracle from this bill. I'm talking about a Praise Jesus! miracle. Because the amount of money that this bill is going to cost tax payers, $787 billion, is a high price to pay for mediocre results.

Off the Deep End, Mankiw's Blog

According to estimates from the Wall Street Journal, the annual deficit in 2009 will be nearly 14% of the US gross domestic product with the stimulus package.

The Obama administration hopes that the stimulus will create 3.5 million jobs. However, the chief economist at Moody's Economy.com, Mark Zandi, believes that the administration's hopes are too optimistic. He estimates that the stimulus will only add 2 to 2.5 million jobs, lowering unemployment by 1 to 1.5%.

You're right Barack, that's certainly no miracle. And I'm not sure that even 3.5 million jobs are worth the massive increase in federal deficits.

Saving and Interest Rates

In the long run, sustained budget deficits will likely dampen overall economic growth. Budget deficits dampen long term economic growth because they raise interest rates.

Increased government spending decreases national saving which increases interest rates. In turn, investment in the economy decreases because of higher interest rates. Essentially, it costs more to invest so fewer companies do it.

Lower investment consequently leads to lower productivity growth and lower economic growth in the future.

US deficits are already on track to expand substantially without massive stimulus spending.

Government spending will vastly increase in the coming years because the US population is aging. As the Baby Boomers continue to retire and accept medicare and social security benefits, government costs in these areas will soar.

Together, the stimulus spending and rising costs for medicare and social security will heavily depress future economic growth.

Absent divine intervention, the stimulus will not stimulate any miracles. It will most likely produce mediocre, short-term results and worsen the dismal long-term potential for the US economy.

The miracle I should be demanding is that the President won't sign the bill tomorrow. But that's not going to happen. So I guess I will just take the President's advice: I won't expect any miracles--now or in the future.

Article by Ryan Olivett

Links:

Congressional Budget Office

Alternative Stimulus Package

The Becker-Posner Blog

NYT: Greg Mankiw

Deficit Spending

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Rebuilding the GOP

“If I wanted Obama to succeed, I’d be happy the Republicans have laid down… I hope he fails.”

Rush Limbaugh made this distasteful statement while discussing Liberals’ ill-treatment of President Bush. The fact is, Liberals wanted Bush and the Republicans to fail. They got their wish and the country is in dire condition.

I hope Limbaugh doesn’t get his wish. But, if Obama and the Democrats succeed, how can the GOP rebuild and become a dominant party again?

The GOP must return to core, conservative principles and illustrate what these principles are and why they will be successful.

The GOP is in shambles–and everyone knows it. Mitch McConnell, the Senate minority leader, told the Republican National Committee yesterday that the party was in danger of becoming a regional party without widespread, national support.

In a recent column, Is GOP Still a National Party?, Pat Buchanan issues a similar diagnosis. According to Buchanan:

“Put succinctly, the red pool of voters is aging, shrinking and dying, while the blue pool, fed by high immigration and a high birth rate among immigrants, is steadily expanding.”

Buchanan argues that minorities and the nation’s youth are predominantly liberal-minded. One GOP problem is demographics. The GOP can’t change the demographic inertia of the country.

What the GOP can do is return to core, conservative principles. This sounds cliché, but it’s the truth. The GOP can’t be the “conservative” party and not be conservative. The GOP also needs to illustrate what these core, conservative principles are and why they will be successful. The GOP must work hard to influence these demographic groups that lean to the left.

First, the GOP must repudiate the policies it supported for the last eight years. Many consider Bush’s failure to be a failure of conservatism. Bush’s presidency can hardly be called conservative. According to an article in Reason magazine,Bush’s Regulatory Kiss-Off, “…Republican rhetoric doesn’t always match Republican policy.” On the surface Republican rhetoric suggested that their policies were “conservative,” but underneath they were distinctly liberal.

One tenet of conservatism is small government. But, as Reason magazine points out in the same article, “The Bush team has spent more taxpayer money on issuing and enforcing regulations than any previous administration in U.S. history.” Hardly small government, hardly conservative.

US foreign policy has been equally anti-conservative. Traditionally, conservatism embraced foreign policy realism. Realism stresses preserving the power of the nation by avoiding foreign entanglements and costly wars. In contrast, the Bush administration’s liberal internationalism has sought to force democracy on other nations, destroying our image abroad and costing tax payers billions.

The problem here is that many Republicans are as convinced as all other Americans that GOP policies have been conservative. The facts, coupled with sound reason suggest otherwise. It may take time for the GOP to recognize its recent policy blunders and ideological shift.

After the GOP recognizes the reasons its policies failed, it must launch a conservative counter-attack on liberal ideas. It must convince the non-white, non-conservative demographic groups that its principles work.

It must also improve it’s image to these groups and to the American public at large. Appointing Michael Steele as RNC chairman is a step in this direction. Limbaugh’s comments are a step in the opposite direction.

If the GOP simply panders to these groups, offering benefits and special treatment, the GOP ceases to be conservative. In the long term this policy fails because the Democrats will out-pander the GOP. It’s what they’ve always done.

To be certain, the GOP can’t hope for President Obama’s failure because that is the same as hoping for the failure of the country. And saying it only further tarnishes the GOP’s image. What it can do is emphasize conservative positions as alternatives and revamp its public image.

If the GOP wants to rebuild, it must get back to conservative principles. And, it must shed light on the fact that it’s recent policies have not been conservative at all. First thing’s first. Then it can move ahead and offer sound, conservative alternatives to Obama’s policies and rebuild its image.

Article by Ryan Olivett

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