Obama's Stimulus Package is Morphing Into a Monster
Tim Iacono
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Calls for $1 Trillion Stimulus Package Grow as Economy Tumbles
While the $50 billion economic stimulus package proposed during his presidential campaign now looks almost laughable after the events of the last few months, the size of the plan now thought to wind up on President Obama's desk come inauguration day is anything but.
As there are no real numbers to report since legislators have yet to sharpen their pencils and get to work, all that is available at the moment are informed guesses as to the total cost, and these estimates seem to grow by the day.
Some time ago, conventional wisdom had it that something in excess of $300 billion would be needed. Then Senator Charles Schumer (D-New York) got on one of those Sunday morning talk shows and cited $500 to $700 billion as a reasonable size - about five percent of GDP.
But, with the recession now believed to be of a longer duration than first thought, this seems to have morphed into $500 to $700 billion for each of the next two years bringing the total to at least 20-times the size of President-elect Obama's original figure.
And it could go even higher.
This report from Bloomberg fills in some of the details:
By Rich Miller and Matt Benjamin
Dec. 4 (Bloomberg) -- The one thing that isn’t shrinking in the U.S. economy these days is the size of the stimulus package that financial experts say is needed to turn it around.
With automobile sales dropping, payrolls plunging and manufacturing contracting, economists from across the political spectrum are raising the ante on how much the government should lay out. Some are now calling for at least a $1 trillion boost.
Kenneth Rogoff, a Harvard University professor who was an adviser to Republican presidential candidate John McCain, and Joseph Stiglitz, a Nobel Prize winner who served in President Bill Clinton’s White House, are among those who say President- elect Barack Obama should push for a package of that size.
“They need a stimulus of $500-to-$600 billion a year for at least two years to counter what is going to be a collapse in consumption,” said Rogoff, a former chief economist at the International Monetary Fund.
You mean consumption has yet to collapse?
That's a scary thought.
Well, actually, the scariest part of all is how this is going to get paid for. Surely, more than a few people already realize that, with what's going on around the rest of the world these days, it is unlikely that foreigners will plow another few trillion dollars into U.S. Treasuries in the years ahead in addition to financing all the debt that is rolling over.
At current yields?
Of course, credibly threatening to monetize this new debt would send interest rates soaring, which would then attract buyers from all over this Zero Interest Rate world.
Maybe that's the plan.
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This article has 24 comments:
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AlexS
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191 Comments
Dec 04 04:35 PM-
User 118015
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301 Comments
Dec 04 05:49 PM-
ohioconsumer
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2 Comments
Dec 04 06:42 PMBAILOUT THE CONSUMERS!
The only thing the mortgage lenders are doing with the bailout is putting homeowners late house payments & fees back on to the principal - they are not using the money to help homeowners so where is it going?
This country needs a large bailout to CONSUMERS.
People no longer have money to buy houses, cars, furniture, stocks, and most no longer have money for gasoline to get back and forth to work or groceries.
If the consumers were given a large bailout immediately - the impact on the economy would be a major upswing.
Why is it that no one with the power for these decisions has realized this? When do the American people who ultimately foot the bill for the bailouts count? When have they suffered enough that they matter to our government??
If they would have split that same amount of money up between all the taxpayers - CONSUMERS could have caught up their houses and probably re-financed, purchased houses and cars for the ones that needed to, bought stock and so on and so on.
It would have been an immediate jump-start to the economy (nearly overnight) and would have affected every sector that is experiencing problems including banks, automakers, retail, Wall Street and everywhere else. WHY DOESN'T ANYONE IN POWER SEE OR UNDERSTAND THIS???
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investor88
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721 Comments
Dec 04 06:43 PM-
Alan von Altendorf
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345 Comments
My Website
Dec 04 07:12 PM-
ohioconsumer
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2 Comments
Dec 04 07:58 PM-
debtacid
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114 Comments
Dec 04 08:00 PM-
rber
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15 Comments
Dec 04 08:10 PM-
sheople
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64 Comments
Dec 04 08:41 PM-
Bobco23
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25 Comments
Dec 04 08:41 PMLets run the numbers: A trillion dollars is roughly $3,500 for every man woman and child in America (legal). Assumming 4 persons per family unit, a trillion dollar "consumer" bailout would translate to $14k per family unit. If this thing gets to be $5T, then you are talking about $90k per family.
You lay $90k on each family in America and the recession is over tomorrow.
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zanardm
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42 Comments
Dec 05 02:10 AM-
constructe
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319 Comments
Dec 05 03:07 AMSo far bush's Administration and Fed's actions effectiveli blew 7.5 trillion dollars and are backing even more liability without helping anyone but inept banks, brokerages, and insurance companies. Obama's stimulus package sounds modest compared to that don't you think?
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Robert Nabloid
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252 Comments
My Website
Dec 05 03:23 AMMr. Obama, please save us. Save us, save us. Mwhahahahaha. Sheep.
This is capitalism? No.
What we have here is a country that now begs for handouts from their master(s) (I'll give you a hint: Obama isn't the master but the figurehead or puppet - the front PR guy so to speak). They [the real masters] control the entire system from the creation of money to the way our economy now depends on debtors. Why is it that people work 30+ years to pay off a mortgage for a simple home? In the old days, Americans saved up some money and then bought one or built one. There weren't 30 year mortgages... What we have here is a modern form of slavery by mass indebtedness. The system is predicated on people taking on more and more debt to sustain itself - why else do you need economic growth every year? Why can't economic growth be zero? If we grew for the last five years and unemployment is low, why do we need it to grow again? (I'm talking hypothetically - when times are good, why is further growth needed?). Why do we allow so many immigrants to come in? Answer: We need growth and we need more debtors to sustain this system. It's a shame really that the entire system has been altered to become what it is today.
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Robert Nabloid
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252 Comments
My Website
Dec 05 03:26 AMOn Dec 05 03:07 AM constructe wrote:
> So far bush's Administration and Fed's actions effectiveli blew 7.5
> trillion dollars and are backing even more liability without helping
> anyone but inept banks, brokerages, and insurance companies. Obama's
> stimulus package sounds modest compared to that don't you think?
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The hand
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732 Comments
My Website
Dec 05 03:58 AMi am just waiting for the next unintended consequence of what is going on.
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Mowog
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65 Comments
Dec 05 08:12 AM-
tgi nomorebush
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98 Comments
Dec 05 09:11 AM-
standingtall
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2 Comments
Dec 05 02:26 PMOn Dec 05 08:12 AM Mowog wrote:
> Rather than slash execs' pay, slash government workers' pay and pensions.
> Slash entitlevisiousment spending. End bailouts. Be Darwinist.
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Robert Nabloid
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252 Comments
My Website
Dec 05 04:25 PMObama has taken actions - First he endorsed and URGED the bailout bill to be passed!! Did you forget?
Second, he has already appointed many of the Federal Reserve guys to be his top economic advisers - the same people that created the mess we are in and now require "bailouts" or they will fail. Sheep like you will give Obama a free pass and not question anything - when our system was founded upon freedom and transparency and requires critical thinking and questioning EVERYTHING ANY leader does.
On Dec 05 09:11 AM tgi nomorebush wrote:
> robert nabloid ............ dumbazz ........ your king george iii
> bush-it is still the president ....... Obama has not taken ANY actions
> ......Obama will BE THE President Jan 20th 2009!
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standingtall
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2 Comments
Dec 05 08:22 PM-
closed book
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24 Comments
My Website
Dec 06 03:28 PM-
nova
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96 Comments
Dec 07 07:52 PMPeople no longer have money to buy houses, cars, furniture, stocks, and most no longer have money for gasoline to get back and forth to work or groceries"
May be it is the time for consumer to
- work hard
- save
- pay taxes
- become responsible consumers
There is no a single reason to lend more money to consumers who already are incapable of paying for their present obligations.
As for bailouts, they just reward for bad behaviors and bad decisions keeping losers longer in a game.
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On Dec 04 06:43 PM investor88 wrote:
There is a view in governments and experts that there is a magic wand, just print, flood , bailout , run deficits etc , it will solve all problems. Damn the consequences of such actions, let's hope they are right.
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buddman342
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1 Comment
Dec 14 08:50 PMHere is what im talking about:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness"
The begining of the constitution:
" We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America"
this is the way i feal and I know that there are people out there that agree and would like to put things the way they should be.
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Jose Roncal
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1 Comment
My Website
Dec 30 05:24 PMLet’s review the highlights
First of all, remember back when there was a housing bubble—the one that burst? That was followed by mortgage defaults and foreclosures, which then led to major losses for financial institutions that were dealing in mortgage-backed securities. When those losses caused their balance sheets to crater, they tried to stop the bleeding by bringing lending to a screeching halt. And that resulted in a freezing up of the credit markets.
Thus the whole financial bail out plan was supposed to thaw out the frozen credit. But did it? No. Why not? Because nobody knows where the money went. Even the bailed-out banks say they can't track where they're spending the money, but even if they could, they aren’t telling us.
Then there’s the auto industry. Bush has left a $13.4 billion parting gift to G.M. and Chrysler and they have until March 31 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers. In February, another $4 billion will be available for G.M. if the rest of the $700 billion bailout package has been released. But then what?
Toyota and Honda, long considered to have the state of the art manufacturing facilities, not to mention the most appealing designs and reliable technology, are also in trouble. Toyota just announced its first operating losses in 71 years. If these two giants are faltering, one wonders how GM and Chrysler expect to bounce back. Meanwhile, where will all the bailout money go?
It’s not just the U.S. economy that needs bailing out
Ireland's finance minister just announced plans for a $7.7 billion bailout of three leading banks because of reckless property lending practices during Ireland's recent housing boom. With Ireland facing a deepening recession, Allied Irish, Bank of Ireland and Anglo-Irish all need a boost to their cash reserves just to stay alive. The banks now face government control. But will it be enough to stimulate a healthy economy for Ireland?
China’s economy, which has been affected by a sharp decline in demand for exports to the U.S. and Europe, is teetering amidst job losses and worker protests. They’ve cut interest rates for the fifth time in four months and in November they announced a $586 billion stimulus package. That may help boost the economy, but only if the country can survive long enough for their planned infrastructure projects to get moving sometime in 2010.
Why TARP failed
Excuse our naiveté, but we thought bailouts were supposed to come with defined preconditions and oversight and that the benefits would filter down to the pockets of the consumers. We were also under the impression that stimulus packages were supposed to put cold hard cash into the hands of consumers so they could start spending the economy back into motion.
We’ve all witnessed the results of having little or no bailout preconditions and the oversight that never was—failure and vaporized money. We won’t know the details of Obama’s stimulus package for a while, but whether or not consumers can be encouraged to actually spend the money is unknown. A stimulus package may also end in failure.
There is simply no confidence left in the markets, in financial advisors or economists. And just as we were mending our wounds and thinking maybe we’d seen the worst, the Madoff scandal broke, and with it, the sinking feeling that the worst may still be coming.
Even though Obama seems to represent change and optimism, it’s going to take some time for us to be able feel confident in governmental decisions again. So far, none of the bail out and promises of stimulus packages have had any effect on turning the world’s economy.
This comment was posted by Jose Roncal, co-author of "The Big Gamble: Are you investing or speculating?" - For more information, visit financialspeculation.c...