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Saturday, October 3, 2009

Stimulus on the Horizon

After the grim jobs report for September, the latest D.C. watercooler rumor has the president extending a few different programs that are a part of the stimulus package.

After another grim jobless report, President Obama is turning his attention to extending a lifeline to the unemployed and making the case that his health care plan would create jobs by making small business startups more affordable.

The Obama administration has begun talks with congressional Democratic leaders on moves to extend health insurance subsidies, the $8,000 first-time home buyer tax credit and jobless benefits, congressional and administration officials told FOX News late Friday.

The three programs that the president is looking to extend are the beefed up COBRA credits (credits to allow unemployed workers continue to pay for their health insurance), beefed unemployment benefits, and the $8000 first time homebuyer credit.

These three look like naturals for the Obama administration. He's always been a big fan of any program that supports the poor and downtrodden and so the first two fit there. With the success of cash for clunkers (yes it's debateable), the first time home buyer credit is another program Obama would favor. We've seen some movement in housing over the last few months and many analysts have given this credit at least some of the credit.

The problem of course is that these programs have dubious effects on creating jobs. After all, it's the latest sour jobs report that has spawned talk of extending these three. It's hard to make an argument that extending COBRA or unemployment will create any jobs. They may make it easier for those without a job, but creating jobs is another story. In fact, you could even make an argument that extending these benefits hurts job creation because they are an incentive to stay out of work. As for the first time home buyer's credit, we've seen car sales depress following cash for clunker. Cash for clunkers has proven that such credits really only steal from future sales. The housing market is nowhere near settling, and so, unless the president extends this credit in perpetuity, we're only putting off a housing hangover for a few more months by this extension. Meanwhile, all of these extensions cost money and run the government deeper in debt.

Beyond this, he has several political problems with these extensions. First, the extensions are inherent evidence that his initial stimulus didn't work. If it had, he wouldn't need to do this. Second, if he's extending parts of the stimulus, that's technically a second stimulus. That's something the White House wants desperately not to have these extensions be referred to as a "second stimulus".

The economic moves were recently pulled together by White House economic advisers as an act of economic triage aimed at millions of chronically unemployed Americans. The White House is loathe to call this emerging package a second economic stimulus.

So, instead, it's being referred to as an "economic triage". I presume that's because it's three extensions all at once. Of course, if you're extending three programs originally in the first stimulus, that sounds to me like a second stimulus. The bigger problem, in my opinion, is that Obama continues to implement policies that have shown absolutely no sign of success.


Anonymous said...

It's keeping people off the streets and in their homes, so I guess that's something.

mike volpe said...

maybe, except that money doesn't come from thin air, and so there are consequences to doing all this. We could give everyone a stable income and never have to worry about anyone being on the street. The problem of course is that the stimulus wasn't supposed to keep people off the streets and keep them in their homes but it was supposed to create jobs.

If the president wants programs to help the down trodden that's fine but he can't advertise them as job creators.

United Citizens Council said...

Every dime they spend hurts the economy more.

The end of this is everyone is living in poverty except the trop 1% who are friends of the "one-party autocracy".

Don't think for a mninute that Thomas Friedman was kidding, thats their end-game.

Cars4Charities said...

Cash for clunkers' only accomplishment is that it destroyed 700,000 running cars, many in good shape. That caused used car prices to go up and car donation and auto repairs to go down.