Obama: No more tax cuts, no negotiation on tax relief.

[SirNitram]

Link

From NBC's Mike Viqueira
This is a sort of a live blog from a member and aide inside the room with President Obama, via e-mail:

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Obama speaking now.... Talking about how bad the economy is and that it is deteriorating rapidly
Mentioned caterpillar and Microsoft having to layoff workers.
Says Stimulus is just one leg in multi leg stool to get economy going.
Must get credit lines moving
Must clean out troubled assets
Restore confidence to lenders
Deal with housing market more aggressively.
This is just the first step.
Says would love to not spend this money
Has no interest in increasing government just to increase the size of government.
But he talked to many economists who told him almost uniformly that they needed to get a stim bill up and running asap to avoid huge unemployment------------
So... We put together a package with direct spending and tax cuts.
Mentioned martin Feldstein.
Spending has a more simulative [sic] affect than tax credits.
For every dollar of direct spending, we get 1.5 dollars of stimulus
For every dollar of tax cuts, we get 75 cents of stimulus
We have included NOL and small business provisions.
Obama wrapping up now. Some spending will not get done within the two year timeframe.
Closing with a budget that makes some very tough choices.. Everyone will have to take a haircut. Doesn't want to create programs that will last forever.
No pride of authorship...a good idea is a good idea. Honest effort to deal with a tough problem.

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First q from dave camp.
First meeting with house dems was the markup.
Can we find some more common ground on tax relief.

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(responding to Camp) Obama says tax relief for some working families must come from payroll so even families who don't pay income taxes get relief and they will spend it.
He said "feel free to whack me over the head because I probably will not compromise on that part.
Obama said that there will be time to beat him up and a time for politics. He said I understand that and I will watch you on fox news and feel bad about myself.
Question 2--Roskam asked about grass on the mall vs. $41 million for small business.
Obama said if we can do more small business tax relief, we should do it, but I am just as concerned about the long term impact of tax cuts as I am about spending.
Obama says (kind of joking and getting laughs) that the national mall is kind of important.

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Third q from Stearns is about dTV transition We are ready to go on the transition so why are we delaying? Please reconsider.

Obama: I have no ideological problem, but I have been told that a lot of people's TVs will go dark. He said people like TV's to work. He wants the transition to work as fast as is possible.

*** UPDATE *** MORE...
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Brady (TX): can you assure us that this stimulus will not be an excuse to raise taxes and have wasteful spending (applause)

Obama: spending can sometimes be like closing the barn door after the horse has already left. This recession is different, deeper, and global.

Nobody is more worried about the deficit and the debt than me. I will be judged by the legacy I have left behind. I don't want to leave our children with a legacy of debt. I am inheriting an annual yearly debt of over 1 trillion

At the pace we are going, we are doing irreparable damage to our economy. We are going to have to make some very painful choices. We will present a budget with a realistic approach to eliminate debt, and bring down spending.

Format is less than ideal, but. The sacrificial lamb provisions died, as was more or less inevitable. But Obama was ultimately too trusting: The GOP has every reason to want this to fail. Who cares if it leads to a deep, horrific depression? Better than let the idea of liberals and government activism be right.

[Kanastrous]

That's interesting. I have frequently heard economists claim that every dollar of tax cuts grants $1.50 of stimulus, while every dollar of government spending yields $0.75 of stimulus.

I guess there's an economist to suit every perspective.

[Illuminatus Primus]

I haven't heard anything like your quote. I have definitely heard what supports Obama, and before this debate came up.

[Kanastrous]

IIRC I heard this sort of thing from people interviewed on stations like KFI and KABC radio, so a handful of salt is probably in order.

[Pablo Sanchez]

IIRC I heard this sort of thing from people interviewed on stations like KFI and KABC radio, so a handful of salt is probably in order.

A while ago Nitram posted this this, wherein he cited a source (testimony before Congress by a guy from Moody's Economy) that showed the opposite of what you heard; government spending yields better return than tax cuts. But then again, opinion among economists is so divided that I'm sure you could find reputable people arguing either direction. What is certain is that there are many historical examples of government investment in the economy yielding positive economic returns, whereas the record of cutting taxes for growth is mixed at best.

EDIT:

Format is less than ideal, but. The sacrificial lamb provisions died, as was more or less inevitable. But Obama was ultimately too trusting: The GOP has every reason to want this to fail. Who cares if it leads to a deep, horrific depression? Better than let the idea of liberals and government activism be right.

I think you're right. This reminded me of a quote from an abstinence-only sex-ed proponent who had it pointed out to her that her ideas were statistically proven to not only be ineffective but counter-productive--worse than useless. I'm paraphrasing, but she basically said that it didn't matter whether it yielded good results or bad, because it was more important to take a stand against immorality than to slow the spread of STDs or reduce teen pregnancy.

[Kanastrous]

Thanks for the link, Pablo. Reading it now.

[Mr Bean]

All it takes is two Republican Senators, if he can find two Senator's willing to play ball and get to sixty it could become the Senate of the Democrats and those two Republican guys and bugger all to the other 40. Assuming they get Franken soon and keep Lieberman.

[Omega18]

All it takes is two Republican Senators, if he can find two Senator's willing to play ball and get to sixty it could become the Senate of the Democrats and those two Republican guys and bugger all to the other 40. Assuming they get Franken soon and keep Lieberman.

Uh, with Franken in along with Lieberman cooperating it would be only one Republican Senator needed at that point, although its not clear it will happen by the period Obama wants the stimulous package passed. (It should happen but the details of the legal process in Minnesota can stall things for awhile preventing formal seating.) You may be forgetting Bernie Sanders who is technically an indepedent, but actually is pretty much to the left of the Senate Democrats and usually votes with them on most issues.

[Pablo Sanchez]

All it takes is two Republican Senators, if he can find two Senator's willing to play ball and get to sixty it could become the Senate of the Democrats and those two Republican guys and bugger all to the other 40. Assuming they get Franken soon and keep Lieberman.

Lieberman's conservatism mostly shows up in social and foreign policy contexts, so he'll probably back the stimulus package. Meanwhile, I'm pretty sure they can cleave a couple of moderate Republicans to seal the deal.

Even if not, I'm hoping for a real difference from the previous two years, with Reid hopefully bringing the vote to the floor so that the GOP has to actually filibuster the bill, in front of the cameras and everything, instead of just rolling over for them like a fucking jackass. I think at least a few Republicans will get cold feet if they are actually forced to go on record thumbing their nose at a popular president's economic plan during a bad recession.

[Gerald Tarrant]

That's interesting. I have frequently heard economists claim that every dollar of tax cuts grants $1.50 of stimulus, while every dollar of government spending yields $0.75 of stimulus.

I guess there's an economist to suit every perspective.

Dr. Christina Romer the future (or current?) head of President Obama's Council of Economic Advisers had this to say in a longish study on tax cuts

The strong negative relationship between tax changes and investment also helps to explain the
size of our estimated overall effect on output. Recall that we find that a tax increase of one percent of
GDP lowers real GDP by about 3 percent, implying a substantial multiplier. An important part of that
effect appears to be due to the procyclical behavior of investment.32

PDF Link Page 37.

This may be where the idea of a higher multiplier for taxes iscoming from. I don't think it's a very good criticism though, as Dr. Romer is also a coauthor on the Administration's team that analyzed the effects of the stimulus, they were assuming the standard multipliers of ~1.5 on spending and ~1 on tax cuts.

I think the reason Dr. Romer may be discounting those results is that the current climate is not investment friendly. In this case I'm thinking that procyclical behavior means investments tend to track closely the Keynesian business cycle sinusoid. That would suggest that a tax cut multiplier is different depending on what phase of the cycle we're in. So cuts now would be less effective than cuts at the bottom of the recession. That's just my opinion on the seeming contradiction.

[CmdrWilkens]

The funny thing, which nobody on the "GDP is all" portion of the right wants to talk about is that even if the government literally just spent a craplod of money to build a money statue, that is they put money into something with absolutely zero return on investment GDP would still go up $1 for every $1 spent. Sicne GDP includes Government Spending as one of its componenet increased government spending automtically increases the national GDP even before follow on effects are felt. In other words it is physically impossible for $1 of government spending to increase the GDP by less than $1.

[Alan Bolte]

I understand what you mean, but I still feel it necessary to point out that the money spent has to come from somewhere - either borrowing or increased taxes. If the borrowing or taxation has a negative effect on GDP, then it it is possible for $1 of government spending to increase GDP by less than $1.

[Gerald Tarrant]

I understand what you mean, but I still feel it necessary to point out that the money spent has to come from somewhere - either borrowing or increased taxes. If the borrowing or taxation has a negative effect on GDP, then it it is possible for $1 of government spending to increase GDP by less than $1.

It's almost certainly going to be debt financed; John Maynard Keynes (the guy whose theories this is based off of) advocated deficit spending as the way to do this sort of thing instead of taxes for the same reason you offered about taxes canceling part of the "multiplier". The reasoning for deficit spending is that debt doesn't need to be paid right away, so it doesn't represent an immediate drag on the economy. The debt will need to be paid, but hopefully we won't be experiencing double digit unemployment at that point, and the economy won't be actively shrinking.

A sidenote, there are some indications that Keynesian economics as it was practiced post-Keynes wouldn't have met his approval. It looks more like Keynes meant his methods to apply more to extremes, the Great Depression fit that mold, and President Obama's advisers think the current downturn merits Keynesian action.

[Darth Wong]

The funny thing, which nobody on the "GDP is all" portion of the right wants to talk about is that even if the government literally just spent a craplod of money to build a money statue, that is they put money into something with absolutely zero return on investment GDP would still go up $1 for every $1 spent. Sicne GDP includes Government Spending as one of its componenet increased government spending automtically increases the national GDP even before follow on effects are felt. In other words it is physically impossible for $1 of government spending to increase the GDP by less than $1.

Can't they also increase GDP by simply encouraging massive inflation?

[PeZook]

Can't they also increase GDP by simply encouraging massive inflation?

They have to lie to do that, since it's standard practice to adjust GDP for inflation. Unless you're a dishonest fuck and just want to show off inflated figures, that is.

[Gerald Tarrant]

Can't they also increase GDP by simply encouraging massive inflation?

Many economist used to predict that you could do that. During the 50's a fairly reliable inverse relationship was discovered between employment and inflation, called the Phillip's curve. Monetary policy started encouraging, or allowing inflation to boost employment numbers. Inflation steadily became less and less effective at pushing growth ('til in the 70's double digit inflation coincided with flat to nonexistent growth) which suggests that people eventually get wise, and adjust their behavior. Also Milton Friedman offered a critique and alternate explanation which convinced most economists that the Phillip's curve was too simple, so it's mostly been discarded.

That said, the memory of stagflation has probably faded quite a bit. Which kind of suggests that in the short run some government pushed inflation could boost the economy. That's kind of what Bernanke was doing at the Fed, with his massive capital injections. The idea hopefully being that they'll rein in inflation later.

[Ender]

The other day I was reading an article with quotes from McCain and other republicans where they were basically trying to dictate tax policy like they had been the ones who won. Insipid partisan wimpering aside, it will be very interesting to see how the votes lay out on the table and see who is going to try and fight this.

[Ender]

Can't they also increase GDP by simply encouraging massive inflation?

They have to lie to do that, since it's standard practice to adjust GDP for inflation. Unless you're a dishonest fuck and just want to show off inflated figures, that is.

No, they adjust for inflation when they want to do comparisons. Calculating GDP itself does not take into account inflation. GDP = C + I + G + (EX - IM) where C is household consumption, I is investment, G is government spending, Ex exports and Im is imports. textbook link

[CmdrWilkens]

I understand what you mean, but I still feel it necessary to point out that the money spent has to come from somewhere - either borrowing or increased taxes. If the borrowing or taxation has a negative effect on GDP, then it it is possible for $1 of government spending to increase GDP by less than $1.

Taxation could, outside of all other factors, decrease Consumer spending and thus reduce overall GDP but debt financing would not directly (obviously there are all sorts of interelations) affect consumer spending or commercial investment thus $1 of debt financed government spending will always add at least $1 tothe GDP in the short term. The long term effects are where things get dicier in terms of the return on investment, growth in the other factors fo GDP such as C and I, etc.

[PeZook]

No, they adjust for inflation when they want to do comparisons.

Uh, yes? Which is, you know, the entire point of using GDP as an econmic indicator?

What I meant is that it's so ridiculously easy to adjust the figure for inflation that you need to be a dishonest fuck and deliberately use the wrong numbers to show high inflation = higher growth.

[Darth Wong]

No, they adjust for inflation when they want to do comparisons.

Uh, yes? Which is, you know, the entire point of using GDP as an econmic indicator?

What I meant is that it's so ridiculously easy to adjust the figure for inflation that you need to be a dishonest fuck and deliberately use the wrong numbers to show high inflation = higher growth.

How is that more dishonest than spending borrowed money and calling that "growth"?

[PeZook]

How is that more dishonest than spending borrowed money and calling that "growth"?

Well, you can spend borrowed money wisely (for example, to improve infrastructure) or wastefully (too many examples to show). I suppose it's just sneakier to artificially pump up GDP via deficit spending, rather than more dishonest.

Just another reason that you shouldn't look at GDP alone when considering economic problems...

[Darth Wong]

How is that more dishonest than spending borrowed money and calling that "growth"?

Well, you can spend borrowed money wisely (for example, to improve infrastructure) or wastefully (too many examples to show). I suppose it's just sneakier to artificially pump up GDP via deficit spending, rather than more dishonest.

And you can use inflation to decrease the effective size of your existing debts. I'm still not seeing why one is inherently more dishonest than the other.

Just another reason that you shouldn't look at GDP alone when considering economic problems...

Well, we can certainly agree on that.

[CmdrWilkens]

No, they adjust for inflation when they want to do comparisons.

Uh, yes? Which is, you know, the entire point of using GDP as an econmic indicator?

What I meant is that it's so ridiculously easy to adjust the figure for inflation that you need to be a dishonest fuck and deliberately use the wrong numbers to show high inflation = higher growth.

How is that more dishonest than spending borrowed money and calling that "growth"?

If you borrow and spend you have at least increased liquidity in the system by moving existing sums of money around. Moreover unless you continue to do that in ever increasing lumps you can't sustain GDP growth since the year after you borrow and spend you either have to borrow and spend just as much or have the rest of the economy catch up. So in the absolute short run of the first fiscal year inflation is just abotu as dishnoest as borrow and spend but from the 2nd year onwards there will have to be real growth in the non-debt financed protions of the GDP otherwise the natioanl debt as a percent of GDP will continue to grow (which is its own shaky indicator).

Obviously GDP isn't a great measure because you can pull short term tricks on it but as a sort of high level overview a rising or falling GDP is a good start before delving into the real meat of a country's economic situation.

[Illuminatus Primus]

No, they adjust for inflation when they want to do comparisons.

Uh, yes? Which is, you know, the entire point of using GDP as an econmic indicator?

What I meant is that it's so ridiculously easy to adjust the figure for inflation that you need to be a dishonest fuck and deliberately use the wrong numbers to show high inflation = higher growth.

How is that more dishonest than spending borrowed money and calling that "growth"?

You could say the same thing about a student or young man taking out loans in order to get an education, buy assets, or start a business. Surely there is risk of squandering it, but there is the possibility of proper investment of loaned money producing returns that covers the principle and the interest of the loan with profit to boot. There's the rub.