The Sell Job Stinks
- We are lead to believe things are really bad, and swift government intervention in the form of a stimulus package is imperative.
- I keep hearing the same rhetoric, "It's urgent; if we don't pass this bill the consequences are unthinkable."
- Earlier this month, the front page of the Wall Street Journal (Jan. 10) headline shouted "Yearly Job Loss
Worst Since 1945." If the WSJ (Rupert Murdoch...) says it, it must be true, right ? They got it half right. More
people lost jobs since 1945 but the unemployment rate is only 7.2 percent. Bear in mind during the great depression the unemployment rate was more than 25 percent.
- In reality, things aren’t good. Jefferson must attempt to speak with the voice of reason and say during a crisis, rash acts more times that not, create a bigger problem than the original disaster.
- It sounds sort of like a car salesman pressure tactics. "I can offer you this price for the car if you buy it from me today." Yea yea. You are asking me to spend 40 percent of my annual income on this car without the opportunity to sleep on it?”
- The same thing, put another way, as it relates to the annual federal budget: you want to spend over half of the annual federal budget with the stroke of a pen and don’t offer more than one alternative?
- Let’s start with what we do know:
• The economy has a normal cycle that oscillates between a high and a low every four to seven years.
• Loans were made to people who couldn’t afford them.
• On the up swing, the economy flourished far beyond its sustainable growth. The economy peaked and started to correct (downward).
• Many people defaulted on their loans.
• Lots of banks/insurance companies lost lots of money.
• Banks/Insurance companies played "economic possum" and got a piece of the "bailout pie".
• Lots of people lost their jobs.
• The American citizens bore the cost ($2,500 each) to fund the "bail out".
• More companies among the likes of the auto/transportation makers like Harley-Davidson are also trying to jump on the "All American Apple ( bail out) pie" bandwagon.
• More people lost their jobs.
• Bail out money was dispensed.
• The Federal Reserve lowered the interest rates banks pay them.
• Banks didn’t lower interest rates. Banks hoarded the cash and didn't loan the money out.
• The banks aren't stalling the sale of defaulted houses because they want to see if there will be further handouts. (If you feed the kitty, it will always come back).
• More people defaulted on their mortgages.
• Recipients of the bail out cash had the audacity to pay huge bonuses. The most disturbing thing about this is the unmitigated gall to reward the same behavior that was the proximate cause of the company's near demise. b) Other Americans are losing their jobs and these folks are having a banquet at our expense. c) Clearly, the rapidly designed bail out legislation failed to give the American people their money's worth. (Remember the don’t be in a panic rush thing I warned us about last issue ?).
What Is Being Sold
• The current plan caries a price tag of $819 billion a (CPC or Cost Per Citizen $2,730)
• Each adult will receive $500 and $300 for each child
• That means that each citizen also pays $2,230 for the rest of the package.
• The package includes the expansion of the following departments already in existence:
Social Security Administration, Environmental Protection Agency, Homeland Security, Department of Defense, National Institute Of Standards And Technology, Justice Department, Department of the Interior, Department of Education, Department of Agriculture, Federal Aviation Administration, Bureau of Indian Affairs, Health and Human Services, Centers for Disease Control, Department of Energy, Smithsonian, Endowment of the Arts, etc. (Maybe, in the interest of saving paper, I could have listed the portions of the Federal Government not expanded by this bill).
Some of the more egregious expenditures are:
• Agricultural Research Buildings (Aren't food prices up, with General Mills posting healthy profits?)
• More Barracks for all branches of the military (Where are they sleeping now?)
• Mississippi and Tributaries (Sounds a lot like fix the dykes and levies in New Orleans we already paid for at least once).
• Electricity Deliver and Reliability ($4.5 billion: Sounds like the feds are paying to clean up what the former governor of California created).
• Federal Building for Administration ($7.7 billion).
• Small Business Loans (SBA - A mere $3 billion: Is this enough to stimulate the economy ?).
• National Park Construction ($1.7 billion).
• Education for the Disadvantaged ($13 billion).
• Special Education ($13 billion).
• Student Financial Assistance ($16.1 billion).
• School Modernization and Renovation ($14 billion).
• Higher Education Renovation ($6 billion).
• Military Defense Construction ($3.7 billion).
• FAA Airport Expansion ($3 billion).
• Highway Infrastructure ($300 billion).
• Federal Transit Assistance Grants ($6 billion).
• Public Housing Expansion ($5 billion).
• Community Development ($5 billion).
• State Fiscal Stabilization Fund ($79 billion).
(Folks, this is in addition to the amount already in the budget).
- We've all heard the old saying too little too late. In this case, it's too much too soon.
I don't want to be completely negative; a little nudge would be nice, but $816 billion dollars? What kind of
dope are the legislators smoking? I think it's a drug called "buy votes with the other taxpayers' money or maybe it's the government employee expansion and job reclamation project for government employees."
- This legislation reeks of the government stimulating themselves. (Get you mind out of the gutter. I didn't mean it that way).
- Why is this an "all or nothing proposition?" Very few of the line items or departments listed above will directly stimulate the economy, save homes or create productive jobs. (Remember...the original problem we are trying to solve ?)
- Thanks for the stimulus check. The stimulus check written to citizens is really a rebate; it was our money in the first place.
- As we tighten our belts and dig in for a long cold winter, the federal, state and local government (the same incompetents who primarily contributed to the cause) is expanding.... That sounds a lot like the Mafia is selling us protection. Here's a $500 rebate, now we are going to spend $2,250 on our pet projects and hope
you find it stimulating.
- Let them eat cake. The alleged fixes in the "Stimulus Package" (yes I added the quotes intentionally) don't treat the problem. Yes the economy is malnourished. Most can agree the government is in a good position to help. However, if malnourishment is the cause, don't give me potato chips, soda and pork rinds.
- It sort of reminds me of an old Bill Cosby routine: Mom is sleeping in on a Saturday morning and it's dad's turn to feed the kids. "Hey Dad, we're hungry can we have some of the leftover cake ?" "I'm not sure your mother would approve of cake for breakfast. Hmmmm, let me read the ingredients. Flour, milk eggs, this looks pretty nutritious. Yeah you can have cake for breakfast."
- One for you, four for us. OK little citizens, here's $500. Be fruitful and stimulate. Oh and, by the way, we are spending an additional $2,230 to expand government by building more bridges, barracks, and stuff. You know,
create jobs. After all more bridges will contribute to the economic health for many years to come.
- What's the deal with our politicians/legislators? Are they ignorant, stupid, selfish or narcissistic or something else? Candidly, I don’t know. I have a difficult time understanding how, with the stroke of a pen, they can be OK with expanding the National Debt by 10 percent ($700 billion bail out + $819 billion stimulus = $1.5 Trillion or 10 percent of $10.6 Trillion.
- In summary, the smoke and mirrors continue; problems are vaguely defined, the proposed solution is too voluminous to comprehend and the media is crying wolf (or maybe I should say bear).
- If you are having trouble sleeping, I know a great nonaddictive way to cure your insomnia: read the American Recovery and Reinvestment Tax Act of 2009 (all 680 pages).
– Jefferson Pinto, CPA, MBA
Jefferson Pinto is a retired CPA , holds an MBA from one of the finer accredited universities in this country, and is the VP of corporate operations for his day job.
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RELATED ARTICLE: Economy: 'Heads I Win, Tails You Lose,' Apr 2010, #25