A new economic “stimulus” proposal floating around Washington in the days before Congress returns is not sitting well with many. Here’s a brief roundup of today’s reactions:
According to USA Today, Moody’s Analytics chief economist Mark Zandi, who has advised both House Speaker Nancy Pelosi (D-CA) and former presidential candidate Sen. John McCain (R-AZ) said the $180 billion package of tax cuts and infrastructure spending will not “add up to a lot of new jobs.”
Ken Camp, CEO of Hillenbrand, Inc., told The Wall Street Journal a tax break included in the plan to spur business investment “wouldn’t persuade him to increase investment at the company…” The problem, it seems, is the temporary nature of most of the proposals. Terex Corp. Ron DeFeo, said the tax incentives won’t “change fundamental demand” and actually could lead to more instability in the economy.
One manufacturer said the tax portion of the bill may help a little, but he’s much more concerned with the looming tax increases he’ll face when the 2001 and 2003 tax cuts expire. Brad Benson, president of Squires-Belt Material Co., told the Los Angeles Times while he welcomes the proposal “as a manufacturer, [he’s] more concerned with the tax-cut issue.”
As Washington begins to re-float the idea of another “stimulus,” USA Todayadvises: “Don’t just stand there – do nothing.”
As the economic recovery falters, pressure is mounting on policymakers to do something —anything — to boost growth, preferably before Election Day.
In response to this clamor for another short-term stimulus, here’s one piece of advice: Don’t just stand there — do nothing. More government borrowing and spending would accomplish little but provide lawmakers yet another rationale for delaying the day of reckoning.
But for now, with depression off the table and about 30% of the $814 billion stimulus still in the pipeline, it’s time for government to start following the lead of its people and businesses. Instead of passing a minor stimulus that would be almost meaningless in the context of global economic trends, Washington should focus on the big picture. The national debt stands at $13.4 trillion, or $104,000 for every U.S. household. And even that is just a prelude to the horrific numbers projected over the next two decades as the result of surging expenditures on health care and retirement.
Acting to slow the growth in benefit programs such as Social Security and Medicare would not only forestall economic Armageddon down the road, it also might actually be the best thing for the economy now. It would restore confidence among investors that the nation is not heading for a major credit crisis or a period of hyperinflation.
Today’s USA Today reports on the summer’s dismal hiring lapse in large metro areas, and points to business’ uncertainty about the future as a key culprit.
The unemployment rate rose in nearly half of the nation’s 372 largest metro areas in July, as the pace of hiring slowed from earlier this year.
Hiring has slowed nationwide, as businesses are increasingly unwilling to add workers, even as their profits and cash piles grow. Many economists say business executives are holding back until there is more clarity about the economic outlook.
The economy is barely growing and economists worry it won’t expand fast enough to bring down the 9.5% national unemployment rate. On Friday, the government is expected to say that private employers added only 41,000 jobs in August, down from 71,000 the previous month.
Note: Be sure to check back tomorrow morning for our quick breakdown of the Bureau of Labor Statistic’s monthly jobs report.
Today’s USA TODAY discusses the disparity between the salaries and benefits of private and public sector employees:
At a time when workers’ pay and benefits have stagnated, federal employees’ average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.
Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.
What the data show:
•Benefits. Federal workers received average benefits worth $41,791 in 2009. Most of this was the government’s contribution to pensions. Employees contributed an additional $10,569.
•Pay. The average federal salary has grown 33% faster than inflation since 2000. USA TODAY reported in March that the federal government pays an average of 20% more than private firms for comparable occupations. The analysis did not consider differences in experience and education.
•Total compensation. Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers.
This morning, Michael Medved argues in USA Today that the government poses a greater threat to the nation’s economy than any of the recently reviled corporations:
No corporation on the planet comes close to the United States government in sheer magnitude, or unimaginable, unprecedented power. The nation’s top 100 corporations combined still fall far short of the behemoth in Washington, D.C., which conducts extensive operations in agriculture, weapons production, medical care, housing, real estate, education, mail delivery, policing, resource development, banking, the arts, security services, food provision, transportation and much, much more. Within five years, federal spending will consume 25% of every dollar generated by the private economy.
Every American feels the dramatic, relentless growth of federal power, but a dwindling minority — less than one-quarter, according to pollsters — wants Washington to do even more.
Hitting struggling corporations with more taxes, regulation, lawsuits and rhetorical abuse can hardly assist them in their all-important mission of job creation.
The public also understands that such recklessness, such unsustainable spending, would bring individuals or small businesses to rapid financial ruin; only the largest corporations, and the federal government itself, can get away with long-standing patterns of irresponsibility. The contrast raises the painful issue of double standards: the application of different rules for the people and the powerful.
Two recent articles provide more evidence that Washington’s failure to put forth a sustainable fiscal and economic plan (or any plan, for that matter) is itself hampering the nation’s economic recovery. (For our previous posts on this issue, go here and here.)
USA Todayreported yesterday that non-financial companies in the Standard & Poor’s 500 Index have more cash on hand than ever before ($837 billion), but are still not hiring. The newspaper explains, “[C]ompanies are piling up cash and collecting practically zero interest on the money, hoping there will be a better time to invest later.”
When will there be a better time?
Barron’s Randall Forsyth suggests it’ll be when Washington provides a little certainty. Forsyth wrote Tuesday: “Confronted with incredible uncertainty about the future business climate brought about by massive regulatory and tax changes, [businesses] are sitting on cash instead of investing in capital equipment and, especially, hiring new workers. … [T]he policy changes on health-care and financial services that have emerged from the current crisis, plus the largest tax increase in history that will hit Jan. 1 without Congressional action, are restraining companies, especially mid-to-small-sized ones.”
USA Today also points out the money those S&P companies have saved could fund 2.4 million jobs with salaries of $70,000 each. Unfortunately, because Washington keeps kicking the can down the road on things like deficit reduction and tax policy, it’s just too risky for these businesses to commit to hiring until they see what Washington will do next.
USA Today has an interactive graph today showing the growth of U.S. and international debt since 1943. In the last 30 years, debt-per-American has increased from $10,210 to $38,655. However, the trend line in the last four years might be the most astonishing thing on the page.
Viewers can compare debt-as-a-percentage-of-GDP between several countries. Greece’s ratio still far outpaces the U.S.’s, but both have moved up in recent years.
Here is our weekly look at some of this week’s most interesting, and consequential, budget- and economy-related issues in the 50 states:
Yesterday, the Denver Post reported that Denver Mayor John Hickenlooper warned that the city faces a $100-million budget deficit next year. The deficit, $20 million more than projections in April, will force the city to make significant cuts.
A recent Wall Street Journal article explained that across Detroit, citizens are volunteering to provide basic services that the city can no longer afford on its own.
According to the Wall Street Journal, programs implemented by states to increase lending to cash-strapped entrepreneurs have been so popular that states are now struggling to keep up with demand in the face of impending budget cuts.
The Pittsburgh Post Gazette reported late last week that Pennsylvania state lawmakers passed a $28-billion budget, meeting their deadline for the first time in eight years. The budget is 0.6% higher than last year’s and includes no tax increases.
Paul Davidson writes in the USA Today that up to 400,000 city and state workers could lose their jobs as city and state governments work to close their growing budget shortfalls.
With many state government workers facing possible layoffs as a result of massive deficits, the Wall Street Journal observes that capital cities across the country are beginning to feel the squeeze.
Pew and The National Journalasked adults how U.S. states should deal with their budget deficits. 43% favored cutting funding on transportation and road maintenance; 27% favored cutting funding on health services; 25% favored cutting spending on public safety; 22% favored cutting K-12 spending; and 39% favored raising taxes.
According to a Gallup/USA Today poll, 53% of adults think the government is doing too much. Only 39% think the government should be doing more.
Kaiser asked a pool of registered voters how important various issues were to their vote in this fall’s elections. 44% said a candidate’s stance on the budget deficit was “extremely” important; 35% said “very” important.
In an effort to explore the nature, the origins and the ultimate destination of government spending, we’ve come across two interactive tools that help to give a little perspective to the subject.
The first was posted on the blog of the Center for American Progress, a progressive thinktank. The tool allows a user to click on a pie chart that represents the 2010 federal budget – though, the tool only allows the user to explore non-defense discretionary spending. The tool gives users a reference for how much the government spends on a given department or initiative and gives the user a percentage for that spending relative to the overall 2010 federal budget. The more one clicks, the more specific the tool gets. For example, according to the tool, community planning and development costs $4.07 billion and represents 0.12% of the 2010 federal budget. Please click here to use the tool from the Center for American Progress.
The second is a tool that allows the user to input a salary level and year, and then learn about several of the implications of earning that salary. The tool teaches the user things like his or her effective tax bracket (or what percentage of their paycheck goes toward taxes and how it is calculated), how many paid tax dollars go toward different government functions like national defense or agriculture, and what an equivalent salary might have been in years past or vice versa (adjusted for inflation). Please click here to use the tool from USA Today.
Use these online tools to educate yourself about government spending. What do you think about these tools? What do you think about the government’s spending? Let us know in the comments section below, on Facebook and Twitter.
