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  • January 29, 2009 09:25 AM EST by Brian Sullivan

    Analysis: Whatever You Call It, Don't Call It A "Stimulus" Plan

    Reaction to the stimulus plan (hereafter which should instead be called the "spending" plan based on the lack of stimulus and heavy dose of spending) has nearly universally been negative this morning.

    The problem is that there seems to be very little "stimulus" in the stimulus plan, at least in the way of promoting new spending by companies and individuals.   Much of the plan is instead devoted to spending on entitlement programs, schools and other social projects.

    Analysis from the New York Times indicates the following about the plan:

    • An $87 billion provision increasing the federal contribution for Medicaid costs is expected to go a long way to help states close their budget gap
    • The bill would also create a $79 billion state fiscal stabilization fund, disbursing half the money in late 2009 and half in late 2010. The Congressional Budget Office has estimated that little of that money would be spent this year
    • The greatest prospect of delay in spending is on infrastructure. The bill provides $30 billion for highway construction and tens of billions more for other transportation projects, water projects, park renovation, military construction, local housing projects and more
    • A look at more than $140 billion in the bill’s spending on education finds some that can move quickly — for instance, $13 billion each over two years for Title I schools, which serve impoverished students, and for special education under the Individuals With Disabilities Education Act
    • Unemployment benefit checks due to stop will keep coming, along with an extra $25 a week
    • At the grocery store, a family of four on food stamps could find up to $79 more a month on their government-issued debit card

    Remember the President says his impetus for the plan was to create or save 4 million jobs.   In his weekly address two weeks ago the President said "the jobs we create will be in businesses large and small across a wide range of industries.    And they'll be the kind of jobs that don't just put people to work in the short term, but position our economy to lead the world in the long-term."  How exactly do the tiny tax breaks, big entitlement spending and handing billions to states to "fill budget gaps" accomplish this goal?

    The Democrats are using the cover of bashing the morals of those against the plan as a way to silence the critics.   Because much of the plan has to do with educational, medical and entitlement plans it is easy to accuse those against the plan of trying to damage "children and the ill."   Good try.   No one is suggesting that we as a nation do not have a responsibility to help those in need, let's not confuse that with "stimulus."    This is instead about comparing the stated goals - the selling points - of the plan to what it is now trying to do.   And that is to create jobs and "stimulate" the economy.   Nearly $100 billion to health care/medicaid, $140 billion to education and a few hundred bucks back in many taxpayers' pockets will do nearly nothing to create or save jobs as the President has said.

    Moreover, the one thing that may create new jobs and help the country's future energy needs - building thousands of windmills, solar farms new roads, telecommunications and other types of infrastructure - has mysteriously been put on the back burner.  As the Times reports, only $30 billion will go to these types of projects initially and even with the possibility of "tens of billions more" we are still looking at just 15-20% of the plan being put toward projects that can actually create jobs and provide longer term benefits to the economy.

    As former Fed Governor Larry Lindsey writes in today's Wall Street Journal the plan as it is will not work, and he says we need to give more money directly back to the people:

    And what of the plan being put forward now? As crafted, it is unlikely to produce the desired results. For a similar amount of money, the government could essentially cut the payroll tax in half, taking three points off the rate for both the employer and the employee. This would put $1,500 into the pocket of a typical worker making $50,000, with a similar amount going to his or her employer. It would provide a powerful stimulus to the spending stream, as well as a significant, six percentage point reduction in the tax burden of employment for people making less than $100,000. The effects would be immediate.

    Here is a note sent to me today written by the smart folks over at Bianco Research.

    Now that we know some of the details of the economic rescue legislation we know why the Democrats have kept it so private. To help put the items in the bill into perspective we suggest that you use a simple litmus test and judge for yourself how each part of the legislation will help boost the U.S. Economy. That test is simple. Does the subject item have a multiplier effect. If the item does not have a multiplier effect, it's not a valid stimulus and it doesn't belong in this bill. We may not all agree on the exact amount of the multipliers, but we should be able to determine if a multiplier exists.

    Let me explain. Building a highway from one point of commerce to another should over the life of the highway produce an economic benefit greater than the cost of the construction. Some say the multiplier for new highway construction is from 3 to 5 times the initial cost. The important thing is not that we agree on the exact degree of the multiplier, but that we agree that the expense will stimulate the economy and bring some return in excess of the cost.

    Remember, this is an economic stimulus bill. It is not intended (we're told) to tackle social problems, feed the poor, house the homeless, improve the landscaping in Washington D.C., etc. The President has gone to great lengths to assure citizens that the sole purpose of this unprecedented legislation is to stimulate and jump start the U.S. economy. He promised us that the bill would be free of pork, social programs and pet projects. He went so far as to guarantee the public that he would not sign a bill if it had any pork in it.

    So then what's the multiplier for the $50 million for the National Endowment of Arts? How about the $400 million for global warming research, the $335 million for STD prevention, the $650 million for digital conversion coupons, the $81 billion for Medicaid, the $20 billion for food stamps, the $30 billion for Cobra insurance extensions, the $4.1 billion for neighborhood activist groups like ACORN, the $83 billion for the earned income credit to give tax refunds to people who don't pay income tax, and the $6 billion to subsidize university building projects just to name a few.

    The Wall Street Journal estimates that only 12 cents of every dollar in this bill could be called a growth stimulus. Apply your own judgment and the multiplier test to each of the items contained in the bill and come up with your own estimate. I think that the 12 cent estimate is quite generous.

    It was telling that not only did no Republicans vote in favor of the bill, but a few Democrats (notably some of the fiscally conservative "Blue Dog" breakaway group) also rejected this plan.   They know that it is unlikely to create jobs and likely more of a gift to the Democratic states that help vote the party into full power.

    Now it goes to the Senate, and though some tweaks are expected, expect it to pass.    This plan adds another $900-plus billion to the long term obligations of the country and our children.   This in addition to the trillions already lent and spent by the government and Federal Reserve.    Worse, this spending package comes with little benefit to the kind of real job creation or real technological breakthroughs that America urgently needs.   The kind that create real change in our transportation and energy usage.   And that's real depressing.

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jason

LOJACK you assume that all people against this bill are republican, I myself vote independant and have for the last three elections. Remember a guy named Ross Perot, if not go look him up, some of the things he was predicting about nafta and all the free trade are here today. You also assume that no democrats voted against this bill and you are wrong again. Crying about a military deficit is futile, maybe you should study some history and note that all military conflicts usually run a deficit. Adding to that deficit for foolish entitlement spending is........ you decide what you want to call it. Of course if you are a liberal obama supporter you will call it brilliant when all of the history of this exact thing shows it to be futile.

January 29, 2009 at 2:54 pm

unclebigboots

As usual, the lackies for the banks and robber barons are spewing their venimous trickle down theory, in the guise of being interested about the health of our nation and our citizens. No Republican lapdog insisted on there being oversight and transparancy over the $350 billion thrown at the so called bankers. To the Republicans, anyone who is struggeling to survive is unworthy of help. A child is not worthy of health care unless their parents have incomes of over $250,000 a year. And they aren't worthy of a decent meal. And they shouldn't be educated. And they don't deserve a clean environment. Basically, poor citizens deserve to be poor and suffer. Democrats are often puzzeled by this callous view of live. My solution to understanding them is to go to an aquarium and watch the sharks feed. There is no emotion, no compassion, no interest in that which they consume other than their desire to have more. They (Republicans/ sharks) would devour every living thing, even if it meant that tomorrow there would be nothing left. Obama must put aside these silly impulses to "get along", and do what must be done to salvage this nation. We will somehow learn to live amongst the Sharks/Republicans.

January 29, 2009 at 3:45 pm

Rick Reding

Brian, Just wanted to voice my opinion on the unified Republican response in the House against the Obama/Democrat Stimulus Bill. Now, the Senate needs to do the same…100% Against, with no dissenters. If any Republicans cross the aisle and vote for this plan with Obama & the Democrats, I would like to see you or someone else in the media to name names so that we can not only vent against them, but give them the boot next time they are up for re-election. Any possibility we can get someone to propose a government holiday, whereby the entire government takes the next 6 months off and does nothing so that the economy can begin healing itself without their meddling?

January 29, 2009 at 4:36 pm

earle

The current government has firmly decided for us,that our political philosophy should be that of "Socialism"! The "New World Order", has come to fruition,..? Fantastic read Brian,Thanks

January 29, 2009 at 4:43 pm

nate

This is stimulus instead of giving our money to all of these banks and companies here is what should have happen.if they gave each person 125,000 a piece all the problems with the banks,mortgages and credit would have been solved.People would pay mortgages,pay debt,pay schooling,healthcare,open new businesses etc.whats so hard about that.we will never get out of this mess until they congress realize this.people are waiting for their share.Its cheaper and more fruitful.

January 29, 2009 at 5:06 pm

R

Please rename this bill the "We Won, Up Yours Bill" Aa a Republican I could deal with $800 Billion IF it was a stimulus. Obama stop the lectures. You're digging the biggest hole on this planet. To the guy who complains about Repulicans running up the deficits. Check the Facts. Dems have been creating the budget for the past 2 years!. The only reason Bush didn't veto their stupid spending is because it's the only way he could get his military budget! Now Obama will ecnourage stupid spending!

January 29, 2009 at 8:08 pm

jenny

I am not happy with any of this stimulus pkg. I just read where all this money is going and I want to cry. Our country is going to hell people are losing there jobs left and right, losing homes etc and all this money, is being wasted away on foolish programs that are not important in this time of crises. Then I read about wall street taking 18B in bonuses. What in the world is going on with all this greed. I can not believe that these companies are whining for bailout money and they are getting these bonuses. UNBELIEVABLE AND SHAME ON EVERYONE ONE OF YOU GREEDY BASTARDS. Same with the big oil companies you are not any better. Your profits are outrageous, you do not need that kind of money either. The prices keep going up crippling the U.S. and you are coming up with record profits everytime. Come on people, stop being so GREEDY!!!!!!!!!!!!

January 29, 2009 at 11:50 pm

pkatt

hmmm money for STD prevention.. round two for trying to make Gardasil a mandatory vaccine? Im sorry Im a dem.. but this bill started porky. Stimulas means job creation. Stimulas should mean confidence that the gov. is on our side and trying to help. All I see here is a big spending bill which will probably swoosh down the big black hole of failed economic bills. Meanwhile keep printin that money. Only saving grace is everyone else is too so everyones is worth nothing.

January 30, 2009 at 7:44 am

Terrence

Nice read Brian, and what a sham this is! Maybe the people should vote on this so-called stimulus plan? We need to get rid of these crooked politicians since there agenda is pure socialism. All we heard is give Obama a chance. Well, he is not starting out very well now is he? I guess it's time for him to pay back all the people who got him elected. At our children and grandchildren's expense. At least Bush kept us safe with his emphasis on protecting our country. Wait till we get attacked again because our enemies think our current president is weak. Then what are we going to do? Give more money to the National Endowment for the Arts?

January 30, 2009 at 9:02 am

pearl

This is not “stimulus”. If housing market is the main issue. Let’s go out buy all mortgage defaults houses and foreclosed houses. Don’t let banks to do the jobs. If this is the supply and demand issue of the housing market, Let’s break (burn) them down. There will be no more surpluses of houses (keeping houses will cost massive tax payers money) to maintain. It will be still less than the current “stimulus” and we can sure to see how our $$ is burning. No matter how much money we try to put into housing market, One simple rule, Supply> Demand= Never ending price reduction. By the way, why anyone thought everybody deserve to own a house? I thought Obama’s plan was to revive the economy, not to punish responsible and working people. I guess, we should all start to speak French. Ms. Pelosi, is French lesson is a part of the Stimulus package?

January 30, 2009 at 11:25 am

Marvin

Somebody needs to tell the Speaker of the House the Election is over. Her comments about the House Republicans not voting for the so called stimulus package is her fault, she needed to get off her arrogant pompous self and work as a nonpartisan body for the good of America instead of the good of herself and her fellow democrats. I used to vote democrat and although the Republicans can act the same way at times, I am glad I switched parties, at least my representatives and Senators listen to their constitutes.

January 30, 2009 at 11:56 am

not_sure_anymore

Where is the stimulus funding for the preparation of Armageddon? They have $600 million to prepare the nation for national heathcare!

January 30, 2009 at 12:18 pm

Larry

Brian, I am thankful that a few Business Journalist "get it" and especially someone under age 40. Our problem isn't lack of stimuous. We almost ODed on it over the last 15 years. That age comment above refers to the kids (30 or younger) I see on your netword with what they try to pass off as economic understanding. They would make John Maynard Keynes proud. Suffering fools is hard work. Larry Missouri

January 30, 2009 at 2:00 pm

Jerry

Just more of the same, GRAFT. Pet projects get the money. And don't forget the people who were major contributors (bribery) and the illegally registered voters. NOT CHANGE!

January 30, 2009 at 4:11 pm

mike

Stimulas plan, how about a honesty plan for our elected officials, it continues to astonish me that we as the American people put up with these lowlife polititians and their crooked ways. We need to rethink our who we put in office and remember that it is our responsibility to change the goverment when it does not serve the people. Lets audit everyone of them and see who comes up clean. Wake up America.

February 3, 2009 at 3:00 pm

dnbunting

Please tell me where I'm going wrong here. Democrats want to borrow...er ... spend almost a TRILLION dollars on whatever spagetti sticks to Nancy Pelosi's wall. Republicans want to give everyone a tax credit and HOPE people wont just save the money. Could we split the difference and say give every TAXPAYER 3000 dollars and TAXPAYER couple 6000 dollars in the form of a credit card. The cards would be sponsored by the usual suspects,..visa, mc, amex, they'd get their name on a percentage of the cards. In return they'd wave the retailer fees, allowing retailers to advertise a discount to said card holders on their goods and services. Kinda socialist yeah... but kind of capitalist too. Retailers discounting to compete for business, card holders looking for the best deals on everything from groceries to cars. Putting an expiration date on the card would force people to use it or lose it. According to my math this is well short of a TRILLION dollars so use the rest for pet...er infrastructure.

February 6, 2009 at 4:58 pm

about this blog

  • Brian Sullivan joined FOX Business Network (FBN) in April 2008 as an anchor. He co-anchors the 10am-12pm ET hours of the FOX Business block. Prior to joining FBN, Sullivan served as an anchor for Bloomberg Television where he hosted the programs Morning Call and In Focus.

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