Student Loan Debt Forgiveness for Stimulus?

An interesting idea making the rounds in recent weeks has been to have the government pay off all currently outstanding student loan debt as a means of stimulating the still-in-recession economy.

It is an intriguing concept. The theory goes that this measure would inject money into the economy (the purpose of all stimulus) by freeing up additional spending cash each month for the hundreds of thousands of citizens currently dedicating a portion of their income, not to mention setting aside money in their savings accounts, for debt repayment. Additionally, this would avoid moral hazard, as their was no expectation on the part of these people that they'd be bailed out and there would not be future expectation of bail outs. And, even if there were, since this would reward higher education, the additional people paying for more learning would increase the human capital of the nation.

Of course, Republican Punk doesn't support any additional stimulus. The country is in the process of a slow recovery and we cannot afford any further deficit spending or bubble-creating. Would this have been a good idea if it had been thought of before the pork-basket that was the $700 million plus "stimulus" package. Very possibly. But keep in mind, higher education costs are rising much faster than inflation, primarily due to government intervention that promotes lower-and-middle class people going to college regardless of their ability to pay or whether it is actually in their best interest. So, there are a lot of unintentional consequences that must be considered with any plan.

Germany and France Snap Out Of Recession Despite Stimulus Packages That Obama Called Too Small

Germany and France enjoyed a shock return to economic growth in the second quarter of the year, data showed on Thursday, ending their recessions earlier than many policymakers and economists had expected.

German gross domestic product rose by 0.3% in the second quarter, bringing an end to the country's deepest recession since World War Two and boosting hopes of recovery in the broader euro zone.

French GDP also grew by 0.3% in the second quarter. The consensus in a Reuters poll of economists had predicted a 0.3% quarterly contraction in both countries.

An interesting note...their recessions were significantly deeper than that in the U.S. (Germany's GDP contracted by 7.1% on the year compared to 3.9% in the U.S.), but look at the size of their stimulus packages in comparison:

So smaller, targeted packages (France = Less than 1.5% of GDP, Germany = 4.3% of GDP) appear to have been more effective than just throwing money at the problem (U.S. = almost 7% of GDP). Huh...

Also, who would have thought that the U.S. would be the most Keynesian country in the world (well, besides China, but they were running a massive surplus and are, well, COMMUNIST), and by a lot over France. Oh, how things have changed.

Source: http://money.cnn.com/2009/08/13/news/international/europe_economy.reut/index.htm?postversion=2009081304

Moral hazard, anyone?

In reference to a new New York program funded by federal stimulus cash (with a little extra from George Soros) that gives $200 for each kid under the premise of back-to-school shopping:

"It's free money!" said Alecia Rumph, 26.

Now, there were definitely worse uses of the stimulus cash around the country, and not being a New York citizen, this blog will not attempt to question the choice.

However, this shows the problem with Obama's promises of everything for everyone with no consequences. Bush did it with his "Go shopping!" request after 9/11, and if someone doesn't step in, it's only going to get worse.

Source: http://www.nydailynews.com/money/2009/08/12/2009-08-12_billionaire_feds_give_out_175m_to_aid_neediest_students_around_the_state_its_fre.html

Armadillo as Liberty

Tom Coburn is quickly becoming my favorite senator. Here is an excerpt from his floor speech on the stimulus:

"You know, in Oklahoma, I trap armadillos in my yard. They come in, they'll ruin a little yard, because they like grubworms. So all you gotta do is put a few marshmallows out, put a marshmallow or two in the trap cage, and you'll catch those suckers. We'll that's what Washington is doing to American liberty...

We steal your liberty. We steal your freedom. We steal your choice...

Now there's two things I do with those armadillos, one of two things. I either put 'em in the back of my pickup and take 'em 10 or 15 miles away from my property, or I shoot 'em. And that's exactly what's gonna happen to us. We're either going to be carried far away from what we know and trust and believe in to be right, or we're gonna be extinct as a nation."

Hat Tip: Glenn Thrush

P.S.
Bias in Mr. Thrush's writing has gotten really bad in recent weeks. If you remember, about a week ago Mr. Thrush thought Zell Miller was being racist by using Gorilla Glue to metaphorically glue President Obama to his chair. Well, he hasn't been afraid to let his bias slip in recent weeks, and this post was no different. He made a big deal out of the fact that Mr. Coburn shoots the Armadillos in his yard. Good. Frickin'. Lord.

60+% of the Country Oppose Stimulus; 60+% Support Stimulus

A new ABC/Washington Post poll shows that polling depends entirely on how you ask the question:

"Would you support or oppose additional federal spending above the 787 billion dollars already set aside to try to stimulate the economy? ... Do you feel that way strongly or somewhat?"

StronglySupport SomewhatSupport SomewhatOppose StronglyOppose Unsure
18 17 18 43 3

"Would you support or oppose new federal spending of about 800 billion dollars on tax cuts, construction projects, energy, education, and health care to try to stimulate the economy? ... Do you feel that way strongly or somewhat?"

StronglySupport SomewhatSupport SomewhatOppose StronglyOppose Unsure
43 27 9 17 3

This means, despite impressive numbers showing people strongly oppose a general second stimulus and do not want to add to the deficit (see previous polls), Republican hopes that they could regain power simply on the deficit alone were misplaced. Any opposition to stimulus needs to be three-tiered:

1. The massive deficit (obviously)
2. The fact that the previous stimulus did not work and any new one would be ineffective as well
3. The particulars of the package must be exposed as not worth it...more so than the last package where Republicans focused on things like birth control, which, while it shouldn't have been in there, was only a small piece.

Source: Polling Report

Definition of Insanity: We Want A New Housing Bubble!

Politicos on both the left and the right are getting upset with President Obama for his inability to stem rising foreclosures. There are calls for revisiting the idea of letting bankruptcy judges modify mortgages, a terrible precedent that would further trample creditors' rights. Even normally reasonable economists such as Mark Zandi are calling for some kind of new Homeowners stimulus. Of course, Barney Frank and Anthony Weiner (the Hot Dog reps) are looking to loosen Freddie Mac and Fannie Mae's lending standards, this time to help condo owners.

The fact of the matter is that the market is recorrecting itself, and the only way the government could stop this would be to form a new housing bubble through targeted tax cuts and subsidies and reduced lending standards. Unfortunately, some seem to be ok with that, which brings to mind Benjamin Franklin's famous definition of insanity.

Source: http://www.politico.com/news/stories/0709/25095.html

Issue Numbers Good for Republicans to Keep Hammering Debt Message

Now that Congressional Republicans have rediscovered their fiscal souls and oppose deficit spending again after 8 years of letting the Bush administration run rough-shod all over them, a variety of polls released yesterday seem to show that this is probably their best issue (along with Gitmo, which is a tad bit more controversial), and a much stronger one than we thought.

These numbers can all be found on Polling Report (most of it here: http://www.pollingreport.com/budget.htm) and don't require much commentary.

• 50% of Americans say they will base their 2010 congressional vote on the candidates feelings concerning Economic Stimulus(stimuli?). The next biggest issue is 23%.
• 54% of Americans are either not very or not at all confident that the last stimulus will ever work. 52% do not even think it will produce jobs.
• Depending on the poll, either a 52%-36% or 61%-33% margin opposes a new stimulus.
• 71% would prefer a slower recovery to an increased deficit.
• And, to those who do not believe people will vote based on deficit issues, 67% (correctly)believe that the deficit affects their everyday lives and finances.
• Finally, President Obama has fallen, for a few polls in a row now, to the point where the country is virtually split right down the middle (with a few undecided) on whether they approve of his economic policies.

Sorry Harry, A Conservative Second Stimulus Is Still One Stimulus Too Many

Harold Ford, Jr., former Rep. and Senate candidate from Tennessee and currently the leader of the moderate Democratic Leadership Council (of Bill Clinton fame), has a new editorial on the Politico calling for a new stimulus. You can read it for yourself here: http://www.politico.com/news/stories/0709/24927.html.

Ford stakes out an honerable position: attempting to craft a package that would entice Republicans and Blue Dog Dems concerned about the economy. In fact, his proposals, consisting of loans, not grants, to the States and a "vacation" from payroll taxes, paid for with returned TARP money, were central tenets of the Republican stimulus alternative. Surprisingly, he even advocates sacrificing expanded coverage in health care in order to get both reform and this new stimulus package without further breaking the budget:

It is also critical that we take concrete steps to restore fiscal balance in the long run. New budget estimates for health care reform show that tough measures to rein in spending and curb reimbursements can have a significant impact on the rate of growth in costs. The unfortunate truth is that cost-cutting may need to be prioritized over expansion of coverage, which, in any case, is unsustainable without massive cost savings.

The problem is the last stimulus went too far. If we could refund some of that money, specifically the $200 billion or so that had nothing to do with stimulus and solely sought to further the progressive agenda, conservatives and most of the nation could get behind this. Unfortunately, Pelosi, Reid, and Co. have made it clear to people like Paul Ryan and John Thune who would like to pursue this path that it is not going to happen. If that is the case, we are at such a tipping point budget-wise that the negative effects of any added debt are so great in the long term that the benefits in abating the recession now would be moot when the economy lurches back into a deeper one in 10 years.