I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.- Thomas Jefferson.

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Friday, July 16, 2010

Less bang for the Buck than Obama claims

I was watching the news last night and heard our president say that the govt was getting a return of 3 dollars of private spending out of every dollar of stimulus money spent. I started laughing out loud, which my 4 month old daughter really enjoyed, but then i thought about her, and the legacy the Obama-bin-Biden administration will leave her, and the laughter stopped. (Bush and the Pubes share some credit, they can't blame everything on the D-rats)

Here is the transcript for the entire speech, I've excerpted the relevant paragraphs below-

Just yesterday, the Council of Economic Advisers put out a detailed report and it showed that for things like tax credits that go to advanced energy manufacturing or loan guarantees for small businesses or financing for infrastructure projects, we're leveraging nearly three private dollars for every public dollar that's spent. That's an incredible bang for our buck. By making critical seed money available, we've attracted more than $280 billion in investment from private companies and others, which will mean new jobs and brighter futures for families in Holland and in communities across the country.

And by the way, these aren't just any jobs. These are jobs in the industries of the future. Just a few years ago, American businesses manufactured only 2 percent of the world's advanced batteries for electric and hybrid vehicles -- 2 percent. But because of what's happening in places like this, in just five years we'll have up to 40 percent of the world's capacity -- 40 percent. (Applause.) So for years you've been hearing about manufacturing jobs disappearing overseas. You are leading the way in showing how manufacturing jobs are coming right back here to the United States of America. (Applause.)

For example, the workers at this plant, already slated to produce batteries for the new Chevy Volt, learned the other day that they're also going to be supplying batteries for the new electric Ford Focus as soon as this operation gears up. That means that by 2012, the batteries will be manufactured here in Holland, Michigan. So when you buy one of these vehicles, the battery could be stamped "Made in America" -- just like the car. (Applause.)

What's wrong w this you ask? At least Obama's not suggesting that every stimulus dollar spend has a 3-1 return, as I initially thought he said (short quote on TV). Let's look closer, or paraphrasing South Park, " Look more closlier ". The administration has given tax breaks to a S Korean company to build a plant in Michigan, as part of a govt plan to increase the capacity to build electric batteries for cars. This is typical of targeted govt intervention in the economy, taking money out of the general economy (either by borrowing or taxing) to spend on a particular segment of the economy, overruling the market forces which are much better at determining where money should be allocated. For the factory in Holland Mi., the govt spent 500K, for each "job" created, in an industry w overcapacity. Little bang for those bucks, plus, how much money was spent flying the president and his staff our for that speech and photo-op, to brag about what great things he's doing for the people.

From Politifact-

The projection of capacity by Deutsche Bank "pretty well matches with the other projections of announced capacity," said Mike Millikin, editor of the Green Car Congress.

"The Administration has certainly put its money toward boosting U.S. capacity," Millikin said. "However, what ultimately matters is production and purchases."

In fact, many industry experts say capacity will far exceed demand for, and production of, advanced batteries.

In April, 2010, Menahem Anderman, founder and chief executive of Total Battery Consulting, issued a report on plug-in hybrids (PHEVs) and electric vehicles (EVs) based on-site interviews with top technologists and executives at 20 major automakers and 15 current and prospective battery suppliers on three continents.

"The government’s stimulus money will create severe overcapacity from 2013 on," Anderman told PolitiFact. "There is no market for the capacity planned."

That's because demand for the cars is limited by high up-front cost and still-evolving battery technology.

"Unfortunately the mass EV and PHEV market at current gasoline pricing and battery technology status (cost, performance and life) will require unaffordable heavy subsidies to carmakers, battery makers and the consumer," Anderman said.

And because the market is so dependent on government subsidies, he said, it is risky.


And to reiterate- every govt dollar spent to subsidize one industry, is paid for by every other productive industry, and every individual taxpayer. And on top of that, the govt has the gall to complain about other govts industrial subsidies and unfair competition. If I'm not being clear, let's simplify. Every govt subsidy, is a tax on everyone else not receiving the subsidy.

More from Politifact-

Indeed, some economists, including many conservatives, believe that the multiplier effect from the stimulus is small or nonexistent. "Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy," writes economist Brian Riedl of the conservative Heritage Foundation. "No new purchasing power is created; it is merely transferred from one part of the economy to another. ... Removing water from one end of a swimming pool and pouring it in the other end will not raise the overall water level -- no matter how large the bucket. Similarly, borrowing money from one part of the economy and redistributing to another part of the economy will not create new growth -- no matter how big the stimulus bill."

I had more to write, but I've run out of time. I'll finish off w 2 articles, the first is simply the Reuters report of the White House press release, which by the title was a purely reactive move over poll results. The second, sent to me by Brett Mosley, led to me writing the above missive.

White House: Stimulus saved 3 million jobs

Report comes a day after a pair of polls raised red flags for Obama

by Caren Bohan and Alister Bull

WASHINGTON — President Barack Obama's economic policies have significantly boosted U.S. growth and hiring this year, the White House said on Wednesday as it seeks to counter sagging confidence in his economic leadership.

A quarterly White House report estimated Obama's $862 billion economic stimulus package, which he signed last year, has so far lifted employment by between 2.5 million and 3.6 million jobs, while giving growth a big boost.

"The impact of the fiscal stimulus suggest that the (Recovery Act) has raised the level of GDP as of the second quarter of 2010, relative to what it otherwise would have been, by between 2.7 and 3.2 percent," the report by the White House Council of Economic Advisers (CEA) said.

"Real GDP growth is expected to remain steady in the second half of 2010 and throughout 2011."

The first official estimate for second quarter growth is released on July 30.

Growth in the first quarter was 2.7 percent, continuing a gradual recovery from the worst recession since the 1930s, which has yet to dramatically cut a painfully high unemployment rate that stood at 9.5 percent in June.

Vice President Joseph Biden said the economy "would be barely growing at all" without the emergency spending.


Morning Bell: Why the Obama Stimulus Failed

Posted July 15th, 2010 at 9:18am

Today, President Barack Obama will attend a groundbreaking ceremony in Holland, Mich., for a South Korean-owned factory that will make batteries for electric cars. The purpose of the trip is to highlight the “success” of the President’s $862 billion economic stimulus package which the White House claimed yesterday has already “saved or created” 3 million jobs. Specifically, this factory is being subsidized by $151 million of stimulus funds from an even larger $2 billion honey pot of stimulus money set aside for electric car battery investments. This one plant is expected to employ 300 workers. That works out to more than $500,000 per job created. $500,000 per job. This plant, in a nutshell, explains why the President’s stimulus plan has been an objective failure.

The American people know the President’s stimulus has failed. A new CBS poll out today shows that 74 percent of Americans believe the Obama stimulus either damaged the economy or had no effect. And a Washington Post poll released Tuesday again showed that a majority of Americans disapprove of President Obama’s handling of the economy. So how on earth can the White House claim they “saved or created” 3 million jobs? By rerunning the same economic models that predicted the stimulus would prevent unemployment from ever rising above 8%. That’s right. The White House’s 3 million jobs number is not based on any real world data.

So what does the actual objective real world data show? When the President first began selling his stimulus plan to the American people in November 2008, he promised it would create 2.5 million jobs. But as employment fell at the end of 2008, President-elect Obama increased his employment promise by one million to 3.5 millions jobs created. At the time, employment stood at about 134.3 million. Using these two data points, one can objectively establish the Obama jobs target for December 2010 at 137.8 million. Fast forward to July 2010 and the latest jobs report shows total U.S. employment at almost 130.5 million. This means President Obama’s stimulus has failed to meet its own standard for success by 7.4 million jobs.

Why has the President’s $862 billion stimulus failed by 7.4 million jobs? Because government spending does not stimulate economic growth. All it does is move resources away from one sector of the economy to another. And government has a horrible track record at efficiently allocating resources. All that really happens is that, on net, jobs get destroyed in the transfer process.

That brings us back to Holland, Michigan. Maybe this new battery plant is worth investing millions of dollars in. Maybe it will eventually turn a profit. But maybe not. The issue is, “Why is this any of the government’s business?” We used to be a capitalist country. We’re supposed to have vibrant capital markets that make these decisions using market principles. Instead we have the Obama administration acting as a venture capital fund picking winners and losers not based on economics, but on political priorities (in this case global warming).

And this is where the President’s war on the rule of law and audacious domestic agenda come into play. The White House claimed yesterday that the Obama stimulus has encouraged $280 billion in private sector spending. The facts do not support this. In reality annual private fixed nonresidential investment has fallen by $327 billion since the recession started— a 19 percent drop. Businesses are not investing because of the vast economic uncertainties the Obama administration is creating.

Will secured creditor contracts be honored in court? Or will the Obama administration rip up those contracts? How much does it cost to hire a new employee? No one will know until thousands of pages of Obamacare regulations emanate from the IRS and HHS. How much will energy cost? That depends on how draconian the Obama EPA global warming regulations are. What are the rules for financial markets? You better have the cash for an army of good lawyers, because the 2,300-page Dodd-Frank bill touches every aspect of financial markets and requires 243 new rule-makings by 11 different federal agencies.

The Obama administration’s massive spending and regulatory expansion is not helping economic recovery. It is actively thwarting it.

Quick Hits:

Today at 2 PM Eastern, The Heritage Foundation will host an event titled “Remember the Gulf: Is the Administration Doing More Harm Than Good,” featuring The Honorable John F. Young, Jr., council chairman for Jefferson Parish, La. RSVP here or watch online.

U.S. home foreclosures reached a record high in the second quarter of this year, U.S. retail sales dropped for the second consecutive month in June, and according to Gallup, Americans’ confidence in the economy sank significantly between June and July.

The Federal Reserve marked down their expectations for growth and inflation, concluding that the economic recovery is proceeding more slowly than previously thought.

Erskine Bowles, former White House chief of staff to President Bill Clinton and co-chair of President Obama’s fiscal commission said Wednesday that Obamacare will do very little to bring down costs, contradicting claims from the White House.

The Obama administration has approved taxpayer funding of abortion through new high-risk insurance pools in Pennsylvania and New Mexico.

UPDATE: The original version of this post reported the Obama jobs target as 138.6 million jobs based off of BLS data that showed 135.1 million jobs in December 2008. In January 2010 the BLS revised down the Decemeber 2008 count to 134.3 million. So the updated Obama jobs target is 137.8 million and the 7.4 million jobs gap total is correct.

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