Tuesday, July 7, 2009

Obama Advisor Tyson Wants Second Stimulus

Here comes. Laura Tyson, one of Obama's economic advisors, wants second stimulus package to make sure the economy will recover.

Obama Adviser Says U.S. Should Mull Second Stimulus (7/7/09 Bloomberg)

"The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an outside adviser to President Barack Obama."

"A bit too small", Professor Tyson? $787 billion is about the size of annual GDP of Turkey. The budget deficit in the fiscal 2008 was $459 billion and that was a record. Already, thanks to the (soon-to-be-first) stimulus package and last October's bank bailout package, the budget deficit projected for the fiscal 2009 is already over $1.8 trillion. Professor Tyson wants to increase that by another... trillion, this time, if the first package was "too small"?

This is lunacy. Where does she suppose the money is coming from? (Oh I see, never mind. Surtax for the "rich" (people earning more than $250,000)) Never mind also that the top 1% of income earners already pay 40% of federal income tax, and top 5% pay 60%. Yes, and money grows on trees and vegetable gardens at the White House.

"“The economy is worse than we forecast on which the stimulus program was based,” Tyson, who is a member of Obama’s Economic Recovery Advisory board, told the Nomura Equity Forum. “We probably have already 2.5 million more job losses than anticipated.”"

How should anyone still listen to her or the likes of her? Sorry we badly missed our estimate but trust us with more money and we will get it right, someday, maybe, if we're lucky.

"Even Democrats have bemoaned the pace of the package’s implementation. House Majority Leader Steny Hoyer, a Maryland Democrat, said on “Fox News Sunday” June 5 that congressional Democrats are “disappointed” stimulus funds weren’t distributed faster."

Bemoaning is good, but the problem is not the pace of implementation. It's where it's going. The bulk of "stimulus" money is going to state and local governments to pay for the welfare services and other pet projects that got tacked on to the bill. (See my post.) Or you could say the entire bill is about politicians' pet projects over a decade or two. How would that "stimulate" the economy is a mystery to me, number one; and number two, the economy may not want to be "stimulated".

At least the private sector of the economy is shedding the excess (capital, inventory, manpower). The government is furiously adding the excess and penalizing the private sector for shedding the excess by increasing regulations and de facto taxation. Explicit taxation will come with healthcare "reform" and the "climate" bill.

"Tyson, 62, later told reporters that the U.S. can afford to pay for a second package, even as the fiscal deficit soars. She said the budget shortfall is “likely to be worse” than the equivalent of 12 percent of gross domestic product that the administration forecast for 2009 and the 8 percent to 9 percent it projected for next year.

"Tyson said the U.S. should shift away from its dependence on consumption to grow, and promote expansion through investment and exports. The dollar will need to weaken in the longer term to promote export-led growth, she said. "

Professor Tyson may have been stressed out from a plane ride to Singapore. She's almost incoherent. The U.S. (= taxpayers) can afford to pay for a second package even if she firmly believes the budget deficit will be far worse. The dollar will need to weaken? It is already at 20-year support. How much lower does she want? 40? That's what the chart pattern of U.S. dollar indicates. And how much longer does she think the creditors of the U.S. debt tolerate the weak dollar?


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