$4 trillion and counting

More and more banks have decided to reject the intial bailout offer. The banks that did accept the bailout used it to help pay bonuses to their executives, resulting in predictable, if Captain Renault-esque, outrage from President Obama. (Really, what did he think? He voted to give them $300 billion. What did he think they’d do with it? Make paper hats?)

Biden, as usual, makes the dumbest comment,

I’d like to throw these guys in the brig,” he said. “They’re thinking the same old thing that got us here, greed. They’re thinking, ‘Take care of me.’

Well, I wonder why they think that? Let me get this straight… Biden voted to give the banks $700 billion dollars, no strings attached, and is campaigning for an additional $900 billion and he says that someone else is greedy? He gave them the money and now he wants to put them in prison for accepting it.

Local banks are rejecting TARP money because, well because it only makes sense to spend the money on bonuses and corporate jets. Using it to make more bad loans is stupid.

Congress wants banks to make loans, so businesses can expand and people can start buying houses again. But lawmakers also want them to make only trustworthy loans. But there are only so many good loans to make in a weak economy with high unemployment.

So the money’s not going where Congress wants. But where does Congress want the money to go?

We’ve looked it over, and even we can’t quite believe it. There’s $1 billion for Amtrak, the federal railroad that hasn’t turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There’s even $650 million on top of the billions already doled out to pay for digital TV conversion coupons. — Wall Street Journal

Don’t forget the billions of dollars they’re giving Acorn. And… wait… wait a minute! The whole farging point of this “stimulus” bill is to spend money, right? To “create jobs?” then why is buying a corporate jet a bad thing? That creates demand for jets, right? That stimulates demand for manufacturing jobs, right? Why is that bad spending, but $600 million for government cars is a good spending? Is there any sense in this mess?

The numbers are staggering:

If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars.

Crunching the inflation adjusted numbers, we find the bailout has cost more than all of these big budget government expenditures – combined:

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

Barry Ritholtz

But some of that $4 TRILLION must be “good” spending right?

If, for example, your teenager came home after spending the day at the shopping mall with your personal credit card and tells you “Hey Mom and Dad, I know that you told me to spend no more than $100, but I spent instead $10,000,” you’d likely be furious.  And you would not be becalmed by your profligate teenager suggesting that, because he spent $10,000, surely some of it is wise. — Don Boudreaux

We’re up to our necks in debt! Let’s borrow our way out!

I’ve said it before and I’ll say it again. If the economy really does need a “stimulus” then why not simply stop withholding taxes? Simple, easy, direct, effective, and immediate. But no graft.

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Crisis or excuse?

“You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.”  — Rahm Emanuel, President Obama’s Chief of Staff.

Steve Horowitz gets it exactly right,

One of the (correct) complaints about the proposed stimulus plan is that it’s full of all kinds of programs that would appear to have nothing to do with any accepted economic theory about what sorts of spending could even possibly lead to recovery.  The best example of this is the funds for family planning policy that are in the bill.  Of course to those who understand public choice, none of this is a surprise. …

This isn’t just your run-of-the-mill pork.  What we are seeing happen right now is that Congress sees this crisis as an opportunity to enact a whole variety of programs that they’ve wanted to pass for years, especially (but not only) the Democrats who no longer fear a veto, and now finally have the chance.  Just as the Patriot Act was a bunch of laws waiting for a political “crisis,” so is much of the stimulus package a bunch of programs waiting for an economic “crisis.”  The current crisis is just a convenient excuse.

As it happens, the family planning provision has now been deleted from the bill.  The bill is over 1,500 pages long. There’s money for ACORN in there. What else? Will the administration comb through the bill to remove pork, or will they be content to react only to the most egregious examples that get media attention?

Peter Boettke explains the basic economic principles at work,

Government can raise revenue in one of three ways: (1) tax, (2) borrow and (3) inflate.  The natural proclivity of democratic governments is to pursue public policies which concentrate benefits on the well-organized and well-informed, and disperse the costs on the unorganized and ill-informed.  And there are strong reasons why this bias in policy making will also be biased toward shortsightedness — pay out the benefits now, and worry about the costs down the road.  Thus, the natural tendency for elected government officials is to borrow (rather than tax) and then inflate (rather than tax).  Deficit financing, accumulating public debt, and monetization of the debt. …

The US has made a lot of bad policy choices that violate the teachings of basic economics and common-sense for over half a century.  We have not yet destroyed the US economy through these choices, but we are potentially on that path. The most effective way to get off that path would be to establish new restraints on the natural proclivities of elected politicians (take away discretionary powers in fiscal and monetary policy) and unleash the private sector and the creative powers of entrepreneurs. We can still pull out of this current crisis, but first government must stop making matters worse by catering to the natural proclivities of elected officials (from whatever party).  As James Buchanan once summed up the policy wisdom of public choice: “Don’t let the fox guard the chicken coop.”

And from Ilya Somin,

These days, we are repeatedly told that we have to pass a massive new infrastructure spending bill in order to fix our “crumbling” roads and bridges. Everyone seems to have forgotten that just three years ago, in August 2005, Congress enacted the biggest federal public works program in American history, spending a massive $286.4 billion on the 2005 highway bill. At that time, President Bush and congressional leaders from both parties told us that the new highway bill was needed to fix our infrastructure problems.

Before passing a new and potentially even bigger infrastructure spending bill, I would just like to know what happened to all that money Congress appropriated for the same purpose back in 2005? If that act succeeded in its purpose, it’s not clear why we need another huge federal infrastructure bill now, less than four years later. If it failed, we need to know why.

One reason why the 2005 bill may have failed is that much of the money was spent on various porkbarrel projects, such as the notorious “Bridge to Nowhere,” which is the only thing most people now remember from that bill. It’s certainly possible that the 2005 money was largely wasted because most of it went to politically connected interest groups and districts rather than genuinely valid infrastructure priorities. But if the 2005 bill indeed failed for that reason, why would we expect a different result this time around? You have to be a very committed partisan to believe that today’s Democratic Congressmen and senators are any less committed to lining the pockets of their favored interest groups than their Republican predecessors were in 2005. Certainly, Democrats such as Barney Frank have been more than willing to do that with the funds allocated in the bailout bill. Whether Congress is controlled by Democrats or Republicans, it is almost inevitable that much of the money appropriated in in large spending bills will be allocated on the basis of political power rather than economic rationality. Congressmen who refuse to channel money to politically influential constituents are unlikely to hold onto power long.

It’s simply impossible for the federal government to spend $900 billion effectively, efficiently, or even sensibly. The numbers are too large and the opportunities for graft too numerous. The potential rewards for gaming the system are simply too large for us to imagine–for even a moment–that vast amounts of money won’t be completely and utterly wasted.

If a stimulus we MUST have, then why not a simple moratorium on tax withholding? Why not simply take less from the American public for two months?

Because that leaves no opportunity for graft, and Congress lives on graft.

Here’s a link to a full page ad opposing Bailout ’09 taken out by Cato and signed by 200 economists.

Premium Apples!

I’m the “computer guy” to many of my friends. I had a friend ask for recommendations. Specifically, if I thought it was worthwhile buying from Apple.

I told him I’d check on it, but that I didn’t imagine it would be worthwhile. I had no idea how bad Apple would be until I ran the numbers.

For a high end Mac Pro, Apple.com lists a suggested configuration for $2,799. That’s a lot of money, but the machine is pretty impressive:

Two 2.8GHz Quad-Core Intel Xeon “Harpertown” processors
2GB memory
ATI Radeon HD 2600 XT
320GB hard drive
16x double-layer SuperDrive

It looks great (but we’d want to add some more memory). Problem is, I priced the same rig, with 180gb more drive space, for $2,360. That makes the Apple $400 more expensive. I guess that’s not sooo bad, since the Mac comes with an OS. Vista ultimate 64 bit edition costs $169 with a system, so that makes the Apple OS more than twice as expensive. Maybe it’s worth it, I doubt it, but maybe.

However, my friend is unlikely to drop 2 grand on a computer and unless you’re rendering massive videos or doing large-scale computational analysis, dual quad core processors (*jazz hands* “Harpertown!” *jazz hands*) don’t actually make much difference. More cores doesn’t mean faster unless the applications are specifically tuned to use those extra cores. Neither World of Warcraft or Club Penguin are specifically tuned.

So I took a look at a “midrange” Mac.  The 24inch iMac, which apple retails for $1,799:

2.8GHz Intel Core 2 duo processor
2GB memory
ATI Radeon HD 2600 XT
320GB hard drive
8x double-layer SuperDrive
24 inch LCD monitor

This is where it got really ugly. I priced the same system for $891. That’s $908 cheaper. $908. The iMac is more than twice as expensive. But the iMac is white. And you can’t upgrade it. And it’s white.

Now, to be sure, I’m not looking at Dell, or HP; I’m building my own. But that means that I can get better hardware than I could at Apple, Dell or HP. Since Apple switched to a commodity platform, they compete within a mature ecosystem of motherboard/ram/drive suppliers. I can get premium components for less, much less, than Apple charges.

I could also upgrade the hard drive, ramp up the video card, downgrade the processor and bulk up the RAM for what would wind up being an even faster, more powerful system, for substantially less money.

So, I guess this is my offer: if you’re thinking of buying an iMac, I’ll build you the equivalent system and only charge a $400 premium! That’s a $500 savings! Buy three! With the savings, you could subscribe to Club Penguin for 25 years. (Or WoW for 9.6 years.)

No we can’t.

Excellent, excellent article by David Boaz at Cato, Can We Afford All This Spending? No We Can’t.

Political leaders talk about making the hard choices and laying the groundwork for the future, but their actions demonstrate a different approach. They try to solve problems — or at least to be seen to be solving problems — today without in fact thinking about the long term.

Where will this new spending come from? It could come from raising taxes; but even President Obama seems reluctant to raise taxes during a sharp economic slowdown, indicating that he does know that taxes reduce work, investment, and production. And would anyone propose to raise taxes by $825 billion? Or by the $3 trillion that it would take to cover the already-projected deficits and the current proposed spending? And of course money taxed away from those who earn it is taken out of the economy, only to be reinjected by politicians and planners rather than by consumers and investors. That means, as the Washington Post reported on Tuesday, “It will fall to Obama and his subordinates to decide winners and losers in the banking, financial services, automobile and other major industries, a span of control that dwarfs President Harry S. Truman’s attempt to seize control of steel production.” That’s not good for freedom or for economic growth.

If not taxes, of course we could borrow the money. Assuming a government plunging further in debt to the tune of a trillion dollars a year can still borrow. But again, borrowing just transfers money from private investment to political investment. What we’ll actually probably do is create the money out of thin air on the books of the Federal Reserve. More money injected into the economy surely means inflation, maybe a lot of inflation given the size of the spending already undertaken or now in the works.

Update:

OK, so let’s see….

Give money to the automakers because they’re going bankrupt.

Pass laws making cars more expensive to build.

Make plans to close military detention center.

Make no plans of any kind to do anything with the detainees.

Promise to increase “transparency” in government.

Vote to give hundreds of billions of tax dollars to private banks with absolutely no oversight.

Promise to make the word better for the children.

Borrow trillions of your children’s dollars to make payments to your parents.

Argue that the economy needs a “jump-start.”

Propose spending projects that won’t begin paying out funds for two more years.

Promise to eliminate pork barrel projects from the stimulus plan. (no, really!)

Fill the stimulus plan with highway and infrastructure spending. (Highway spending is the crispy bacon of congressional pork products.)

OK, Joe…

I find the following video clip heartening. Biden and Obama are in the process of swearing in White House senior staff and apparently it’s the Vice-President’s job to administer the oath. Who knew?

At first, Biden forgets that he’s the one to administer the oath, but he quickly remembers. He then quips, “My memory’s not as good as Justice Roberts’ … Chief Justice Roberts.” Referring, of course, to the flub of the Oath that Obama took at the inauguration.

Ha … Ha. Chuckles all around.

Except for Obama, who’s clearly not amused. Watch closely and you’ll see Obama reach out, grab Biden’s elbow, and steer funny ole Joe back to business, even shaking his head at someone off camera.

Why heartening? Biden’s joke wasn’t off-color, or even rude. It wasn’t particularly funny either… but it was–as so much modern political humor is–a needless, pointless, partisan jibe. Obama didn’t scold Biden, he just… steered him back to business, sending a message that I read as, “OK, enough. We’ve got work to do.”

Despite all the rhetoric, there will be plenty of partisan wrangling in the next four years. That’s a good thing, by the way, partisan differences are real and important, they shouldn’t be brushed aside easily. But civility and decorum are important too and Obama seems, in at least a small way, truly committed to engaging his opposition with dignity.

Good for him.

Close Gitmo?

Timothy Sandefur has an excellent piece on Obama’s executive order to close the detention center at Guantanamo Bay.

Change™, it is a comin. Sorta. Maybe. OK, maybe not….

Just to be clear: I believe the Guantanamo Bay camp to be totally unconstitutional, and the length of the detention of some of the prisoners there to be absolutely unjustifiable. I think the camp should be closed—and I simultaneously recognize that this is not something that can be done overnight, and should not be done overhastily, given the national security consequences. But realism (a quality notably lacking in some of Obama’s fans) requires us to keep in mind that this order takes only the most meager step, if that, toward actually addressing the constitutional concerns related to indefinite detentions without trial. It does not end indefinite detentions, and it does not require trials. It does not provide counsel, and it does not provide enforceable rights. It does not set meaningful deadlines, and it does not provide oversight. It is subject to no checks and balances, and it provides no enforcement mechanism. It can hardly be said to do anything at all, so far.

Michael Newberry

More paintings! This time from an artist that I actually know personally and… I actually own an original piece! (How cool is that!)

I’ve had the good fortune to know Michael Newberry for a few years, and every time I see him I am warmed by his wonderful sense-of-life and his radiant, effervescent smile.

From his website,

There is a place centered low, inside my ribcage, where light, knowledge, and intense feeling meld. My art comes from this place.

This sense guides me through the landscape of art history: absorbing a color here; a technique there; and gives me a sense of connection with all the artists I love. This spark is also the foundation to go my own way, encouraging me try new things, yet, always with beauty and my very best.

I am honored that the collectors in my art family, share this sense with me.

In addition to Michael’s site, there’s the Michael Newberry Archive, with a catalog of 665 unique works.

(I own this one)
Windows

The following are available as Giclee reproductions:
Absorption
Denouement
Pastels
Synergy