Damning Evidence from the Secret Memo - Part 1

Yesterday, I read at Doug Ross' site how a "Sensitive/Confidential" Memo to President-Elect Øbama from 2008 that the White House knew the Stimulus was a scam.  Make sure you follow the link to the original article from AEI.

The 57-page document is available for download.  I'm running through it right now to see if it's so.

And I'm finding a lot of other stuff that further convinces me why Øbama SHOULD NOT BE RE-ELECTED IN 2012.

At this point, I'm only at page 11, but there are a few things I've already found in the memo that are well worth reporting.

Starting off, the second and third bullet points on Page 2 admonish the President-Elect to "establish serious reform and fiscal discipline credentials" and "committing to a responsible budget."

Continuing on to page 3, the team that put together this memo also said, "Your campaign proposals add about $100B per year to the deficit largely because rescoring indicates some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed."

Chairman Zero.  The faux Constitutional scholar who would wind up circumventing Constitutional principles showed even worse economic sense.  And that was before he took office.

Well, how well has he done with that advice so far?  It kind of reminds me of the sort of advice Rehoboam took when he was crowned King of Israel (1. Kings 12).  Instead of listening to the wisdom of the older generations, Rehoboam took with the inexperience of his own.  And it spelled the beginning of the end for Israel.

Well, there's that Stimulus that was rammed through Congress, and set off the Tea Party Movement.  The official line fed to us from the Hill was controlling unemployment.  Then-Speaker Nancy Pelosi even went so far with her "500 million jobs lost per month" gaffe. 

In the memo, the team put together projected rates of unemployment without the Stimulus, as shown by the graph below (taken from the memo itself):

How well did the memo-preparing eggheads do with their predictions?  Miserably.  Here are the unemployment numbers reported from January 2009 to January 2012 (Source:  tradingeconomics.com)

Now to give you a rough idea as to the difference between projected non-stimulus unemployment and actual numbers after the stimulus had been passed:

In short, it seems we would have been better off NOT passing the Stimulus.

To bolster the case for the Stimulus, on pages 10 and 11, a handful of economists are briefly quoted.  Now, economists from the Left and Right are presented, apparently to show a sort of bipartisan consensus for the Stimulus, but there is some fudging of the truth here.

From the Memo: 

     "This is standard macroeconomic analysis and it has led most leading economists to callfor substantial stimulus packages. Based on our consultations and published accounts:

Progressive Economists:
• Robert Reich believes it should be $1.2 trillion over two years, but also indicated it could be larger.

• Joe Stiglitz believes it should be $1 trillion over two years.

• Paul Krugman: at least $600 billion in one year

• Jamie Galbraith: $900 billion in one year

• Institute for America's future (signed by Dean Baker, Andy Stern, Leo Gerard, John
Sweeney, and others): at least $900 billion

First of all, why use the label "Progressive?"  They don't use the label "Conservative" when listing "Republican" economists.

Secondly, any report involving Robert Reich and Paul Krugman should not be taken seriously.  Robert Reich has a tendency to emphasize the facts only convenient to his ideology.  Krugman, despite his Nobel Prize (whose worth has been cheapened over the years) has striked out consistently on his economic predictions.

The majority of the IAF signatories mentioned here is very troubling:  Andy Stern, Leo Gerard, and John Sweeney are all major figures in the Union scene.  Of course they would advocate anything that would pour money into their interests!

But all of the economists listed here--Krugman, Reich, Baker, and Galbraith--have one thing in common:  They're all Keynesians.  That is to say, they believe in the notion that you can spend yourself into prosperity, as opposed to exercising fiscal discipline.

And this is what is problematic about their choice of "Republican Economists":

Republican Economists:
• Marty Feldstein was an early proponent of a spending-only package and currently
believes it should be $400 billion in the first year.

• Larry Lindsey, a former Federal Reserve Governor and NEC Director, estimates that
$800 billion to $1 trillion is desirable.

• Ken Rogoff (widely respected macroeconomist, former chief economist of the IMF,former McCain adviser): $1 trillion over two years

• Mark Zandi (widely quoted economist, fom1er McCain adviser): at least $600 billion in one year

• Greg Mankiw is the only economist we have consulted with who refused to name a
number and was generally skeptical about stimulus.

Ken Rogoff is a Keynesian.

Feldman and Lindsey are not, but their names are attached to a memo supporting a Keynesian approach without telling the whole story.  Both expressed concern about where exactly the money was going to go.    As it turned out, the money went more towards political interests, so this confirms at least one point of Doug Ross' and AEI's findings about the Stimulus being a scam.

Mark Zandi's inclusion in this list is outright deception.  He was an "informal advisor" to the McCain campaign, but he himself is a registered Democrat.

Then there are all the "Others:"

Others:
• Senior Federal Reserve officials appear to be of the view that a plan that well exceeds
$600 billion would be desirable.

• Adam Posen (Deputy Director of the Peterson Institute): $500 to $700 billion in one year
• Goldman Sachs: $600 billion in one year

• Open Letter signed by 387 economists including Nobel Laureates Robert Solow, George Akerlof, and Joe Stiglitz on November 19th [note that most economists, including Stiglitz, support higher stimulus numbers today than they did a month ago]: $300 to $400 billion per year

Funny how they felt the need to quite Joe Stiglitz a second time.

Peter Klein of The (non-Keynesian) Mises Institute had this much to say on the whole lot of them: 

"So, we’ve got left-wing Keynesians, right-wing Keynesians, moderate Keynesians, Robert Reich who wouldn’t know a Keynesian from a Kenyan, and Goldman Sachs. How’s that for diversity of opinion?"

The only really honest alternative opinion to all this Keynesianism and special Union interest was Greg Mankiw.