Damning Evidence from the Secret Memo - Part 3

WRAPPING IT UP

So far, it seems that Doug Ross' and AEI's assessment of the Summers memo from 2008 seems to line up.

AEI's checklist:

1. The stimulus was about implementing the Obama agenda.  Check.
2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them). Check
3. Obamanomics was pricier than advertised.  Check
4. Even Washington can only spend so much money so fast. Check
5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic. Check
6. Team Obama wanted to use courts to force massive mortgage principal writedowns. Check
7. Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing. Check
8. Greg Mankiw, economic adviser to Mitt Romney, was dubious about the stimulus. Check
9. But the Fed was a stimulus enabler.  Check
10. IPAB was there at the very beginning. Check
11. The financial crisis wasn’t just Wall Street’s fault. Check.
And I'm only at page 34.  23 more pages to go.

Thing of it is, even AEI and Investors' Business Daily didn't get into all the details that taking my own look into the memo did, and even the article in the New Yorker (which started this whole discussion), while it gives the story of this memo in a nice, flowing, narrative, and even includes Summers' bombshell, that none of his recommendations “returns the unemployment rate to its normal, pre-recession level," it leaves much out that proves that the Obama administration has not been up-front with us about his economic policies. Some might even call it outright lying.

The remaining pages of the memo (34-57) go into (among other things) technical details regarding bank regulation, continued auto industry bailout, and plans for education improvement.  One particular comment by Summers stood out to me in this last section:

"This section outlines our strategy for stabilizing the U.S. financial system based on work led by Tim Geithner. Our judgment is that we need to move quickly to put in place a program that satisfies the critical imperative of decisively restoring public confidence in the health of our financial institutions and improving overall market functioning. Doing so will require more resources--potentially considerably more--than those authorized under the TARP. An effective program for stabilizing the financial system is a necessary complement to your Economic Recovery Plan and to more targeted efforts to support the housing market. Without healthy institutions and robust markets, our efforts toward repair and recovery for the broader U.S. economy are likely to be compromised."

 It's funny that it took a crisis for the Dems to see what is economic common sense for us fiscal conservatives.

Lesson learned:  if you put your political agenda ahead of the economic health of the country, you wind up with the cluster schtupp-laden nightmare that finally manifested itself in '08.

And yes, I largely blame the Dems for '08.  It was government-forced (and therefore, funded) "fairness" (in this case for the housing market) that created an unstable housing market, leading to the crash.  The GOP has its part as well for letting it go (ever since 1977) in the interest of scoring political points themselves, but this, too, proves my main point.

But was the lesson really learned by Dems?  Two items in the appendix (the memo's final ten pages) don't really inspire that much confidence.

The first is a Green Energy agenda.  Now, the memo makes a rather optimistic, if not unrealistic, assessment of what pursuing such an agenda ought to yield.

However, it fails to ask a central question:  is it economically viable?  Well, the downfall of Solyndra and other Green Energy Enterprises doesn't inspire much confidence at all.

And how in the hell can we dump billions of dollars into these boondoggles when we can ill afford them?  But, like I said, the memo didn't discuss the economics of Green Energy much.  But it does say that it was a "campaign commitment."

Once again, it proves my point.  And Spain proved how much of a jobs-wrecker Green Energy was.

The second point was education.  But I'm seeing about 90% attention being paid to physical matters (building maintenance/improvement), and not a whole lot to teacher accountability--which, in my view, is a lot more central to effective education than a nice building.

This item, however, really showed how economically clueless the Left is:

"The plan sets forth measures to assist more Americans enroll in college and job training
programs during this economic downturn. The plan will help ensure that every academically qualified student can realize the potential of a postsecondary education."

Think about this.  #1:  Economic downturn.  #2:  Encouraging people to undertake an expensive endeavor like college during an economic downturn.  #3:  Letting the government pay for an expensive endeavor like college during an economic downturn.

What could the end result of this economically genius approach be?

The so-called "99 Percenter," who has spent $86K on an esoteric degree and can't find a job for it.  So, instead of using that supposedly agile mind to adapt to other work, he spends months in a tent whining about the success of others (and getting nowhere closer to paying off that degree).

Not taking into account that said success stories probably started out in the same boat as he, only this person decided to do something about it instead of expecting someone else to take care of him.

But that could be an entirely different post in itself.

Bottom line:  Obama lied, the Economy Died.

More Damning Evidence from the Secret Memo - Part 2

In the last post, we found out that the Stimulus was egged on by Union interests, and despite a "bipartisan" veneer, was really only looking for confirmation bias along Keynesian lines.

This next section, covering pages 12-33, there are a few passages that hint that this Stimulus scam wasn't the best of ideas.

So far, in my reading, only one bit of forecasting in this memo seems to have held true:

"An excessive recovery package could spook markets or the public and be counterproductive."

If you see the graphs I put up the last post, that seems to have been the case, and we would have been better off not having passed the Stimulus bill.

Further on down, it seems that a political agenda was a chief consideration for this stimulus bill.  It wasn't necessarily doled out by need.  The "Core" package included "key campaign priorities."  And the "short-run economic imperative" was to address as many campaign promises as possible.

But here is another critical factor--so critical, in fact, that it was in bold, underlined, and italicized in the memo itself: 

"But it is important to recognize that we can only generate about $225 billion of actual spending on priority investments over next two years. and this is after making what some might argue are optimistic assumptions about the scale of investments in areas like Health IT that are feasible over this period."

In short, you have only so much money you can spend.  This was a point the memo felt a need to spell out twice.  Unfortunately, there seems to be nothing in this memo that takes seriously the notion that spending cuts might be something to consider for the country's economic health.



And speaking of spending, the memo's preparers had a thing or two to say about Obama's campaign promises:  they were unsustainable.

"Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run."

What's more, the memo says if Obama were able to implement his campaign promises in 2007, before the crash,

"...the deficit would rise by another $100 billion annually. The consequence would be the largest run-up in the debt since World War II and the highest debt as a share of the economy since the 1950s. Figure 4 shows the projected increases."

Let's have a look at that figure, shall we?

Holy crap!  And this was supposed to help our economy how again?

But take a look at that slump in the graph (and here, a slump is a good thing).  That happened after the GOP took control of the House & Senate after Clinton had pissed off the public enough (and after just a year in office, to boot).  Compare this with the 2006 Dem takeover of House & Senate (which occurs about where the red leaves off after 2005):

I really do not see how, especially after looking at this chart, Obama and the Dems could possibly see this massive spending bill as a good thing.

And this was the reason the people revolted in the form of the Tea Party in February of 2009.

People tend to want to blame the President for bad economic policy.  He may have some hand in it, but according to the Constitution, the purse strings belong to the House.  Which brings up another interesting point, the memo encouraged Obama to take on a familiar line that Obama has used pretty much throughout his presidency:

"With a short-term economic recovery package, the deficit in fiscal year 2009 is likely to
be about $1.3 trillion, which at 9 percent of GOP will be by far the largest deficit in American history excluding the two world wars and the Civil War. Most economists are not concerned about the near-term deficit deterioration, but the public may be more concerned. As noted above, it is therefore crucial in early January that we make it clear to the American public that you inherited this large deficit rather than created it." (Emphasis mine) 

But, in comparison to the debt projections post-Stimulus, the Bush years, even at their worst, were far better than what the Stimulus slapped onto us.

You would think Obama & Company would see this clearly, but unfortunately, even the memo points out Obama's economic cluelessness as a senator, citing the failed "Hope for Homeowners Act" that he co-sponsored:

"You were an original co-sponsor of the Hope for Homeowners Act- a foreclosure mitigation policy which sought to encourage principal write-downs among investors by splitting the cost with the government. Unfortunately, largely due to the unwillingness of lenders to write down principal, the program completely failed: 400,000 mortgages were eligible for writedowns but only 111 applied."

And why did it fail?  Borrowers and lenders were more familiar with economic realities than pie-in-the sky idealism:

"Our conversations with industry and community groups have led us to believe that
lenders will continue to resist the idea in most cases (and hence our core proposal is the
affordability program outlined in Part 1). However, there were some flaws in H4H that remain:  fees that push interest rates up for borrowers, fees that deter lenders, and requirements that lenders eat too much of the mortgage losses for them to be willing to participate."

Nonetheless, the memo proposes a mortgage restructuring program that could modify 2.5 million loans, "profitably," with the caveat that 1 million of those would probably redefault.

Did you get that?  1 million of those would probably redefault!  This is the sort of thinking that got us into the whole subprime cluster-schtupp in the first place!  A plan that expects about a 40% rate of failure is a plan that should not be considered!

But, you know, the Proglodytes of the Left have this habit of letting their ideologies trump reality.

As a final note of disgust, the precursor to Obamacare's "Death Panel" is mentioned in this section of the memo.  I've highlighted the bothersome part.

"The health board idea, proposed by Sen. Daschle in his book, allows for timely and oftentimes difficult policy changes to be made to Medicare and Medicaid and possibly other parts of the health system with a degree of independence from the Congressional process and special interests. This idea is included in Sen. Baucus's white paper on health reform. The Health and Economic Teams consider a Board an essential ingredient to improving the value of health care in the long run."

Congressional circumvention.  It's been a hallmark of these past three years.