Mortgages for Big Macs

OK, this is the last one about the stimulus plan. It’s going to pass in some version this week so it’s too late for anyone I know to make any difference.

What the hell, I’m not going to live long enough to have to pay any of this money back. But my grandchildren will spend their working lives repaying what Congress is going to appropriate in the next 3 days. I teach a class at Penn where the students are mostly between 23 and 28; my daughter is 34. Their generations should be absolutely outraged at this.First a set of givens:

  • The world is in economic chaos
  • The “market” is not going to get us out of this. In fact a good case can be made that it was a vastly under-regulated market (and way too many 27 year old MBAs on Wall Street way thinking that actually knew something…and apparently without any adult supervision) that got us into this mess.
  • The federal government is the actor of last resort so has to take the lead.
  • THERE IS NO CASH SITTING IN THE NATIONAL SAVINGS ACCOUNT! So all of this stimulus money is coming from borrowed funds.
  • It is not McCain or even Barack Obama who will have to repay this debt but it will be their children, grandchildren, and in McCain’s case great grandchildren.

So if we’re going to burden at least two and probably three generations to pay for this, the money ought to be spent for long term assets, so at least they get some use out of what they are paying for.
And Obama’s words seemed to suggest that was going to be the case – infrastructure, building weatherization, rebuilding schools, etc.

The poor guy just got torpedoed by Nancy Pelosi and her myopic, self-serving colleagues in the House of Representatives.

Here’s my back-of-the-envelope calculations:

  • 57.8% of the money is going to be spent on operating expenses and cash distributions, the impact of which will be entirely in the next 12 months.
  • Another 14.8% will be spend on short term assets — those that have a life of 5 years or less.
  • 17.4% of the money will go towards assets with a useful life of between 5 and 20 years.
  • Leaving only 10% of all that money invested in long-term assets.
  • Put it another way, 90% of what the money is being spent for will be entirely gone while 70% of the bill will yet to be paid. This is exactly the same as buying and consuming a Big Mac, but financing it with a 40 year mortgage.

If I were the age of my daughter I’d start an impeachment campaign for every member of Congress in both parties in both houses.

And lest you think the Republicans are any better than the Democrats – absolutely not! The only answers they have are “No” or “Tax Cuts”. And they say, “Let’s cut taxes, and give the money back to taxpayers…afterall it’s their money”.

Bullshit! You’re giving me a tax refund that my grandchildren will have to pay.

And speaking of the litiny of bullshit that all of them are using:

“Create or save” 4 million jobs. Both Obama and Arlen Specter one of the three Republicans who supported the “compromise” in the Senate used that phrase. “Create 4 million jobs” is one thing. How many jobs exist now? How many exist in a couple of years? Is it more or less than 4 million more jobs? That, at least, can be measured. But “save jobs”? Rhetorical nonsense. There is no way to demonstrate that. In three years there could be no more jobs than today and one could still say, “Yeah, but I saved 4 million jobs” and there is no way to disprove it.

And what it a “job” anyway? I’ll tell you what is being used. Various econometric multipliers that calculate jobs based on output…”how many jobs are created when $1 Million is spent building a highway” for example. But look at the fine print. A “job” is defined as one full time equivilant job for one year. So let’s say a guy who finishes concrete is now going to have a job building highways for the next 4 years. That’s not one job. That is 4 jobs!

And, speaking of highways, here was a once in a generation opportunity to shift from our sprawl inducing, environmentally disasterous, health impairing, overdependence on cars, and shift to enhancing public transportation, particularly rail. And that’s what Obama sounded like he wanted to do. Instead the amount going to highways is 10 times what is going to rails and public transportation. It ought to be the other way around.

I’m all for using tax credits. We should give tax credits for people to wean themselves from so much automobile dependence. Even a 15% reduction in automobile miles traveled would have an incredible impact on air quality, commuting times, and fuel consumption. Instead, the idiots in the Senate added a tax incentive for buying another car!.

Dean Michael Lykoudis of the architecture school at Notre Dame had what I though was an excellent suggestion. He pointed out that at the beginning of World War II in six months time the US automakers shifted their entire production facilities from making cars to making tanks and other equipment to fight the war. If we’re insisting on helping General Motors, argues Lykoudis, then say, “We’ll help you retool to make passenger rail cars, subway cars, and other mass transit vehicles.” Great idea.

The Republicans are saying, “This is too much”. The reality is, no one knows. The issue is not the size of the stimulus but its composition. It is almost all very short term expenditures with no lasting impact at all. And it sure as hell isn’t sustainable development by any measure.

Poor Obama came to the White House genuinely believing, I think, that he could change how Washington worked. But this stimulus package is exactly how Washington has worked (or rather why it hasn’t worked) in the past – no set of underlying principles; pandering to constituencies; hanging Christmas tree ornaments on every spending bill; thinking not a day past the next election.

We have to have a stimulus bill.

The stimulus bill that is about to pass is irresponsible, myopic, selfish, vote-buying, self-serving and reprehensible. It is a gigantic “screw the next generations” piece of legislation. Our grandchildren will rightfully curse this Congress and us for electing them.