Posted by: distributorcap | January 25, 2008

The Iron Pyrite Stimulus Plan

As the markets all over the world continued to gyrate wildly (including the revelation by Société Générale in France that a single futures trader at the bank had lost over $7 billion in fraudulent trades this past weekend, fueling the European sell off on Monday), our revered Dominatrix of the House, Nancy Pelosi and her merry band of idiots announced a bipartisan agreement for an economic stimulus package. Nancy was emphatic that we remember this was bipartisan.

Guess what – Nancy delivered a bipartisan package of Iron Pyrite – FeS2, which in laymen’s terms is Fool’s Gold. But at least we got the bipartisan kind of Fool’s Gold.

Let’s take a look at some of the preliminary provisions of this Fool’s Gold

  • Tax rebates for about 116 million families, worth up to $100 billion
  • Individuals who pay income taxes would get up to $600
  • Working couples $1,200
  • Those with children an additional $300 per child (with limitations
  • Workers who make at least $3,000 but don’t pay taxes would get $300 rebates.

To address the mortgage crisis, the package also allows Fannie Mae and Freddie Mac — government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans — to buy mortgages much larger than the current $417,000 limit. The lending cap could reach as high as $700,000 in areas with the highest home prices.

The package also includes close to $50 billion in business tax cuts. The package would allow businesses to immediately write off 50 percent of purchases of plants and other capital equipment and permit small businesses to write off additional purchases of equipment. There are other business provisions as well.

That’s what we got. What didn’t we get:

The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children. Pelosi also agreed to drop from the package several key Democratic provisions — increases in food stamps, more money to the states for Medicaid, and an extension unemployment benefits. They were taken out as an agreement for the GOP not demanding the Bush tax cuts become permanent. By dropping these provisions, Pelosi also got checks for those making too little to pay Federal income tax.

Nancy: I can’t say that I’m totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come.

John Boner Boehner: You know, many Americans believe that Washington is broken. But I think this agreement and I hope that this agreement will show the American people that we can fix it and will serve to move along other bipartisan agreements that we can have in the future.

As I said, Fool’s Gold.

From Johnny Mercer:
Fools rush in where angels fear to tread
And so I come to you, my love, my heart above my head
Though I see the danger there
If there’s a chance for me then I don’t care

That’s right America — Congress just doesn’t care.

So what should we think of this “stimulus”

When you get down to brass tacks, this is nothing more than a bribe to make a majority of America stop talking about how messed up the economy is. And for many people, this will work. It is also comes in handy as a great talking point when the folks in Congress are stumping around and pandering for re-election. It is quite amazing how these folks rushed to save Wall Street, but when it comes to ending the War and saving lives – not so hasty. Also, isn’t it cute how Nancy and John are all buddy-buddy over how the US Congress can really, really be ‘bipartisan’ and work for America. Problem is this stimulus package that isn’t going to do a damn thing for the economy except force Uncle Sam to borrow more money from foreign sources and force a garage sale of more assets to Dubai and China. What this economy needs is an over-haul, not a tune-up.

It is cliché to say, but the devil is always in the details. How are we going to pay for this party? Last time we received rebates (in 2001), the checks were technically “advances” on 2002 taxes, meaning you were really just getting an early interest-free loan on money you ended up “paying back” in 2003. In other words, you were just getting a portion of your 2002 tax refunds two years early. Confused? — you should be. Basically it was a smoke and mirrors tax rebate — you were getting money you were going to get anyway. Is the 2008 rebate being forked over with the same smoke and mirrors? Who knows – it hasn’t been explained. And rest assured it won’t be. Also, during the last rebate time we had a budget surplus in our treasury to help cover this outflow of cash. And there were no endless Iraq or Afghanistan wars. That ain’t the case in 2008.

With no cash in the piggy bank, the government is going to have to go into more debt to pay for this. There is no choice. So Congress and Bush are continuing to borrow even more from our children’s future to ensure they can make “I love America” stump speeches while on the campaign trail this fall. Watch the mint go into overtime to print the billions of greenbacks necessary. You know what an uncontrolled money supply does (along with the just lowered interest rates) — it fuels inflation. This means that the enormous $600-$1200 you just got back will buy even less.

It would have been much better if the government “stimulated” the economy by expanding the provisions left out of the bill — unemployment, food stamps, medicaid and Social Security (all aka as welfare to the GOP) in order to help those who need it most and who will spend it in the local economy. Most people will take this check and use it to pay off car loans, Visa cards and make mortgage payments. none of which will help the economy. By lowering your debt, you are just paying for things you already have — not increasing GDP with the purchase of new goods and services. If not paying down debt, a lot of the money is going to be squirreled away. And honestly, how long will $600 or $1200 last in today’s world. If they had focused on the people that really would spend it on the things necessary to stimulate the economy – it actually would have been by far the biggest AND quickest bang for our buck. With agriculture being one of the FEW industries that is still primarily domestic, directing the money toward food stamps and those who need to buy food first would have allowed the spent cash to stay in the US!

Instead what little of the rebates that does get spent on new goods and services becomes less and less effective because the money is used for merchandise that is increasingly produced overseas, further negating any little GDP growth we might have seen in years past. So basically, we should call this the Indo-Chinese Stimulus Plan. My advice, take your $600 or so and buys Chinese stocks.

We need real economic reform, not short term band-aids. It must be across the board and include some re-regulation of banking and lending practices. In addition to protecting consumers from fraud, it would also assure investors that they aren’t buying the equivalent of junk bonds when they invest in our real estate market and mortgage markets. This bill addresses NONE of that – which means that there is still going to be low confidence in our financial businesses. There will not be any significant new investment in an industry badly in need of cash due to this bill. Banking and lending reform is an example of a something that actually wouldn’t take years to pay off.

Congress also hasn’t lifted one finger to address the problems in the system that got us here. The cash they are throwing our way (the cash we really don’t have) – in actuality is just to prop up multinational corporations – many of which do not have one iota of allegiance to this country. Meanwhile the money from your past, present and future tax dollars is being used in what is equivalent to a shell game — where we are given back our own money to pour into the multinational corporate urinal. The masses in America are literally laundering money for Wall St. — moving cash around to save short term corporate profit margins.

This is just the House version of the bill. The Senate has yet to get its hands on it – and McDoodypants has not fully chimed in. My prediction — the business breaks will probably remain intact, but the stuff for real people will likely be set at the bare minimum to help Congress get re-elected.

It is amazing to me that the Democratic leadership which was so worried about getting saddled with Bush’s war, would step right into this economic doody pile in such a way that they will now get saddled with Bush’s failed economic policies. Congress is late to the game – they should have been pushing hard for relief for lower income groups and home owners last August so that they were ahead of the Republicans. This way they would have gotten credit for being in front of the tsumani and the remedy would have been fixed in the public’s eye as Democratic. But by now we know better to expect Nancy and Harry to do anything to upset the Bush apple cart. Tweedle Dum and Tweedle Dee feared the wrath of Bush and Wall Street’s backlash much more than they cared about the everyday hardships of Joe Average.

Nancy and Harry are now so backed into a corner. There is a serious crisis brewing and they know that they have to do something or get nailed. However once again, Bush has the two of them up against the proverbial rock and a hard place. Strategically speaking, these are two of the biggest suckers this country has ever seen. They are first class idiots.

This package is ridiculously short-sighted. Bush and Congress are just sweeping the dirt under the rug while putting their collective brainless heads in the sand at the same time. It is doomed to fail. What you are seeing right before your eyes is not that our leaders “just don’t know” rather they “just don’t care.”

Fool’s Gold


Responses

  1. What we really need is a new WPA that hires Americans to rebuild American infrastructure. It’s a win win. Except that the masses will get to enjoy better mass transportation, public schools and other public buildings, etc. And that would be wrong, because only the rich know how to handle money. If I get a rebate (which presumably is an advance on my 2008 tax refund), I’m banking it. Yeah, I’m a bad American.

  2. See what I mean?Breeders get more for every kid they have. P’tooie!We queers should get extra dough for every showtune we have memorized. At least “Don’t Cry For Me Argentina” doesn’t leave a big carbon footprint and jack up school taxes we property owning queers end up having to pay.

  3. Amen. Bravo Dcap.aw shucks, I was going to buy a new Hobie longboard, but think I’ll look into those Chinese stocks.

  4. This is a fantastic post! I wish I could say I’m surprised and disappointed in Nancy and Harry, but I’m not surprised at all—they always disappoint me. While looking at your great images of the Monopoly cards, let’s not forget about the added benefit from this stimulus package. House Democrats gave Josh Bolten and Harriet Miers a “get out of jail free” card by postponing the votes on criminal contempt citations because they felt that holding the “controversial vote”, which has already been approved by the House Judiciary Committee as part of its investigation into the firing of nine U.S. attorneys, would “step on their message” of bipartisan unity in the midst of the stimulus package talks.Nice, eh? Let’s all join hands and sing Kumbaya while the Republicans continue to screw us….thank you Nancy Pelosi and Harry Reid.Excellent post, as usual dcap!

  5. Word.Tengrain

  6. I think we should all use our rebates to rent a crack whore and buy all the fixin’s to go with it.Then we should send the photos to Nancy and Bush and thank them for the free ride.

  7. Love this! And your spot on..its a fucking bribe. God forbid they extend the damn unemployment..all of Kern County is unem-fucking-ployed since the housing market hit the shitter..including my son. I am sure you can see why the removal of the unemployment thang chaps my ass. ;p

  8. This is yet another example of Bush not knowing what’s coming and trusting advisors who are flat out ignorant. Watch what happens. DCap, you’re absolutely right on. The economic Katrina is on the way.

  9. Individuals who pay income taxes would get up to $600 & Working couples $1,200There’s no bigger fool in Washington DC today than that nitwit socialite, Speaker Nancy Pelosi, AKA, Speaker Botox.Some of us have been around a while and we remember going down this road before.Previous administrations who tried to calm and placate the masses with a bandaid in the form of a rebate check (which, BTW, is considered taxable income to the IRS.)But this check will do nothing to address the underlying problems with the Bush economy. The $9 trillion dollar debt, a war in Iraq that is funneling $12 billion dollars a month out of the U.S. economy, the weakness of the dollar, record high energy costs, or the housing market slump.

  10. ME, who is Harriet Miers?I know what I’ll be using my check on, exactly those bills – utilities and medical. Oh, I’m sure I’ll buy some booze to cope with reading about all this crap. I hear the economy can really use my 20 bucks.

  11. Spot on, as usual.

  12. RG, I believe Harriet Miers was a SCOTUS nominee who was sunk by her limited creds. I believe she was (or is) also WH counsel and was caught in the Justice Department flap with the fired Assistant Attorneys General.DCap – This is so on target, I’m wondering why the Times didn’t come knocking on your door as ballast to Bill Kristol. In fact, I’d love to see you debate and skewer that mofo. But I digress. I will be one of those taking the money, but it will be used to pay down debt.

  13. spartacus, I was being facetious. 😉

  14. DCap,You’ll Love this.Remember when Hillary tried to discredit Obama with her specious charge he had ties to Tony Rezko?Charges I discredited on my blog?Well, I discovered a picture of a beaming Borg Queen standing with….., yep, Tony Rezko!The Clintons are lying, ruthless hypocrites.

  15. Sadly, DCap – I don’t see the Get Out of Jail Free card, so I assume Chimpy and Blam-blam already have it.*sigh*Tengrain

  16. This package is a joke. You’ve laid it out plain. It’s very, very small in terms of both the budget and the economy as a whole. It’s a purely political move.Look, I’m not even sure a REAL stimulus package is the right thing to do fiscally with the amount of military and domestic security dollars being passed out and the commitment, it seems, to monetary looseness by the Fed and the inflationary pressures in all markets other than housing.There is a way out of this mess, of course. PEACE. That would solve the fiscal problems. That would reduce inflationary pressures in the crude, products, and precious metals markets. That would allow for a larger, more realistic targeted stimulus package, coupled with some Fed TIGHTENING, which would in turn strengthen the dollar. Here’s your winning Demoratic bumper-sticker. GIVE PEACE A CHANCE–IT’S GOOD FOR BUSINESS.

  17. dcap – great assessment of our situation. The truth though… I don’t give a damn about the stimulus package. Never have. There was no way in hell that with George W. Bush’s ass still in the oval office that we were going to get anything other than a bribe or another knife in the back. My stimulus package- impeach these people! Nancy and Harry first, if we have to. We have another full year of their governance. We’ll all be screwed by then. I know I sound like a broken record because it seems like my solution to everything lately is impeachment. But seriously… can anyone name one issue that you think will likely get better while Bush is still in the White House? Isn’t removing him (the one the cronies are loyal to) the key to improving…well… everything?

  18. It doesn’t help this is happening in an election year when pols are notoriously scared to do anything. You know like save a crumbling economy or nation.

  19. Yeah, this is such a laugh. What is $300 going to do for the poorest of people? Notice how Bush ignored the issue until eight years later.

  20. Believe it or not, DCap, I had not yet read this post when I wrote mine on the subject. If I HAD, I just would have said, “Go read DCap’s post regarding the Economic Stinkulus Package. It’s awesome!”

  21. Good news DCAP..the Senate is highly pissed about this ‘package’ and won’t be rolling over for The Shrub any time soon.

  22. Oops! I forgot to praise Kelso’s wisdom. Not enough people are saying this: “Look, I’m not even sure a REAL stimulus package is the right thing to do fiscally with the amount of military and domestic security dollars being passed out…” And this: “PEACE. That would solve the fiscal problems.” Where can I get one of these bumper stickers, Kelso?GIVE PEACE A CHANCE–IT’S GOOD FOR BUSINESS.

  23. Its a dispicable plan, total shock doctrine economics. And as you say we have been here before actually twice. I am not even gonna touch all the “stimulus” to big business and multi nationals, american business is being bought up at “fire sale rates” from foreign investors…BUT think about it – what is josephine average gonna do with 300 bucks. Go out and buy a BIG SCREEN TV ? hardly. Maybe she will fill the food cabinets, or pay a little bit on each bill. OR use the whole damn thing for a month’s worth of GAS or put it towards HEAT. There is so much wrong with this “stimulus package” its for the transnationals. We need more social programs, we need relief for SMALL businesses, A morgage Moratorium, And a WPA type program.The democratic give aways and their participation in NEO LIB economics is DISPICABLE. great post.

  24. I liked Phil’s reply, but the poorest of people won’t get anything at all. If we want to help our economy, one way to start is to restore the world’s confidence in the US. Impeach Bush and Cheney, and replace Pelosi and Reid.

  25. As you noted, money has no allegiance to nationality. Foolish policies that allowed businesses to outsource labor to other countries and swell the income of China, India, and other rapidly industrializing nations made this uniformly true.And yet, we are sold a bill of goods as though somehow American corporations are waving the flag right now singing “God Bless America” like any good Patriot should. They don’t give a shit about America, unless it benefits them personally. They’d wave any flag if it padded their own pockets.True reform will address the nature of the capitalist system and the distribution of wealth, not, as you said, provide smiley faced band-aids that are short term fixes.

  26. Nice post, DCap. This package and the big panicky drop in interest rates early this week are really steps in the wrong direction.The problem is that both the government and the people are in too much debt. So the government goes into more debt in the long run and it makes credit cheaper. This would kind of be like stopping the crack epidemic by lowering the price of crack.

  27. Hi DCap;My friend from Baja turned me on to your site. Marjorie from Maggies Madness. I find your site and hers extremely educational and the view points refreshing.You must have a degree in finance for a “Distributor Cap”, because I have yet to meet a mechanic that can illuminate the intricacies of government mayhem as well as you can.Thank youRobert Roels

  28. Matty, what we have here is not capitalism. Adam Smith would look at the US today and leave a load in his pants. This a fascist corporate plutocracy.

  29. Excellent post. I’ve said it before, and I’ll say it again; I so hope that the people of Nancy Pelosi’s district will vote her out of the House next year.

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