Team Obama has gotten its way on the Tim Geithner nomination for Treasury secretary, as all the Democrats on the Senate Finance Committee voted for Geithner despite his embarrassing non-payment of payroll taxes while at the IMF. But the Democrats may rue the day, since Geithner’s lack of character and truth-telling will surely take its toll and sully President Obama’s new era of responsibility.
The jokes are already beginning.
Last night Jay Leno cracked that while Geithner may not be a criminal, the new head of the IRS is a total incompetent. More of this will make the rounds.
As Byron York has so ably reported, Geithner refused to answer senators Bunning and Kyl when they asked if he would have paid his 2001 and 2002 taxes had he not been nominated for Treasury secretary. In today’s committee vote, an honor roll of five Republicans kept their integrity by voting against Geithner: Grassley, Kyl, Bunning, Roberts, and Enzi. Good for them.
Meanwhile, a new CBO report has pulled the rug out from under the Obama stimulus package. Of $355 billion in infrastructure and other cash outlays, only $136 billion would be spent by October 2010. And out of the roughly $100 billion in infrastructure spending, only $26 billion would be spent in fiscal 2009. So much for a quick and immediate jolt to the economy. Oh, by the way, even if the entire stimulus package were put into play, various people have calculated that the estimated 3.5 million new jobs would cost $225,000 per job.
In today’s Wall Street Journal, distinguished Harvard economist Robert Barro estimated that the so-called government-spending multiplier for GDP associated with peacetime government purchases would be “insignificantly different from zero.” While left-wing economist Paul Krugman rants on about opponents to Keynesian stimulus — calling them quacks — a growing list of prominent academic economists oppose the Keynesian approach. In yesterday’s Journal, economists Alberto Alesina of Harvard and Luigi Zingales of the University of Chicago rejected the Keynesian spending approach while suggesting that a capital-gains tax holiday would bring private investors back into the market.
Stanford economist John Taylor also opposes the stimulus package. So does University of Chicago’s Eugene Fama. So does University of Chicago Nobelist Gary Becker. So does New York University professor Thomas Sargent. And Harvard economist Greg Mankiw, who similarly opposes the Keynesian stimulus, has used his highly popular blogsite as a clearinghouse of opposition.
It really is time for the congressional Republicans to come up with a tax-cutting alternative that includes slashing the marginal tax rate for large and small businesses and individuals, and brings the investor class back into play. Not only with a cap-gains tax holiday, but also with a much larger capital loss deduction. Add to this immediate cash expensing for all businesses.
Right now capital is on strike. So are investors. Supply-side incentives will bring them back. This is where the GOP must go.