The TARP Bailout and the Stimulus Plan Worked:

When I first heard that the federal government was going to give trillions of dollars directly to various special interest banks, and trillions more dollars to various democratic state governments and democratic-vote-leaning industries (education for instance), I considered it sleaze and corruption at its worst. It probably was a bunch of sleaze and corruption. But something else has to be added to this formula, the fact that perhaps coincidentally, perhaps despite the original corrupt intentions of the deal makers, both programs succeeded in restoring our economy, and were generally good ideas.

When Obama came into office, things were really, really bad. The stock market was at 7,000. Job losses were accelerating every month. Venerable financial institutions were going bankrupt left and right -- and GM which employs God knows how many Americans directly and indirectly was going belly-under. It looked like we had reached the next Great Depression. States, suddenly lacking their normal tax revenues, were all going bankrupt and firing their workers as well. The problem is, state and local governments don't have much 'waste' they can cut. What are you going to cut, health care? People need that to live. Roads? People need that to work. Parks? Schools? Police? Firefighters? Jails? Courts? Garbage? Sewage? All of these services are essential. To make matters worse, because the Federal Government refuses to enforce our borders, all the states bordering Mexico have to pay tax money out to illegal immigrants who either avoid paying taxes entirely, or pay far too little for the cost it takes to provide them services. State governments giving health care and schools to illegal immigrants on one hand and fighting the crime and drug war these immigrants bring with them on the other can destroy any otherwise healthy budget.

Stimulus giveaways to state governments, therefore, served a vital purpose -- keep public services running until states' tax revenue returned to normal and could start paying for itself again. The cost of disrupting these services would have been far higher than the cost of temporarily bailing the states out of their deficits. Given many state funding requirements are unfunded mandates from the Federal government -- take care of illegal immigrants, provide medicaid, etc, it is only just that the Federal government helps pay for these problems anyway.

The TARP (Troubled Asset Relief Program) bailouts were passed by Bush and a republican Congress. We don't really know what would have happened if TARP hadn't been passed. The stock market was convinced the bailout had to be passed, and rumors were flying around about economic Armageddon. What we do know is that after the bill was passed, things settled down. The economy has been improving ever since. Even supposing we threw all the money away, if it means we restored confidence in the banking sector and stopped any further runs on the dollar, the stock market, banks, etc, it would have been worth it. There's no way to test the parallel reality where we didn't pass TARP, but given where we are today, one of the most optimal 'futures' among the futures we were facing at the time, it's foolish to criticize TARP any further.

However, the good news is even better than that. TARP didn't just restore American economic stability, it's being paid back in full, with interest. Let's just take a look at wikipedia's entry on TARP:

http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

Originally expected to cost the U.S. Government $356 billion, the most recent estimates of the cost, as of April 12, 2010, is down to $89 billion, which is 42% less than the taxpayers' cost of the Savings and loan crisis of the late 1980s.[1] The cost of that crisis amounted to 3.2% of GDP during the Reagan/Bush era, while the GDP percentage of the current crisis' cost is estimated at less than 1%.[2] While it was once feared the government would be holding companies like GM, AIG and Citigroup for several years, those companies are preparing to buy back the Treasury's stake and emerge from TARP within a year.[3] Of the $245 billion invested in U.S. banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010. AIG is considered "on track" to pay back $51 billion from divestitures of two units and another $32 billion in securities.[3] In March 2010, GM repaid more than $2 billion to the U.S. and Canadian governments and on April 21 GM announced the entire loan portion of the U.S. and Canadian governments' investments had been paid back in full, with interest, for a total of $8.1 billion.[4]

Everything is being repaid, and the US government might suffer a 90 billion loss over a few years, less than the cost of solving the savings and loan disaster, and mere peanuts when compared to our other spending programs coming from Washington. (Remember, we spend over a trillion dollars a year on the military, which is almost pure waste.) Since the estimate of our losses keeps decreasing, who knows but if in a few years the number is revised down to zero.

GM doesn't seem to be doing great, but neither is it crashing and burning and taking the entire US auto industry with it. If TARP managed to rescue GM, a lot of middle Americans should have a lot of gratitude towards the federal government.

People generally consider the Savings and Loans rescues under Bush Sr. a success, in that case they should consider the TARP rescue an even greater success. It was also this same TARP that helped restore confidence to the stock markets, months before the stimulus package was passed under Obama.

After both TARP and the stimulus bill were passed, the stock market went from 7,062 to today's 11,045. This could be a giant coincidence, but again, we have to look at this in terms of 'possible futures.' Given that we were at 7,000, the various possible futures were majority grim. A handful of futures could have predicted a recovery, in just a year, back up to 11,000. Given that we live in one of those futures, it would be foolish to change anything about our recent past. Something we did back then was right, and even though we can't pinpoint what exactly, all we know is we were very fortunate to have had this timeline of reality. Even if the stimulus bill was deleterious to our economy, looking back, we have to approve its passage, because the weight of the evidence points to our choices having been good ones that led to above-average results than what we could have expected at the time.

Just because correlation doesn't prove causation, doesn't mean people can make arguments where they take for granted that their description of the parallel reality had other bills been passed should be taken on faith. If correlation doesn't prove causation, far more so, speculation about parallel realities and alternate futures is worth even less. Therefore anyone who argues that Obama's stimulus package was bad because A) correlation doesn't prove causation (the fact that the economy has been improving ever since the bill passed should be ignored), and B) my carefully constructed theoretical alternate reality model proves we would have been better off not passing the bill -- should be laughed out of public debate as a ridiculous double standard.

Let's look at what the stimulus bill has directly done so far, without even consulting the fact that we've managed to restore the housing market from its moribund state, the stock market is up, interest rates are still at record lows and inflation still isn't an issue.

Wikipedia to the rescue again:

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009

No one could have any complaints with tax cuts, right? Cutting taxes is generally not considered 'theft' or 'waste' or 'fraud.' But out of the 787 billion stimulus package, a full 288 billion was dedicated to tax cuts. That's 37% of the total. Tax cuts have almost always improved the economy in the past, so we can surmise they probably helped stop the recession this time too, whatever else the stimulus package did. I wonder if Tea Partiers realize that they are railing for lower taxes and against the Stimulus bill, which lowered taxes, simultaneously?

The next portion, Healthcare funding, cost 147.7 billion. But this must be understood in context. No matter what bill we pass, the federal government must end up paying for health care for everyone in one way or another. This is because hospitals are legally required to render care to anyone who enters their doors, without asking for compensation. Anyone not cared for under bills like these, are cared for under some other provision (Like the non-taxed health care benefits employers give their employees). Ultimately, the cost of providing for this country's health care falls on the federal government, so the stimulus is just admitting reality, it isn't actually adding to our public tax burden. I suppose it could be possible to rewrite America's laws and get the government completely out of the health care industry, but that doesn't have any support outside of the 1% of libertarians who live in America. The whole world has public health care for its people, and America is no exception to that. Railing against public health care funding specifically in the stimulus bill, as opposed to that spent under Medicare, Medicaid, Veteran's hospitals, emergency rooms, or whatever, makes no sense. It's all going into the same pot.

90.9 billion is dedicated to education. Again, this is not shocking to an America which has been devoted to public funding of Education since America's founding. One of the first bills passed in American history was setting up ground rules for the sale of federal lands to private owners in the 'northwest territory.' (Ohio and the like). One of the provisions of the sale of cheap federal land (basically a subsidy to settlers) was that some portion of acres would be set aside to support a public school for the children of that area. You could not get the cheap land without promising to pay for children's education -- ie the government was using its land subsidies to pay for public schools. There is nothing shocking, communist, or fraudulent about the federal government paying for public schools. Bush increased funding to public schools throughout his term as well. Since most people agree schools must be paid for somehow or other, because no one is willing to let illiterate, innumerate barbarians just wander the streets and have no job prospects in the future, what difference does it make if the stimulus bill helped do this?

One could argue that too much money is spent on education, but that's awfully risky considering you're gambling with the productivity of your future workforce. Is saving money really a priority in education, or is it gaining a highly skilled future generation of workers? Given that American schools have continued to churn out the same test results with a 50% hispanic/black child demographic as they used to churn out with a 15 IQ higher white child demographic from the 1960's and 1970's, American schools have been performing miraculously well. Perhaps the increase in school funding for all these years has been a major reason why we have kept up with what seems like an insurmountable obstacle? This really isn't the time to be short-changing our schools, when we need to squeeze as much genius as we can out of our already genetically handicapped future generations.

$82.5 billion for poverty relief:

This includes $40 billion to extend unemployment benefits. Since we now know that unemployment is endemic and has become stuck at 20%, what would have happened to these people if their unemployment benefits hadn't been paid? People have to live somehow or other, and there are no jobs to give them. None. For every job opening, six people are applying for it and need it. Where does that leave the other 5 in this game of musical chairs? On the public dole one way or another. Unemployment benefits are as good as any other way. ((Though really, the citizen's dividend would be the best method.))

Twenty billion goes to food stamps. What are we going to do instead, let Americans starve on the streets? Is anyone heartless enough to demand we, the richest nation on Earth, let millions of people starve to death in front of us to save a few bucks? Remember that in comparison to this 20 billion, we spend over a trillion dollars a year on a military which for all we know hasn't saved any lives. Let's imagine our military is preventing a nuclear bomb strike, 100,000 losses, every year however. There are millions of people on food stamps. The amount of lives saved by food stamps out competes the amount of lives saved by preventing a nuclear bomb strike every year, and for 1/50th the price. So much for our glorious military budget.

Another 14 billion was given out to social security beneficiaries who have paid in to the program all their lives, and veterans receiving disability benefits and pensions. I'm not sure who exactly would be against these expenditures either.

$81 billion in Infrastructure:

One of the primary and best uses of government funds is to invest in infrastructure. The railroad net the government made during the 1800's helped settle the west and promoted commerce all over the nation. In the 1950's, Eisenhower created the interstate highway system, which has admirably served drivers ever since. Canals and other improvements were funded from the start of our Republic. Even many libertarians support government funding of infrastructure. The government is the only entity with enough money, enough long-term thinking, and enough right-of-way in law courts, to build massive public works which reward all future generations. ((The Hoover dam, for instance, has made the nation a tidy profit, as well as provided a living for all the worker's families employed by it, but only because it's still running 60 years after being built. This is the kind of long term thinking only governments can do.))

$51 billion of this infrastructure was spent on bridges, roads, sewer lines, railways and the like. I'd be flabbergasted to find a party who is opposed to keeping bridges, roads, or sewers in repair, and insists this is government 'waste,' 'fraud,' or 'theft.' If the federal government isn't allowed to repair its own bridges, railroads, and highways without whining from taxpayers, you may as well give up on the concept of a state, a society, or a government and just revert to anarchy. If tea party activists protesting the stimulus bill aren't anarchists, they should just shut up -- most libertarians would be too moderate to protest this.

Another 30 billion went into more forward looking infrastructure -- upkeeping public facilities and army bases, funding energy efficiency, cleaning wastewater, and protecting against floods. ((Maybe a good idea post-Katrina after learning we knew the levees needed repairing and refused to do so before the storm hit.)) It's infantile to protest spending on clean water or energy efficiency, when the alternative is paying more for energy down the road and getting sick from dirty water (which in turn increases the cost of health care and lowers worker productivity).

$15 billion for 'supplemental investments':

What does this include? Well hallelujah, $7.2 billion for broadband and wireless internet investments. The very thing I was asking the government to do last post. Internet has become, and should become, a part of our public utilities just like electricity, water, sewage telephones, roads, bridges, and railroads. They are an essential transportation and communication platform that keeps our country running. As the internet expands and takes on more roles, it needs more money and more support -- while costing the economy overall less, by for instance decreasing the reliance on mail deliverymen, business-conference flights, trips to various agencies which can now be done online, and so on. Any investment in internet now will save money, and create massive dividends, later. It makes life happier for the base and more profitable for businesses. If anything, funding for broadband internet should be expanded -- the stimulus bill doesn't do nearly enough. But the money couldn't be better spent anywhere else.

More money for clean drinking water, our national parks (The pride and beauty and collective gift to our children, that there will always be pristine areas they can go to enjoy nature at its best, no matter how developed or overpopulated the world becomes.), Indian Affairs Bureaus (who, like it or not, we are treaty-bound to support), wildlife refuges, computer upgrades for public sectors (always a good idea), and so on. Again, I can't imagine anyone complaining about these projects. Are there any groups opposed to national parks? Clean water? Flood control? Forest Fire fighting?

Next up is Energy, at $61.3 billion. The federal government has always supported the energy industry, as do most governments around the world, as a part of their basic infrastructure and national security needs. Ever since FDR devoted himself to electrifying rural America, it's no surprise the government is spending on energy today. Most people would argue this has greatly improved people's lives and the cost was well worth it. It's hard to imagine energy not being a basic human right in this day and age. It makes places too cold to live, warm -- and places too hot to live, cool. It cleans our water, directs our traffic, warms our baths, lights the city at night to deter crime, powers our machines which do 90% of our work for us, and fuels our cars. I'm sure everyone is a fan of energy, but some could wonder why the government should have to provide it. But the answer is simple, some people couldn't afford it naturally, and therefore, so long as we don't have a citizen's dividend, it will have to be subsidized, somehow or other, until everyone can afford it -- it's just too critical a portion of human comfort and necessity to let anyone go without -- just like food and water. The government also has the duty to combat global warming, which is the product of society as a whole and thus needs a society-wide answer. It also has a useful ability to invest in long-term goals, like energy efficiency, new sources of power that look beyond current technology, or giant state-spanning power transmission lines, that no private business can undertake. For all these reasons the government has a vital role in the energy business.

Almost all of this energy spending is in the terms of infrastructure, not handouts -- 11 billion for a smart grid which will save energy over time. Tons of money to increase energy efficiency of various buildings -- considered by environmentalists so far still the most cost efficient way to reduce energy costs and global warming emissions. A measly six billion for the rapidly emerging renewable energy market, which could be the source of limitless free power for future generations if we could just get it going in this one. Six billion for cleaning up nuclear power plant waste -- just as much as we're spending on true clean, renewable, limitless power. A waste if you ask me but some people prefer nuclear power to wind and solar, and at least they can't claim the government is playing favorites. Billions for carbon-capture coal (a cute way of using fossil fuels without any global warming emissions but probably more expensive than just using wind/solar anyway -- but there are proponents of this model too, and the government wants to cover all bets.)

Housing, $12.7 billion. I'm generally against federal spending on housing, because I feel like America already has enough housing and any lack of housing could be fixed by stopping all further immigration. Also, Americans tend to have enormous houses with very few occupants, and look shameful compared to the modest houses of Europe and Asia. The idea that such opulent housing requires government assistance is a little far-fetched. Nonetheless, it's true that everyone needs a roof over their heads, and if the government doesn't pay for housing one way, it pays for it in another. (Like for instance, giving all criminals a jail to live in, or the homeless homeless shelters.) We have to pay the butcher's bill one way or another, and as usual some people can't pay for it themselves. A citizen's dividend would mean even the poorest Americans could afford all the food, housing, electricity, water, etc they need. Until then, we will have to keep paying for each item individually in this kind of haphazard stimulus manner.

$8.9 billion in Scientific Research:

Again, even libertarians often balk at cutting off government assistance to science. The returns on government investment in science, up to now, have been something like 5 dollars of profit for every 1 dollar invested. Investing in science has never let us down. Government funding of science has dramatically improved the world, as well as enriched it, ever since European courts hosted Galileo as a tutor and knighted Isaac Newton.

Honestly, the government should be funding as many scientists as we can possibly get a hold of. The solution to all the world's problems lie within science. The sooner we make this world a utopia, the better. At present there are always more phd accredited, trained scientists than there are funding grants to go around, which represents a major loss in discovery potential that could accelerate world progress.

$18 billion in 'other':

This includes funding the census (a constitutional necessity), converting analog tv's to digital (always best to have standardization and modernization), airport security, port security, fire stations, and so on. Nothing anyone could really complain about, especially considering how little is being spent per item.

That's the whole of it. None of it went to obvious waste, none of it went to theaters that the government wasn't already funding as a matter of course and throughout history. None of it was revolutionary or communist in nature. The stimulus bill found all sorts of useful work Americans could be doing, they found all sorts of long term projects they could be funding, and took advantage of the recession, which meant a drop in private spending and private employment, to increase public spending and public employment, and help bridge the difference. Even supposing 10% of the money was wasted, or even 50% of it was wasted, since we have to recall we had 20% of our people sitting around idle anyway and the banks weren't making any loans (and the dollar actually deflated last year), even 50% waste is not actually 'wasted.' There was so much slack in the economy that government spending was painless and costless.

Not only were all the projects theoretically noble, and the economics behind funding them during the crisis a good opportunity, we have the results one year down the road. A recovering economy, a stable dollar, people returning to work, and a booming stock market. Everything was terrible before the bill was passed, the bill was theoretically sound when passed, and now everything is great a year after the bill was passed. For all the grousing about correlation not proving causation, I see no ground upon which anti-socialists, libertarians, anarchists, or tea partiers can stand.

A good question to be asked, after my justifying of all public spending in the stimulus, is what could conceivably not be a region for government spending? The answer to that isn't principled, it's practical. I'll reject federal spending for anything that doesn't work when given funding. If an industry thrives, provides cheap products, or helps the poor, because of the government, I'm not about to complain about spending. Show me an industry full of waste, permanently bleeding money, providing no conceivable service, and I'll quite gladly see the program cut. Amtrak is a good example. There's just no sense in supporting that moribund program. Medicare is another good example. Half of the expense of medicare occurs in the last year of someone's life. If everyone just willingly died a year earlier, we could save untold trillions of public money, which could be used to much greater effect elsewhere. The military is another. And as it turns out, by just cutting medicare and the military, we could save so many trillions, that we could fund everything else imaginable completely painlessly. Internet, renewable energy, housing, food stamps, anything conceivable under the sun could be handled by the government, and we'd still be able to cut taxes and lower the federal budget.

Therefore, I can't take seriously complaints about government funding when it comes to programs that work, like NASA, the interstate highway system, or food stamps. When people seriously want to cut the federal budget, I'll take them seriously. So long as they support invade the world, invite the world, in hoc to the world, I refuse to take them seriously when they call for cutting minuscule budget items like HUD, food stamps, or the national parks. The stimulus, a $787 billion investment over multiple years, for generally acknowledged good causes, is not the problem. When the military spends over 1 trillion a year for no conceivable benefit, you know funding schools and highways isn't the cause of our budget deficits or national debt.