No 59 Posted by fw, September 05, 2010
Following is a transcription of the commentary from Parts 2 and 3 of a three-part video documentary film, Overdose: The Next Financial Crisis, which is available for viewing here on the Information Clearing House. I have transcribed most but not all of the commentary from these three parts. Each video part is about 15-minutes long.
Obama’s great giveaway – Different name, same game
Narrator – While the Fed lowers interest rates, President-elect, Barack Obama, prepares an enormous stimulus package meant to get the U.S. economy going.
Barack Obama – The American Recovery and Reinvestment Act that I will sign today, a plan that meets the principles that I laid out in January, is the most sweeping economic recovery package in our history.
Narrator – On February 7th, 2009, Obama approved a stimulus package worth $787 billion. With a Bush stimulus package from the year before, U.S. politicians have now spent close to $1 trillion dollars to stimulate the U.S. economy. The money is spent on roads, airports, education, unemployment and other benefits.
$600,000 to combat homelessness in a town with no homeless
Narrator – The town of Union is located a few hours from the Canadian border. This is where the computer company, IBM, got its start and grew to be the biggest in the world. The factories are now empty but the town has acquired a small-town rhythm. So there was a surprise when $600,000 from the stimulus package arrived to combat homelessness.
Dennis F. Hannon, Mayor of Union – You know, on occasion our police officers may run across someone and they try to take the person to an area where the individual can get some shelter and get something to eat. But it’s not a problem here.
$1 million to repave Rodeo Drive in Beverly Hills
Narrator – This is Rodeo Drive in Beverly Hills, probably the world’s most famous upscale shopping district. It was here, for example, that Julia Roberts went shopping in Pretty Woman. Stimulus money has made its way here as well. These streets are to be repaved to the tune of $1 million. Sure there are potholes in the asphalt, but is this really the economy that needs to be stimulated?
David M. Walker – We had a $787 billion stimulus bill. But only about one-third of it was truly stimulus. By that I mean, timely, targetted and temporary. The other two-thirds were things that people wanted to do, have been wanting to do for a long time, but they didn’t want to have to pay for it. They wanted to do it as part of emergency legislation and charge it to the national credit card.
“King of Pork” Murtha Airport gets $800,000 to repave seldom-used runway
Narrator – The Johnstown Pennsylvania Airport has three scheduled flights a day. Other than that it’s quite empty.
Airport General Manager — When you have the flights coming, that’s when the people are here. Other than that, it’s empty.
Narrator – But one face is everywhere – Congressman John Murtha – the airport’s name sake. He’s been called the King of Pork, and has gotten $200 million for Murtha Airport from Washington. Earlier this year the Airport got a new source of revenue, $800,000 from the stimulus package to repave this backup landing strip. The head of the airport insists that the landing strip is safe. So why does it need repaving if it’s not a safety issue? [The airport manager breaks into a grin and then laughs].
“Cash for Clunkers” gets a cool $billion and then some
Narrator — One of the biggest stimulus programs was aimed at the auto industry — Cash for Clunkers. Turn in your old car and get cash towards a new one from the government. It was so popular that its $1 billion budget ran out in a week, so more money was quickly injected. Many countries offered similar programs. Germany had the biggest one and handed out almost $7 billion to those who scrapped any car more than 9 years old while buying a new one.
Dr Karen Horn, Auto industry analyst – Our government seemed to think that the German auto industry is so important that we have to support it in some ways and therefore they created this bonus.
[End of video 2. Start of video 3]
Not to be outdone, Germany kicks in $7 billion ‘scrapping bonus’ – Ooops, make that ‘environmental bonus’
Dr Karen Horn – Our government seemed to think that German auto industry is so important we have to support it in some ways and therefore these bonds. They didn’t call it a “scrapping bonus” because I think they knew just how ridiculous that was. So they called it an “environment bonus”.
Narrator – Karen Horn is a doctor of economics at a German economics institute.
Dr Karen Horn – And of course people took advantage of that. It worked as long as it was on, the program worked. But now it’s out, it’s over and of course the numbers are dropping. People are feeling that they ran into additional debt due to that bonus that they wanted to take advantage of and they’re having trouble that they didn’t anticipate.
Narrator – So Germany spent almost $7 billion to scrap fully functioning cars and to maintain excessive auto factory output. Once the program ended the industry was right back in the doldrums.
Dr Karen Horn – I was just very surprised that people would accept the idea so readily. That they would accept the money was something else. Who wouldn’t? But that they would find this a solution that they deemed viable doesn’t givc me a very good impression of the rationality of the voter and taxpayer I must say.
It’s déjà vu all over again
Peter Schiff – And that’s where we are. I think at this point the problem is now so big that government stimulus is not going to buy us another 5 or 6 years of phony growth like it did last time. Because we have to accumulate so much debt now because the bigger the problem gets, the more we have to stimulate to get that short-term boost. But now the bigger the bust – because now we have a bigger stimulus – you know, to get out of the economy.
Narrator – About a year after the worst economic crisis in modern history Lehman Brothers is gone. But apart from that, Wall Street looks much the same. Many banks are reporting record profits. The world’s stock markets have skyrocketed. The market is finally breathing a sigh of relief. But isn’t it somewhat uncomfortable? Haven’t we been here before? All of the measures that we have taken to save the economy – the low interest rates, the massive debt, the safety net for the financial industry – these are the very things that led us into a crisis in the first place. We’ve been saved from the consequences of one burst bubble by inflating a hundred new ones all over the world.