Last speaker on the morning panel, Cato Institute adjunct scholar Arnold Kling.
Kling begins somberly: “I think about what’s going on as an economist but I feel it as a father. My wife and I have three daughters between the ages of 19 and 25. And when I see what’s being done to their future I’m really angry. Back in September when they were talking about taking $700 billion dollars to unclog the financial system I wanted to yank Henry Paulson out of the TV screen and say to him: “Keep your hands off my daughter’s future.” But he got away with it. For me it felt like sitting there watching my home being ransacked by a gang of thugs. And now we’ve got a new gang of thugs and they are doing the same thing. So that’s how I feel, now back to how I think.”
Kling says this is a big bill, but not a big stimulus. There is nothing timely, targeted, or temporary about it. It is a simple transfer of money from one set of people to favored interest groups of the Democratic Party.
If economists had designed a plan, instead of Democratic politicians, it would look a lot like Greg Mankiw’s plan which calls for an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax.
Kling stressed that profits are the key to economic recovery. Profits and losses are signals in a market economy. Huge losses in the financial sector signal that that sector needs to shrink. Instead Obama is talking about buying and insuring toxic assets. They think they can force the financial sector to lend. But if businesses are not profitable then it makes no sense to lend. Cuts in payroll tax would make businesses more profitable.
UPDATE: Kling has since gotten in trouble with the PC Police for the statement above. An early liveblogged version of his remarks left out his first mention of Paulson and mentioned Barack Obama by name. Kling did not mention Obama by name at all in his opening paragraph. The above transcript is from a video of the event that will be on YouTube. We deeply regret the error and offer a sincere apology to Mr. Kling.