Please, no more 'stimulus'

I went to some tea parties last March and April. And this editorial yesterday in Investors' Business Daily reminds me why:

Those who pushed through this year's $787 billion fiscal "stimulus" seem to be counting on the American people's short memory. Wasn't it just last year that we were told, repeatedly and with stark emphasis, that this economy was the "worst" since the Great Depression?

That was the pretense for not only the stimulus, but for the federal takeover of the U.S. auto industry and the quasi-takeover of the U.S. financial industry. It's also the underlying premise for both nationalized health care and massive new taxes to cut CO2 emissions.

If the stimulus passed, the White House vowed, unemployment would peak at 8%. Today, it's 9.5% — and rising.

"The truth is, we and everyone else misread the economy," said Biden. He used that phrase — "the truth is," or something similar — at least three times in a talk with ABC's George Stephanopolous. But the "truth is" something quite different.

Many voices — including ours — were raised in opposition to the stimulus when it was debated. We didn't "misread" the economy. We knew from history that, left alone, it would get better without government meddling.

Instead, Americans were promised "shovel ready" projects would put stimulus money to work right away creating jobs. For the record, since February, the month the stimulus was passed, the U.S. has lost 2 million jobs. The stimulus is clearly a failure.

Yet, says Biden: "The truth of the matter was, no one anticipated, no one expected that the recovery package would in fact be in a position at this point of having to distribute the bulk of the money."

But that's not the "truth of the matter" at all. Many economists and conservative politicians warned explicitly about this very problem. So did IBD. And so did numerous other media outlets. The notion that no one brought it up is simply false.

Of $157.8 billion "made available" under the stimulus, only $56.3 billion has been paid out — or 7% of the total $787 billion. And according to ex-Treasury Department economist Bruce Bartlett, "just 11% of the the discretionary spending on highways, mass transit, energy efficiency and other programs involving direct government purchases will have been spent by the end of this fiscal year."

Based on this, there are only two possible conclusions: One, the stimulus has been the most inept public waste of money in history. Or two, it was a cynical attempt by the Democrats to vastly expand the scope of government during a time of crisis. Or maybe it's both.

After all, how else could a government seize major parts of a once-private economy with nary a peep? How else could it boost spending to record levels, then blame earlier administrations for their fiscal incontinence? And how else could they add $10 trillion to the nation's debt in just 10 years and still claim fiscal prudence?

And now they want a second stimulus? That's really gonna help.

Why double-down on failure?

Those who argue doing nothing wasn't an option are wrong. We would now be emerging from this recession if the government had left well enough alone. The Fed's interest-rate cuts to zero last December would have been plenty.

Instead, we're facing the worst recovery since the Depression, and the entrepreneurs who fuel job growth are hunkering down to weather planned tax hikes in the trillions of dollars.

Remember the parties: Newburyport, Manchester, Concord, Portsmouth.

No matter what the Obama administration said, tea partiers knew increased government spending would mean our costs and our taxes would go up, sooner and later.

Do we want to be like California?

It takes years and years to make a mess as terrible as the California debacle, but the recipe is simple. All that you need is two political parties that are always willing to offer easy government solutions for every need of the voters, but never willing to make the tough decisions necessary to finance the government largess that results. Voters will occasionally change their allegiance from one party to the other, but the bacchanal will continue regardless of the names on the office doors.

California has engaged in an orgy of spending, but, compared with our federal government, its legislators should feel chaste. The California deficit this year is now north of $26 billion. The U.S. federal deficit will be, according to the latest numbers, almost 70 times larger.

Reason: Taxpayer's Guide to the Stimulus

UPDATE Thursday

A sequel we don't need: Attack of the Son of Stimulus

A new round of stimulus will merely add to the public debt without permanently improving growth or employment.

Do we need a second stimulus?

The economy will improve. But it will do so because the financial sector is recovering, largely due to the Fed policies to enhance liquidity and the success of the Bush administration's Troubled Asset Relief Program, continued by the Obama team, in helping to recapitalize the banks.

Congress and the Obama administration have used the economic downturn as an excuse to expand the size of government. Calling it a stimulus, they have instead put in place a spending agenda that will unfold over the next two years. Although a little over one-third of the American Recovery and Reinvestment Act of 2009 goes to tax relief, the rest is in the form of spending programs that will be difficult to stop once they are up and running.

Getting cold feet over big government

The financial system collapsed. Housing prices cratered. Unemployment is at a record high for the last quarter-century. The Democratic president has a solidly positive job rating.

And yet we Americans have not suddenly become collectivists.

Independents begin to edge away from President Obama

Nouriel Roubini: Brown manure not green shoots

But eventually, large budget deficits and their monetization are going to lead--toward the end of next year and in 2011--to an increase in expected inflation that may lead to a further increase in 10-year treasuries and other long-term government bond yields, and thus mortgage and private-market rates. Together with higher oil prices driven up by this wall of liquidity rather than fundamentals alone, this could be the double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011.

Comments

[wolfwalker]

No doubt that the porkulus bill has been a disaster, and those who argued against it were right. However, I think the IBD editorialist commits the same mistake when he says

"Those who argue doing nothing wasn't an option are wrong. We would now be emerging from this recession if the government had left well enough alone. The Fed's interest-rate cuts to zero last December would have been plenty."

Fact is, we don't know what would have happened if the government had done nothing. We can guess, but that's all. Personally, I don't think the interest-rate cuts would have been enough, because that didn't address the fundamental problems that caused the meltdown in the first place: a ginormous excess of debt, a sharp drop in consumers' disposable income, and a collapse in consumer spending. I think a carefully planned program of spending cuts, tax rate cuts, and regulatory reform might have _softened_ the dive, but I don't think anything could have _stopped_ it.

[Amy]

Wolfwalker, I agree with you - that couple of sentences in the editorial stood out as unsupported by fact. And my instinct (without a lot of actual knowledge) is that you are correct about the meltdown cause and what might have helped instead of throwing money around.