The Stimulus Bill
Millions of people are unemployed or in risk of losing their jobs, the banking system is in panic, and the economy is facing its worst crisis since the Great Depression. Figuring out how to deal with this problem is the key political question right now.
Unfortunately, the Republican response has been wrongheaded on this issue. Stopping all government spending and extending tax credits to rich people are ideas which reflect the self-lobotomized nature of today’s Republican Party.
That’s not to say a Stimulus Package is the best response either. You want to help people hurt by the ongoing crisis? Extend unemployment benefits and food stamps. Cut the horribly regressive payroll taxes–which would effectively raise the income of every nearly every working American by 18% starting today. Reform corporate taxes by broadening the base and lowering rates–a proposal progressives can get behind. Yes, giving people money may not ‘stimulate’ the economy, but it will certainly improve their financial security more quickly and directly than will building bridges somewhere in the country. The Democrat proposal includes several tax cuts, but these generally work to provide subsidies to various groups, without targeting the people most hurt or eliminating economic inefficiencies by lowering tax rates.
Instead of a quick, targeted proposal that helps those most in need, we’ve gotten a massive spending increase which would have been considered radically leftist only a few years ago. It’s based on the premise that our problems come from a problem of demand–which is clearly not true. We’re going to have problems as long as the banking system is in crisis, but, if history is any guide, fixing the banking system should get us on track regardless of the degree of stimulus we choose–though the more debt we pile on today, the more we have to pay tomorrow.
The administration assumes that additional government spending will lead to recovery at a multiplier rate. There are little theoretical or empirical reasons to expect their high estimates–1 dollar of government spending leads to 1.5 dollars growth in the economy. If this was true in general, then the Bush years of deficit spending should have led to durable growth, which it definitely did not. Sure, there are more idle resources lying around today. But we’re also facing a credit crunch, and there are a number of reaons to suspect that economic recovery will necessarily be slower without a functioning financial system.
But even the presence of idle resources doesn’t guarantee that the stimulus will be a success. The downturn has hurt certain industries much harder than others–house building, finance–and there is no guarantee that these workers can quickly transition to the sectors targeted by the stimulus, such as healthcare or education. Because of these bottlenecks in the short-run, the stimulus will compete with private industry rather than mobilize only idle resources. This spending will come online in several months, possibly as the recovery is already beginning.
On top of that, it’s unlikely that this spending will have a positive impact. This is, after all, a bill passed in a few days, with little debate, and is tantamount to a Democrat wish-list of legislative priorities. In education, for instance, we know that increasing spending without reforming the system will deliver minimal results–a fact Obama has repeatedly recognized. That’s why reform movements–like KIPP program, charter schools, curriculum reform, Michelle Rhee–have demonstrated ability to improve student performance in a way building schools in empty districts can’t. But in the urge to satisfy the ‘timely’ requirement, we’re throwing billions of dollars at problems that can’t be fixed by money.
And these government programs are permanent. We’re headed for an increase in the size of the government from roughly 20% of GDP to about 23% of GDP–without the financing to pay for it. We’re about to see trillion dollar deficits yearly become the norm. This is completely fiscally unsustainable, and it risks a collapsing dollar and inflation the likes of which you haven’t seen since the ’80s. Fleecing those rich, evil, increasingly less-numerous, one-percenters at the top isn’t going to be enough to cover this. In a bizarre, reverse-starve-the-beast, Obama is permanently growing the size of government, confident that taxes will follow.
Mitch Daniels recognizes this. He’s a proven fiscal conservative who has stood up against fiscal irresponsibility in Washington and has balanced the buget in Indiana without raising taxes. The country is fed up with partisan, incompetent Republicans and will soon tire of big-spending liberals as well. We need a principled conservatism that offers limited, competent government–and that’s what Mitch Daniels has delivered.
[...] Justin and Tina put an intriguing blog post on The Stimulus BillHere’s a quick excerpt We’re going to have problems as long as the banking system is in crisis, but, if history is any guide, fixing the banking system should… [...]
[...] been greatly boosted by the fact that the Administration spent its political capital on a massive stimulus bill. Many of these programs, by design, will likely not be temporary, but rather permanent [...]
This blog’s great!! Thanks
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Its all smoke and mirrors and lies. The globalist rulers have decided that America is to lose her soverignty and become part of the New World Order as the North American Union. First order on the NWO agenda was destroy our economy, check that one off. Next is create mass social anxiety and fear, check that one too. Next is take away our second ammendment right to own firearms, not to hunt, but to protect our persons from tyrany! That one is coming!
(where is the spell checker?!)