Crossposted at The Rockefeller Republican
First a confession, I am not an economist. While I consider myself a fairly well educated person, my areas of expertise reside outside of the financial realm. As I have written over the past month about the various stimulus and bail out bill put before congress it has been as a common everyman. I am trying to bring a center-right common sense viewpoint to the debate. Initially I gave tacit support to the proposed 750 billion dollar stimulus with the strong caveat that monies should be diverted to areas of development that actually would lead us into the future, not simply a litany of “shovel-ready” road projects that while might give a short term boost to our economy, would have little to no long standing impact on moving us into the 21st century. I though that we had a unique opportunity to truly invest in the future of America, further cementing its position as first among equals in the western world. However, as the plan has ballooned to nearly $1 trillion in questionable spending, with far too little devoted to permanent tax cuts, which would stimulate business for the long term, and various economists have weighed in on its benefits or lack thereof, I have begun to seriously question whether those at the Cato Institue are right and doing nothing may be better than doing something wrong. What follows are questions to which I do not have ready answers, but which our elected officials had better think long and hard about before voting for anything.
Do any of these provisions sound stimulative?
$1 billion for Amtrak, the federal railroad that hasn't turned a profit in 40 years
$2 billion for child-care subsidies
$400 million for global-warming research
$2.4 billion for carbon-capture demonstration projects
$650 million on top of the billions already doled out to pay for digital TV conversion coupons.
According to the Washington Posts estimates, only $90 billion out of $825 billion- 12 cents of every $1- is for something that can be considered a stimulus. That means 88% of this bill simply raises the budgets of existing programs. What exactly will that do for the middle class most effected by the current recession?
A huge amount of money will be directed towards the urban transit systems, not for revolutionary new forms of transit, just hugely increased budgets. These entities are so badly managed that their fares cover less than half of their costs. However, the people who operate these systems belong to public-employee unions that are campaign contributors to . . . guess which party?
$54 billion will go to federal programs that the Office of Management and Budget or the Government Accountability Office have already criticized as “ineffective.” Is this what Obama meant by a new “era of responsibility?”
$66 billion more for education funding which is more than the entire Education Department spent just 10 years ago and is on top of the doubling under President Bush. Additionally as the cost of college tuition is skyrocketing some $6 billion of this will subsidize university building projects. Have schools become drastically better over the past ten years with all this extra money? Should we be looking instead on ways to revolutionize the way we structure education in the 21st century rather than simply keep doing more of the same?
Will this increased spending become part of the annual “budget baseline” that Congress uses as the new floor when calculating how much to increase spending in the future. But it's hard to imagine that Congress will cut spending next year on any of these programs from their new, higher levels. Are we creating a socialistic society under the guise of emergency aid? Is it happening so quickly and organically that we won't even notice until it is too late?
Government stimulus plans have a long history of failure. From Roosevelt's New Deal to last February’s $168 billion economic stimulus package. President Bush called that “a booster shot for our economy” and promised that it was large enough to have an effect, but it didn’t work. What makes us think this will? $1 trillion is a huge amount of money, but in an economy that is $14 trillion will it be enough?
The Do-Nothing Crowd argues that it is probably insufficient and definitely unwise. Many of the Do-Nothings argue that a painful recession is the best way to destroy America’s runaway culture of irresponsibility and debt. Economic turmoil, after all, has a way of grounding Americans. Maybe dramatic belt-tightening across the board is the only way to stop our endless cycle of borrowing. Many agree with a tough love attitude towards our children- what hurts now will make you stronger in the future- should the same principle apply to a country?
Housing prices are coming down to a more sustainable level. The National Association of Realtors reported this week that housing sales rose 6.5 percent from November to December. Is this a sign that the housing market is on its way to a balancing point at which lower prices once again draw new buyers into the system? Capitalism does work if we let it. If we inject $1 trillion dollars worth of debt into the system will we stiffel the natural recovery process?
The libertarian Cato Institute is planning an all out ad blitz making the case against the proposed stimulus. The ad will include the names of 250 economists across the country, including Nobel Prize-winning economist Edward Prescott of Arizona State University, who oppose the massive spending and tax cut program. Do they know something congress doesn't?
Or scarier still does congress know and not care?