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Saturday, January 24, 2009

Stimulus? Try Democratic Pork.

Photo courtesy of

Leading up to his inauguration President Obama was urging Congress, his Congress with his party in the majority, to put together an "economic stimulus" package that he could sign as soon as possible after his taking office. He wanted a package that would create millions of jobs, that would provide funds for infrastructure improvement and creation and provide millions of jobs, he wanted investment (i.e. spending) in health care and education. He wanted tax cuts (i.e. rebates) for the middle and lower class. What Congress is passing instead is not "stimulus" but pork. Furthermore it will have almost no impact on our current economy but instead will burden future economies with more debt, more public payrolls and more taxes to fund the $825 billion being proposed.

Throughout the Bush Administration the Democrats and media have referred to the Congressional Budget Office (labelled as a non-partisan body for analyzing spending and taxation) and their analysis of every budget and proposal put forth by the Bush White House or Republicans in Congress as the expert, unbiased analysis of what was wrong--let's see if they still have the same attitude to towards the CBO since it is deeply critical of the "stimulus" package being shoved through Congress by the Democrats.

First, the CBO says in its Critical Alert that most of the "stimulus" package money will not be spent until the current recession is over. According to their analysis only 7% (seven percent) of the funds for discretionary spending will be spent by the end of the current fiscal year and only 38% will be allocated, not spent but allocated, by the end of the fiscal year 2010. That means that over $540 Billion will be spent in 2011 and beyond.

Guess what? There is another Presidential election in 2012, guess when the campaigning for that election begins? About the same time the $540 billion will be doled out to pet projects and lobbyists targets in communities throughout America--but most likely those that are swing states. Coincidence that the timing of the allocation and spending is parallel to the next Presidential election cycle? There is no such thing as coincidence in politics--or government spending.

A major talking point for Obama has been "investment in infrastructure" as part of any plan, but this plan does not have as the major spending part funds for infrastructure. If Obama wants spending for infrastructure, and he is serious and honest about his "no pork" policy, then he should send to Congress a proposal for spending that is only for roads, bridges, ports and other public infrastructure projects to be allocated, spent and completed in the next five years. If the infrastructure spending is a talking point to get the public behind the non-stimulus portion of the spending then he has misled the country before taking office.

According to the CBO report that with no "stimulus" package the economy will see moderate growth in 2010 after bottoming out about mid-2009. Therefore no stimulus spending is needed from Washington. What is needed as far as the Democrats are concerned is more federal spending and control over healthcare, education and welfare--and this package delivers under the guise of "stimulus."

Please let me know how using $136 billion of the bill (37%) creating thirty-two new social programs will create jobs and stimulate the economy? How does $50 million for the National Endowment for the Arts create jobs? Why would we give $6 billion to companies that are already expanding broadband services so they can expand broadband service? How do we "prepare our country for universal health care" by spending $600 million--and do we want universal health care? These are just a few of the hundreds, thousands, of items shoved into this "stimulus" package that have nothing to do with stimulus.

Because most of this money will be spent after the current recession is over it will have an incredibly inflationary impact on our economy. There is already over $1 trillion that has been injected into the economy by the government through the first bailout and other spending the past seven to eight months, adding an additional $1 trillion to the money supply will create an incredibly inflationary economic environment. Combined with the substantial borrowing the Federal Government will have to do in order to pay for the new spending the combination of government borrowing and inflation will put substantial pressure on interest rates and we are in danger of seeing them climb to highs not seen since the end of the Carter and beginning of the Reagan Administrations. This spending package will not solve any of our current economic problems and will create serious economic issues three to five years from now--but politicians do not care about the future beyond their next election and that is evident with this proposed bill.

Obama and his aides have said they want a bill that would create 3 million jobs and the bulk of the spending is to occur before 2011; the bill in its current form does neither. Even if it were to create 3 million jobs, at a cost of almost $900 billion that is spending $275,000 per job, or about $225,000 more than the average household income--not a good return on investment. The money would be better spent by eliminating almost all taxes for one year and letting Americans spend and save and invest the money in their local communities.

Obama either needs to pressure his Congress to change the bill, or veto it if it hits his desk in its current form--show Congress and the American people when he said change he meant it.


Gerry said...

Good post, DC. I've yet to hear anybody say that any of these stimuli have actually stimulated the economy over the years.
Best thing Obama and Congress can do is create a positive (low tax) environment so that businsses can hire and invest long term. Hold the pork.

DC Smith said...

That would make sense if any of our politicians had any economic training! Instead they are all lawyers or career politicians used to selling votes. Thanks for the pig and the positive comments!

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DC Smith said...

I don't think anything, it seems you have posted advertising on my blog, I will leave it anyway. Thahks for the positive comments.

Bob Schilling said...

I'm not as skeptical as some. And I'm not in the "let nature take its course" school. By the time "nature" does that, I'll likely be out of business and out of my home. I've pretty much lost faith with the unregulated market. It's wrecked the economy and destroyed the value of my property. It's taken a painful bite out of my retirement savings, and reduced my income to the point that I've been forced to use those savings. I'm ready to try something different. And I'm ready to try it NOW.

There's a substantial tax cut in the bill. A decent amount of that will go to working people who will quickly spend it. It's not lasting, but it is a stimulus.

There's also a bailout for the States, in the form of medical and education payments. I saw an estimate in the Sacramento Bee this morning that suggested that California's budget gap would shrink about $14 billion if the bill were enacted -- not a panacea but enough to make a difference.

I'd like to add a note on "shovel ready" projects. As far as I know, ANYTHING funded by the federal government must have an Environmental Impact Statement. These are breathtakingly expensive, and most take two years to complete -- if nothing goes wrong. Once that's done, contract drawings still have to be made, and the project must be bid. That takes most of a year. So it's not surprising that the infrastructure portion of economic stimulus low. It just can't be done quickly, and the projects that CAN be done quickly are already funded. We could suspend EIS requirements in the interest of economic recovery, but just imagine the uproar among the environmentalists.

A few more closing notes....

Amtrak funding makes a great deal of sense. Some of the money is for the repair of wrecked cars that have lain dormant for lack of money. That can start the day after the bill is signed into law. There's also some corridor work that will be done jointly by Amtrak and its host railroads. That work won't be subject to quite the same delays as other federal projects, so it can start sooner. And strengthening rail infrastructure serves both transportation and environmental strategies.

What's the complaint about renovating the National Mall? It needs the work, and it's the most visited National Park. It will generate jobs for contractors and suppliers. It's not like it's the Democratic National Mall. Sheesh.

Money spent for art is just as productive as money spent for bridges or revenue foregone in tax cuts. Artists hire people and buy supplies just like everyone else. And out-of-work actors are as big a drag on the economy as out-of-work plumbers.

Dennis C Smith said...

I agree with the "shovel ready" comment, however as I said sell an infrastructure bill as completely separate; don't try to fool me and lie to us about "stimulus with infrastructure" call it what it is a great big barrel of pork and paybacks with lobbyists and companies lined up from WDC to Sacto. Speaking of which I completely disagree with bailing out California, like giving just one more hit to a heroin addict to soften his landing.