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Monday, February 16, 2009

The stimulus bill

When the stimulus bill -- officially titled the American Recovery and Reinvestment Act -- was first announced, most Americans probably reacted the same way I did: well, they have to do something, and they certainly can't do any worse than the last administration.

On top of that, we had Obama's word that there is "no pork in the stimulus bill."

But the more one looks, the more one uncovers portions of the bill that, if not exactly pork, are suspiciously sausage-like. Much of it hardly seems the first thing you'd think of to stimulate the economy. (The great thing about writing a 1071 page bill is that there are plenty of hiding places, and you can be sure very few people, if any, will read the entire thing.)

The bill was originally ballyhooed as an infrastructure rebuilding bill, and there are in fact ample provisions for that. If we can repair our crumbling bridges and highways and create jobs at the same time, why not?

There is also a lot of money earmarked for education. Education is always a hard cause to argue with, although much of the money thrown in that direction seems to have little end result. Barack Obama (with a few others, including Bill Ayers) took $49.2 million for the Annenberg Challenge and helped funnel it to various pet causes within the Chicago school system -- after which standardized test scores in the city changed not a whit. The schoolchildren of Washington D.C. have more spent on them per capita than those of any state in the nation, yet they rank third from the bottom on standardized tests.

There is a fair amount of money for research and development, such as a billion dollars for NASA and $1.6 billion for the Energy Department's Office of Science.

There is $20 billion for food stamps and another $2 billion for child care in the package. It's hard to argue with welfare for the poor given that welfare for the rich, i.e., Wall Street, is now government policy as well. And it's also true that aid to the poor is more directly stimulative, since the poor are more likely to immediately spend whatever small windfall they get from the government.

There is a $500 "tax break" for individuals who pay no taxes. Again, one can hardly object to welfare for the poor when we all know that much of that TARP money found its way into Wall Street bonuses. But what raises the hackles here is the obvious subterfuge. It's simply not a "tax break" when a person doesn't pay taxes to begin with. It's welfare. So why not call it what it is?

But, this money will go to someone, who will in turn spend it, thus having a stimulative effect on the economy.

There is $50 million earmarked for the National Endowment for the Arts. One can only wonder which artists that money will go to. And who will determine which art is worthy of subsidy? (Perhaps that should be "art" with quotation marks.)

But again, some people will end up with that money, and they will spend it in turn, stimulating the economy.

There is $4.2 billion slated for "neighborhood stabilization activities." This has the Republicans crying foul since this money could easily end up in the hands of organizations like ACORN, which are thinly disguised political operations. (Just to be clear: the federal government will be handing out money to organizations whose main purpose is to get the federal government to hand out more money.)

But some people will end up with that money, and they will spend it in turn....

There is $400 million earmarked for antismoking initiatives and campaigns to reduce sexually transmitted diseases. These may be good causes, but are they economically stimulative?

Well, some people will end up with that money....

There is $8 billion for high speed rails, some of which could go to Senator Harry Reid's pet project, a high speed train running directly from Los Angeles to Las Vegas in his home state of Nevada. There is $30 million for a nature park in San Francisco, Representative Nancy Pelosi's home district.

And some people will end up with that money....

[I have a suggestion. Why doesn't the government just give me a billion dollars? We can call it the American Patriot Emergency Economic Recovery Act. After all, I am patriotic. And the title implies that if you don't vote for it, you're not patriotic. I can guarantee that the result would be economically stimulative. Ferrari dealers, liquor store owners, fancy clothiers, and expensive resort operators would suddenly find they had more business. And they in turn would spend some of that money....]

Given that the Democrats did not consult at all with the Republicans when crafting this bill, it does seem as if it has been cover to sneak more than a few of their pet projects under the guise of stimulating the economy.

Please note that this essay is not a defense of TARP I, which has not gone for the cause for which it was originally passed. Nor is it a defense of all the money wasted on useless wars in Afghanistan and Iraq.

Speaking of which, one factoid making the rounds in the news these days is that most historians agree that what eventually lifted us out of the Great Depression was not FDR's public works projects but WWII.

In which case the solution seems to be right in front of our eyes: we should escalate the "war on terror," and bomb Iran, Syria, Turkey, Jordan, Lebanon, and Saudi Arabia. Oh, and don't forget Indonesia -- they have Muslims too. (Actually, the way things are going, we should probably now include England too on that score.) This could be just what our economy needs -- World War III.


Anonymous said...

I agree with your point that all the money gets put in circulation one way or another, no matter how ill-conceived the specific government injection. But the ill-conceived ideas are not likely to produce long term growth, which is what we need to climb out of the recession as well as the massive debt the government is presently incurring. Why not grant the entire government stimulus to individuals and corporations, and let them save, spend, or invest the money on their own? People and corporations making bets with their own stimulus money would have to lead to greater growth and economic prosperity.

John Craig said...

Anonymous -- I agree completely, and that was sort of the point of my post. The bill is basically a Democratic wish list disguised as an emergency stimulus. Historically, the way the government has stimulated growth is by cutting taxes, and letting the market decide where the money should go. This time around it's the Democrats figuring once again that individuals are too dumb to know what to do with their own money.