Morning Bell: A Trillion Dollar Failure

Conn Carroll / February 12, 2009

The United States Congress is about to pass the largest single-year increase in domestic federal spending since World War II. Despite the fact that neither the Republicans in Congress, the media, nor the American people have been allowed to read the bill, the House plans to vote on the plan today. The Senate will quickly follow suit so that the bill will hit President Barack Obama’s desk by Monday. Even without the full benefit of digesting what is in this trillion dollar debt bill, over 200 economists have expressed their belief that this plan is destined to fail. And conservative economists that once supported the idea of a stimulus are now calling the current plan “An $800 Billion Mistake.” Even center left economists like President Bill Clinton’s budget director, Alice Rivlin have told Congress that the long-term spending items in the plan “should not be put together hastily and lumped in with the anti-recession package.”

This past summer, Obama Administration National Economic Council director Larry Summers said that any stimulus bill must be “timely… targeted … and credibly temporary.” The plan coming out of Congress is none of those things.

Not Timely
The Heritage Foundation has never believed that temporary tax cuts have a stimulating effect on the economy. That is why last year we predicted that President George Bush’s tax rebates would not help the economy. The Obama Administration temporary tax cuts will be equally ineffective. However, according to the Congressional Budget Office, the tax cut portion of the stimulus bill was the fastest working part of the package. It was also one of the first things reduced in the conference committee to make room for more spending. This means the stimulus will be even slower acting than the CBO originally predicted.

Much of the infrastructure spending in the bill will also not help the economy recover. The Obama Administration’s budget director, Peter Orszag (who was previously head of the CBO) authored a report in 2008 stating: “Large-scale construction projects of any type require years of planning and preparation. Even those that are ‘on the shelf’ generally cannot be undertaken quickly enough to provide timely stimulus to the economy.” (more…)