Somewhere between 75% and 85% of Americans believe the United States is on the wrong track. And if the polls are any indication, Democrats will be elected in large numbers promising a stark “change” in policy. But Americans are in for a rude awakening: Much of the economic stimulus ideas being pushed by the left have already been tried, and have already failed.
Barack Obama has proposed new deficit spending of at least $150 billion and Speaker Nancy Pelosi (D-CA) wants closer to $300 billion. This cash is slated for spending on infrastructure, expanded unemployment benefits, bailouts for spendthrift cities and states, home heating subsidies, and pork-barrel payoffs to business allies in “green” industries. Unfortunately, none of this is new. The government does not create wealth or jobs, it only redistributes them. Consider:
- President Bush and congressional Democrats already passed a $170 billion stimulus spending bill this March. Like the rebates issued in the 1970s and 2001, they were a bust, with only a small portion (perhaps less than 30 cents on every rebate dollar) used for consumption. Goosing consumption is a proven stimulus failure.
- Three years ago Congress passed a transportation bill of more than $286 billion. The transportation budget is up 22% after inflation in the past eight years. Numerous studies show that infrastructure spending does not create jobs, it only transfers them from sector to sector, with a huge dead weight loss to the economy as a whole.
- Aid to local communities has also skyrocketed in recent years. Federal assistance to state and local government has soared by 91% after inflation in eight years, and yet many localities still have their hand out.
Congress does not have a good record of micromanaging anything (think Fannie Mae and Freddie Mac), let alone something as broad and complex as the U.S. economy. Congress should do what it does best: set broad economic policy. Specifically, Congress should concentrate on signaling to investors and workers alike that its principal focus will be on improving pro-growth economic policy, mainly in the areas of tax, energy and spending policies. The test for distinguishing good stimulus ideas from bad ones should be this: Is the proposal likely to raise the economy to a sustained, higher level of growth?
Unfortunately, markets are already receiving the exact opposite signal. As Cato’s Alan Reynolds documents, the National Taxpayers Union Foundation’s analysis of Obama’s promised new government spending, excluding health care, will raise spending by another $611.5 billion over the next five years. Americans know the tax increases are coming; they just don’t know where from. The Wall Street Journal writes:
The prospect of these tax increases is now hanging over the economy like a pall, as investors and businesses wonder where and how heavily an Obama Administration and Congress would strike. The pall is likely to continue well into 2009, as millions of Americans delay their investment decisions until they know how much their after-tax returns are likely to fall.
If Mr. Obama really wants a “stimulus,” he’ll announce that given the condition of the economy he won’t raise taxes at all. Meanwhile, all of us are getting a preview of Obamanomics in action.
- Times are tough, but don’t worry about most members of Congress. Their collective wealth grew by 13% last year.
- Ohio Department of Job and Family Services Director Helen Jones-Kelly, an Obama donor, admitted she allowed the check on Samuel Joseph Wurzelbacher following the Oct. 15 presidential debate.
- Indiana Secretary of State Todd Rokita said a preliminary investigation of ACORN by his office has found evidence of “multiple criminal violations, including possible state and federal racketeering laws.”
- In a damning blow to its fight against drug traffickers, Mexico acknowledged severe penetration of a top law enforcement agency by a vicious gang that may have bought intelligence on U.S. operations from renegade employees.
- In another blow to the language of love, the Rwandan government has decided to change instruction in schools from French to English.