by John Campbell | Irvine & D.C. As regular readers of this column know, I supported the Rescue Plan (TARP program) last October and believe that this program, along with the aggressive monetary actions by the Fed, prevented a collapse of our still damaged financial system. I also support a large stimulus plan in order to hasten a bottom to this economy and hopefully save many people their jobs, homes, and businesses. But the Democrat’s $825 billion stimulus plan now working its way through the House, is nothing short of awful. We are expected to vote on this plan on Wednesday, and in all honesty, I refuse to call it a “stimulus” plan since it contains so few stimulative characteristics. Instead, I will hereinafter refer to it as the “Big Spending” plan. Let me explain. The purpose of any stimulus plan is to take the recession which we are currently mired in and make it shorter and shallower. If the stimulus doesn’t do that, then it will have a negative effect since it will increase borrowing, increase deficits, and generally retard medium and longer term growth prospects. Secondly, every dollar spent by government in a stimulus package should have a multiplier that creates many more dollars worth of jobs and growth in the private sector. If the dollar spent doesn’t do that, then it is just spending and not really stimulative. This ‘Big Spending plan’ will do neither. First of all, the Congressional Budget Office says that only $26 billion of this amount will actually be spent in the next 6 months, even though the bill calls for all the grants and contracts to be let out within 90 days. So, the recession will likely be a long ways towards bottoming out on its own before any of this spending has whatever limited effect it might have. Secondly, very little of this money has any multiplier effect. If for instance, some money is spent to establish a national broadband WI-FI infrastructure, many jobs would be created in the private sector to take advantage of that new infrastructure. Subsequently national productivity would rise. But, if you spend money to paint a federal building, the only job created is the one for the guy painting the building. This ‘Big Spending Bill’ is chock full of that “paint a government building” type of spending. I don’t buy the Keynesian economic theory that government spending can be such a grand thing. But John Maynard Keynes must be rolling over in his grave at the suggestion that this stuff will somehow have a substantial multiplier effect. I could go on for pages about the bad things in this bill, but here are a few tidbits for you:
- According to the Democrats’ own committee reports, this bill will create 3.7 million jobs. That means the total cost per job is $222,972;
- There are 152 specific and separate appropriations in the bill;
- Despite President Obama’s call for infrastructure spending, the bill contains only $30 billion for roads and highways. That’s less than 4% of the total bill;
- This bill however contains $141 billion for education spending in order to “prevent teacher layoffs.” We know the problems schools are having. We can debate whether more money equates to better schools. But you cannot argue that this money creates any short-term stimulus or that there are any downstream jobs created. If you want to do this, fine. But don’t try to fool people by calling it stimulus. It’s just spending;
- There’s $50 million for the National Endowment for the Arts, $200 million to pay AmeriCorps “volunteers” (how are you a volunteer if you are paid anyway?), $600 million for the government to buy new cars (although you maybe can’t afford one), and $500 million to “modernize” the NIH campus.