IBD:
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In one, government gives money to consumers and hopes they spend it. In another, the federal government directly buys goods and services, ranging from computers to building infrastructure. In the third, government hands money to state and local governments to spend.
The $862 billion stimulus package passed by Congress and signed into law by the president tried to do all three things. Unfortunately, none of them worked — a huge repudiation of the ideas behind Keynesianism.
In the case of money handed over to consumers, "It went to pay down some debt or was simply saved rather than spent on consumption." What about federal infrastructure spending on "shovel-ready" projects? Didn't that work? Hardly. In fact, what's stunning is to discover how little was actually spent on this, the supposed centerpiece of stimulus.
At the federal level, the stimulus generated just $20 billion in added government purchases, about 3% of the total spent. And of that amount, only $4 billion was spent on infrastructure. Four billion — that's it.
Then there were the grants to state and local governments, which were expected to get local economies revving again. Didn't happen, according to Cogan and Taylor.
From the time the stimulus was first enacted in March 2009 to the end of the third quarter of last year, $173 billion was handed out to state and local governments under the plan, the authors say. The impact of all that money? "Negligible."
The reason for this is simple: State and local governments didn't use the money to "stimulate" anything. Instead, they used it to reduce borrowing. In short, we were issuing massive amounts of federal, taxpayer-funded debt to help poorly run states reduce their own borrowing.
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The U.S. had 109.51 million private-sector jobs in March 2009. As of December 2010, there were 108.45 million jobs — a decline of nearly 1.1 million. So when the White House claims to have "saved or created" as many as 3.5 million jobs with its stimulus efforts, it's an outright falsehood.
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The report is not complimentary of the
TARP bailout either. We are looking at trillions of dollars in spending that did not work to improve the economy. Most of it just postponed a day of reckoning where state and local governments would have to make tough cuts to get expenditures in line with revenues. That is what states are now having to do, now that voters have made it clear they have had enough of the massive spending programs.
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What an excellent overview touching on what is wrong with attempts to cure government over-spending with more overspending (akin to solving your credit card problem by getting another credit card, something that would soon drive any household into bankruptcy, ahh, the benefits of controlling the Fed!) Of course, such policies are already forecast to lead to serious increases in inflation, beginning with food and clothing, (which we are already starting to see) which hurts who the most? You guessed it, the "working poor" we are led to believe "benefit" from the present Administration's policies.
ReplyDeleteAs you point out, (and rightly so):
1) CONTRARY to what we were promised by the Obama Administration, there were NOT any "shovel ready" projects as we were told to sell us this drastic increase in the national debt that is now saddled upon us and our offspring for likely generations with its resulting loss of jobs and economic independence of millions of people.
1) Like the snake oil "promise" of the Administration that unemployment wouldn't rise above 8%, these promises of Porkulus' effects, rather than the benefits "coming on line" later as some progressive still are claiming the long term effects will likely just increase the obligations of State government's (that will in turn need even more "help" and/or need to maintain such "projects" long after federal "help" dries up). Indeed, in this sense the Porkulus (called so for the hundreds of special interest payoffs and perks in the bill), only provided the States with an incentive to put off their own much needed fiscal reform (and an ensuing recovery) to their long-term financial detriment.
2) All Keynesian and liberal arguments deny the one basic, indisputable fact that, as that alluded to in the above article, GOVERNMENT CAN'T 'CREATE' JOBS, but only robs the ability of the private sector to do so much more efficiently. (Are you so young not to have heard of the "five hundred dollar toilet seat" fiasco of the 80's? Surely you have dealt with the "efficiency" of your local department of motor vehicles!?)
Overall a great post!
Jp Andreas, Pres. ACLP
www.theaclp.org