The Obama Splurge / Stimulus: "A 40 Year Wish List"

Via a kind reader's email: The Wall Street Journal:

"Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before."

So said White House Chief of Staff Rahm Emanuel in November, and Democrats in Congress are certainly taking his advice to heart.

And don't forget education, which would get $66 billion more. That's more than the entire Education Department spent a mere 10 years ago and is on top of the doubling under President Bush. Some $6 billion of this will subsidize university building projects. If you think the intention here is to help kids learn, the House declares on page 257 that "No recipient . . . shall use such funds to provide financial assistance to students to attend private elementary or secondary schools." Horrors: Some money might go to nonunion teachers."

Jeffrey Sachs:

The US debate over the fiscal stimulus is remarkable in its neglect of the medium term - that is, the budgetary challenges over a period of five to 10 years. Neither the White House nor Congress has offered the public a scenario of how the proposed mega-deficits will affect the budget and government programmes beyond the next 12 to 24 months. Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package.

We are told that we have to rush without thinking lest the entire economy collapse. This is belied by recent events. The spring 2008 stimulus package of $100bn (€76bn, £71bn) in tax rebates was rushed into effect in a similar way and we now know it had little stimulus effect. The rebates were largely saved or used to pay down credit card debt, rather than spent. The $700bn troubled asset relief programme bail-out was also rushed into effect and its results have been notoriously poor.

The Tarp has not revived the banks or their lending, but it has supported a massive transfer of taxpayer wealth to the management and owners of well-connected financial institutions. Some of those transfers - as in the case of Merrill Lynch using its government-financed sale to Bank of America to enable $4bn in bonuses last month - are beyond egregious. Yet the US is now inured to corruption and in such a rush that even billions of dollars of public funds shovelled into Merrill's private pockets in broad daylight barely merited a day's news cycle.

More from Victor Davis Hanson and Greg Mankiw on the Congressional Budget Office:

So only 8 percent of this spending occurs in budget year 2009, and only 41 percent occurs in first two years. Note that spending on transfer payments and tax relief occurs much faster than this: click through to the above link for details.

Mario Rizzo quotes Keynes:

"Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle."

Finally, a look at the origins of the Madison School District's $18M slice of the splurge. Long time Wisconsin Congressman David Obey is chair of the House Appropriations Committee, a position that gives him a prime seat for earmarks.

Finally, Nanette Asimove notes the proposed borrowing and printing money for California.

Posted by Jim Zellmer at January 28, 2009 8:13 AM
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