RALEIGH – Even as the latest unemployment numbers demonstrate the ineffectiveness of the Obama administration’s stimulus policies, the president’s defenders are fighting to the bitter end to defend Keynesian pump-priming and interest-group politics disguised as macroeconomic policy.
The truth has become evident to any fair-minded observer: having the federal government borrow gobs of money from investors to redistribute to government employees and contractors is not a serious plan for rebuilding the American economy. It is merely a plan to encourage greater dependency on federal deficits and pave the way for a future, permanent increase in government spending and taxes.
It is, in other words, a plan to turn the U.S. into a European-style welfare state. Given the chronic economic malaise and public disaffection plaguing much of Europe, only a fool would see such a project as one of stimulus.
The failure of the administration’s policies was entirely predictable – and predicted. As economist J.D. Foster pointed out last week, the president is paying the price for his expansive rhetoric in the past by now having to explain away a 7.6 million “jobs deficit”:
The president’s original target for jobs creation, set during the 2008 fall campaign, was 2.5 million jobs. But as employment fell at the end of 2008, he increased the employment target to 3.5 million jobs. At the time, employment stood at about 135.1 million, according to the [Department of Labor]’s most commonly used measure. This establishes the Obama jobs target for December 2010 at 138.6 million. It also establishes a basic trajectory for employment that the economy would need to approximate to hit that target.
According to the latest jobs report, total U.S. employment stood at 130.2 million in July, which means the cumulative Obama jobs deficit stands at 7.6 million.
The president and his defenders, including some politicians and commentators here in North Carolina, continue to ignore or deny some basic truths.
First, every dollar Washington spends on “stimulus” represents a dollar either taxed or borrowed out of what would otherwise be job-creating private expenditures on goods and services, including private investment in new capital goods. Arguing that forcible income redistribution is good for the economy, because rich people invest and poor people spend, is about as sophisticated as arguing that lightning bolts are hurled from Mount Olympus or that warts come from handling toads.
Second, having convinced itself that it was making America richer by moving dollars from one pocket to another, the Obama administration set about inflicting blow after blow on business confidence by proposing new regulations, taxes, and spending programs. As Bloomberg Businessweek reported last month, the resulting uncertainty is acting as a major drag on investment and job creation:
In the U.S., banks are unsure how much extra capital regulators will require them to set aside. Power companies are waiting to see if the government caps carbon emissions, and human resources departments are still calculating the costs of the 10-year health-care overhaul Congress passed in March. A big unknown is the fate of former President George W. Bush’s tax cuts on personal income, capital gains, and dividends, which expire in January unless Congress extends them.
What would really help speed up America’s economic recovery would be for liberal politicians in Washington and state capitals to stop trying to help. Announce right now that there will be no more fake stimulus, no tax increases, no more bailouts, no new regulatory regimes. Instead, announce that federal and state officials will spend the next several years reducing government spending to an affordable level, eliminating low-priority programs and increasing the productivity of core public services such as public safety, education, and highways.
For the private economy to begin a healthy recovery, business managers, investors, and entrepreneurs need more certainty about the fiscal and regulatory future. Otherwise, they’ll never been willing to take the necessary risks to create economic value – which is the only way to create new employment opportunities that will last.
Most “stimulus” amounts to paying people to dig ditches and them fill them up. Lots of effort is expended to create a muddy field. Just stop it.
Hood is president of the John Locke Foundation.