RALEIGH – Carolina Journal reporter Don Carrington is a funny guy and a skillful photographer. But his recent story on federal stimulus funds being used to replace the motors of North Carolina fishing boats – accompanied by a photo of the program’s most representative recipient, a boat named Bite Me – required neither original humor nor trick photography.
The facts of the story were enough to ensure that it made the rounds of national media sites and blogs last week.
No one believes that the country’s fiscal problems stem from a few hundred thousand dollars spent on North Carolina fishing boats. But the story behind the expenditure is emblematic of Washington’s inability to form rational public policies.
The stimulus mania of 2008 and 2009, for example, was based on a fundamental assumption: that the federal government can create economic value by taxing or borrowing money out of private markets and spending it on current consumption.
This assumption is fundamentally wrong. You can’t fill a bathtub by scooping water from one side and pouring it into the other.
Recessions aren’t inexplicable episodes of mass hysteria that need to be combated by government flimflam. Recessions are the inevitable consequence of unsustainable spending during economic booms – booms that are typically fueled by artificially low interest rates and resulting excesses.
A recession is a period of adjustment to reality, of paying down excessive debts and unwinding unwise investments in low-performing assets. During the boom, some households lose discipline and borrow too much. Some businesses invest in what seemed like promising new ventures at the time but prove to be poor fits for what consumers actually demand when the goods or services come to market.
There is no painless way to make these adjustments. There is no short cut to reality. But for decades, politicians have chosen to tell their constituents otherwise. They have promised to inflate away excessive debts and paper over unwise decisions. And they have steered their “stimulus” spending to favored interest groups, political constituencies, and swing states they hope to win in the next election.
Franklin Roosevelt did it. Today’s liberal politicians do it, too. It’s an inescapable element of the stimulus swindle.
When called to account for their cockamamie reasoning and dishonest promises, these stimulus-mad politicians have ridiculed, blamed, and insulted their critics. In effect, they say: “Bite Me.”
In the North Carolina case that Carrington described, there was some effort to camouflage what was really going on with claims of generalized public benefit. Officials said they were using the borrowed federal funds to replace the diesel engines of fishing boats in order to improve air quality and create jobs.
It was a pitiful attempt at rationalization. Coastal North Carolina is not where the region’s air-quality problems present themselves, for example. Modernizing a few diesel motors wouldn’t have had any measurable effect on air quality anyway, even in the I-85 corridor, or on employment anywhere.
The owners of the fishing boats were simply taking advantage of an available pot of free money. Their behavior was no worse (and certainly no better) than that of many other interest groups that have discovered a way to enrich themselves at taxpayer expense.
Writ large, that’s the political problem with Washington’s spending spree. The beneficiaries know more about the spending programs than taxpayers do. The beneficiaries have a stronger incentive to play the political game. They usually win that game.
It’s time for the rules of the game to change. In Washington, some fiscal conservatives – primarily in the U.S. House – are indeed trying to rewrite those rules. They are insisting on immediate spending cuts, hard spending caps, and a long-term plan to bring federal spending in line with the historical level of federal revenues (about 18.5 percent of GDP).
So far, they are getting a big fat “Bite Me” from the Establishment. I say bite them back.
Hood is president of the John Locke Foundation.