PrintSeptember 11, 2010
Election-Eve Stimulus
"When government talks reform on the eve of an election year, you can bet whatever they do will be based on the time honored principle of robbing Peter to pay Paul" (Reagan, in His Own Hand, New York 2001). That was Ronald Reagan in mid-October 1977, in advance of the '78 midterm elections. Reagan was responding to plans by Jimmy Carter to expand infrastructure spending -- an eerily familiar plan intended to create jobs in the midst of stagnant economic growth.
Reagan understood that such election-eve spending was little more than a cheap sleight of hand. Shifting spending forward and adding it to the deficit -- robbing Peter to pay Paul -- does nothing to spur long-term growth. It is, in fact, merely another species of unfunded stimulus spending, a loan secured against the earnings of future generations.
President Obama's recent proposals for $50 billion in new infrastructure spending and $100 billion in business investment write-offs are little more than election-eve theatrics intended to divert attention from his failed economic policies. And like Carter's election-eve spending, they rob Peter to pay Paul.
Obama announced his infrastructure-spending proposal in front of a welcoming crowd of union workers. Those same workers might benefit from government contracts that require union pay scales, but they would not benefit as much as their union bosses or the Democratic politicians who receive union contributions.
As for $100 billion in business investment credits, moving those credits forward does little for long-term growth. Those few businesses with existing investment plans may move them forward to take advantage of accelerated write-offs, but with taxes and the regulatory burden rising, little new investment will be stimulated. "Cash for credits" is just another version of "cash for clunkers." It is the same as stripping equity out of a house to pay for short-term expenses. As such, it is just what we might expect from a president who surrounds himself with foolish and inexperienced advisors. It is, like all forms of stimulus, a short-term loan that will be called in soon after it is extended.
The most important fact about Obama's new stimulus proposals is that nothing has been said about how to fund them. If enacted, they would add $150 billion to the 2010 deficit of $1.5 trillion. Or they would be paid for with $150 billion in new taxes. Either way, they are robbing Peter to pay Paul. No wonder business leaders are skeptical.
As it is, Obama knows full well that they stand little chance of being enacted. They are, in the purest sense of the term, political theater, and Obama is now in full performance mode. Having just spent six weeks on vacation, he will spend the next six weeks on stage, hoping to preserve a Democrat majority in Congress.
What else will Obama come up with in advance of the November election? Another $250 check for senior citizens? An iPad for every student? A Carnival cruise for every voting-age American? More likely, another grandiose new proposal to lift the country out of stagnation -- but one with no chance of passage before or after the election.
When it comes to election-year stimulus, Reagan was right. Election-eve promises of pie-in-the-sky, or in this case jobs in the future, are as common as blackbirds in Georgia. When Obama campaigned for the presidency, he promised prosperity like none we had seen before. He was going to save the middle class, save working families, save Social Security, save our homes, our cars, our jobs. He was going to lead the country into a new age of prosperity for all -- not via the time-tested path of allowing Americans to work and save for themselves, but by government doing it for them. Nothing could be easier, but it hasn't happened, and of course it never will.
Again, after the inauguration, America was promised that $862 billion in stimulus spending would usher in a new age of prosperity. When that failed, further stimulus was passed with the assurance of recovery just around the corner. Now we are promised a bright future of jobs for all, if only another $150 billion is spent on union jobs and business credits.
For this administration, hard work and saving have nothing to do with it. Nothing as mundane as that. What the president offers now is a bold new six-year plan (besting the familiar five-year plans of his socialist predecessors). Will it work? Did it work in 2009, when not just $150 billion, but over a trillion was budgeted for stimulus? That spending produced little in the way of jobs but a great deal in the way of more government.
Yes, grandiose promises are what we might expect from this president ahead of the midterm election, but what's most important is his silence on the issues that count. Silence on making the Bush tax cuts permanent, silence on cutting government spending, silence on tort reform, refusal to rule out card-check legislation in the lame-duck session after the election. On September 8, in fact, Obama boasted that he intended to raise taxes on small business owners making more than $200,000. That is half of the small business owners in the country, and nearly all of those who are capable of creating new jobs. Obama's proud boast that he will raise taxes on "the rich" -- by which he means those small business owners earning enough to reinvest their earnings and hire new workers -- assures that the unemployment rate will stay above 9% for years to come.
Of course, no one really expected the Democrats to change their stripes and actually support growth-related policies, now or after the election. Nothing has changed in these weeks before the midterm election. There are the same outworn tax-and-spend policies on the part of the Democrats and the same false promises of pie-in-the-sky -- and that, as Ronald Reagan wrote long ago, was just what one could expect in advance of an election.
Jeffrey Folks is the author of many books and articles on American culture and politics.
