Remember the stimulus plan? The big spending package enacted at the height of hope and change, its legacy reads like a litany of broken campaign promises. It was “only” supposed to cost $787 billion. It was intended to create or save 5.5 million jobs. It was going to keep unemployment from spiking to more than 9 percent.
Even before Barack Obama was sworn in, members of his economic team were predicting that unemployment would peak at 7.9 percent sometime in 2009 before falling below 6 percent by April 2012. Does it sound like an alternate reality?
Well, prepare to enter into this bizarro world during this fall’s presidential campaign. The White House is standing by its stimulus success story, even though 2 million fewer Americans were working in September 2011 than when the president took office. Every week it seems a new corporate boondoggle, propped up with stimulus funds or promoted as a way to create “green jobs,” goes belly up, laying off workers.
A new book by Grover Norquist and John Lott Jr. tells this story rather than repeating campaign commercial spin. “Debacle: Obama’s War on Jobs and Growth and What We Can Do Now to Regain Our Future” is a guide to the failure of the stimulus and the spend-now, pay-later Keynesian economic theories that inspired it.
Mr. Norquist is well known as the founder and president of Americans for Tax Reform, a position from which he has tangled with the Obama administration, although his usual role is fighting tax increases and keeping Republicans honest. Mr. Lott is a noted economist and academic whose work frequently challenges the conventional wisdom. His tussles with the president have been more personal.
Early in “Debacle,” Mr. Lott recounts working with Mr. Obama at the University of Chicago Law School. By way of introduction, the future president told Mr. Lott, “Oh, you’re the gun guy.” He then gave the unmistakable impression that he wasn’t interested in sorting out their disagreements about the Second Amendment over lunch.
Milton Friedman liked to remind us that there’s no such thing as a free lunch. But there is the idea that if the government takes money from one group of taxpayers and then redistributes to politicians’ friends - especially if they are members of important Democratic voting blocs - magical multiplier effects will cause this to increase the overall level of prosperity in the country. It is taken seriously by the kinds of people who believe Ronald Reagan’s economic policy was lunatic ramblings etched on wet cocktail napkins.
Mr. Norquist and Mr. Lott make the case that this redistribution frequently takes economic resources from more productive purposes and channels it into more dubious uses (take Solyndra, for example). It is easy to see who benefits from a government grant or an injection of stimulus money. It is far less obvious to see what enterprises starved for cash or which jobs were destroyed in the process.
To cast doubt on the current administration’s economic nostrums, the co-authors of “Debacle” compare the economy now to recoveries of the past; they also compare our economic performance with that of other countries that suffered from the global financial crisis but did not resort to massive stimulus packages.
What do they find? “In the first 29 months during the Reagan recovery, the number of jobs grew by 8 percent,” they write. “In contrast, over the same time, the number of jobs under Obama has grown by just 0.25 percent.” Recall that the recession of the early 1980s, following a long period of stagflation, was relatively severe. Unemployment reached 10.8 percent in 1982, the highest since the Great Depression. Similarly, annual GDP growth has averaged 2.5 percent since June 2009, compared with 6 percent over a comparable period of the Reagan administration.
Mr. Lott and Mr. Norquist contend that after the stimulus passed, Canada - a country that faces similar global problems and is economically interconnected with this nation - began to outperform the United States in creating jobs. “While our unemployment rate by September 2011 was stuck at 9.1 percent, Canada’s had fallen to 6.3 percent,” they write.
The authors point out that the Canadian stimulus was smaller than the United States’ and, instead of raising marginal tax rates, actually included a reduction of the total corporate income tax.
Similar stories can be told about Australia, Japan, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom: “The United States had more of a Stimulus as a percentage of our GDP than any of these countries. But none did as consistently poorly [in unemployment] as the United States has since the beginning of 2009.”
Finally, the authors looked at whether the states that received the most stimulus money created the most jobs. They didn’t find much of a connection, concluding, “The Stimulus didn’t create more jobs in the states that got more money.” (This reviewer has no idea why they insist on capitalizing “stimulus,” however.)View Entire Story
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