It was a year ago this week that Democrats passed a bloated $787 billion package of pet projects ostensibly to try to stimulate the economy. The price tag has crept steadily higher, and the result of so much government spending has been anything but stimulating. Now, Democrats in Congress and the White House are planning more massive spending bills. If there is any hope of a recovery anytime soon, it’s important that the stimulus sequel be derailed.
The track record of the first stimulus is hardly impressive. When President Obama took office, he told Americans they had a choice: Support his stimulus and prevent unemployment from rising above 7.9 percent or do nothing and face unemployment possibly as high as 9 percent. The tune changed almost immediately after passage, and his administration claimed the economy was worse than it had realized, so expectations should be lowered. It also was unfair to hold them to their initial promises, officials protested, because times were tough. They subsequently revised their prediction at the end of February 2009, forecasting that the stimulus would keep 2009 unemployment from rising above 8.1 percent. By year’s end, more than 10 percent of Americans were jobless.
The economy has fared very poorly compared to Mr. Obama’s forecast. Using either Mr. Obama’s January or February predictions, the stimulus was supposed to limit any increase in unemployment to just slightly more than the 7.7 percent figure from the beginning of the year. But instead of a 0.4 percent maximum increase in unemployment, the rate soared by 2.4 percentage points. In fact, the jobless rate soared by more than an entire percentage point over what was supposed to have happened if nothing were done by the government to stimulate the economy.
This page predicted early last year that the stimulus would make things much worse than if nothing were done. This is because moving a trillion dollars from where consumers want to spend their money to where the government wants it spent moves jobs from some sectors to others, and the chaos caused by that dislocation triggers a temporary extra increase in unemployment. Unfortunately, it turns out that we were right in our warning.
A year after the stimulus was passed, the unemployment rate still teeters around 10 percent. If the government had not intervened in the economy, thousands of unemployed Americans would still have their jobs. Instead, government wasted $862 billion on the stimulus, which increased unemployment and moved people to money-losing, inefficient jobs that will last only as long as the federal subsidies continue. And to pay for this, Democrats left our grandchildren with a ton of debt. That’s hardly stimulating.