The Stimulus Bill Tragedy

It looks like it’s a done deal. With 3 Republican Senators breaking with the rest of the party, the Democrats, with the help of 3 turn-coat Republicans, are poised to pass a massive trillion dollar expansion of government at all levels. The states get bailed out for wastful spending, and every pet pork project gets funded. As the saying goes, “Elections have consequences”. The consequences of this massive move towards deficit spending are not going to be good.

The reaction to the generational theft has been fairly negative in the polls and across the blogosphere, so I will not rehash all the reasons this “stimulus” bill will not stimulate. But I did want to emphasize two points with this epic congressional shift to the left.

First, support for the pork bill from the Northeast is embarrassingly strong. In fact, two of the Senators who broke ranks with the Republican resistance are from New England: Senators Snowe and Collins from Maine. Without these two turning, the Republicans in the Senate could have joined their House colleagues and made a major statement on fiscal responsibility. Needless to say, the entire Massachusetts congressional delegation will vote for the massive expansion of government. More government please!

Second, it is alarming how many of our representatives truly do not understand how the economy works. When President Bush cut tax rates, the economy surged right out of a downturn. When ‘tax rebates’ were the choice for improving the economy in early 2007, there was a brief spurt of retail spending which lasted about 3 months and then faded. We are not in uncharted waters here – different solutions have been tried for kick-starting an economy, and the results observed. Tax cuts work. Tax rebates (even if called cuts) do not. The Democrats have no intention of letting economic reality get in the way of ideology.

So where are we headed? The stimulus bill as now constructed will not stimulate the economy. In fact, the economic cycle that would normally run its course and lead to an upturn will be hampered and delayed by this reallocation of capital from the private sector to the public sector. A stimulus bill that focused on direct “shovel ready” products might have helped speed up the cycle. Spending on transportation infrastructure, or the military, or improved broadband capability, or improving the electric grid would all put people to work directly, and provide a long-term benefit to the economy (or the defense of our economy, in the case of military spending).

A trillion is a lot of money. That is it going to be wasted on pork is a tragedy of epic proportions.