For those who were expecting change in Washington it appears to be business as usual. Actually, the status quo goes back much further than the founding of America.
When the Roman Senate wanted to do a “head fake” on the ancients, they would stage extravaganzas at the Circus-Maximus to distract the citizens from the empire’s problems.
Today we have a president and vice president (who between them have never held a real job in their lives) selling us a $1 trillion employment stimulus package containing: $1 billion to research which treatments Medicaid intends to deny, another billion for the 2010 census, $800 million in welfare for Amtrak, $400 million for climate change study, $335 million for sexually transmitted disease education and my personal favorite, $650 million for digital TV conversion coupons.
According to the Congressional Budget Office, in exchange for an amount of money that will exceed our expenditures on the wars in Afghanistan and Iraq combined, and that will nearly double our national deficit, we will get an amount of economic stimulus in 2009 equal to approximately $26 billion (2.6 percent of a trillion) and $110 billion in 2010 (11 percent of a trillion). The truth is that the only thing “shovel ready” about this stimulus package is the people selling it.
Christina Romer of the University of California-Berkley, a highly respected economist and newly appointed chair of the President’s Council of Economic Advisors, authored a paper in 2000 entitled, “What Ends Recessions?” Her conclusion, “Discretionary fiscal policy (government spending) does not appear to have had an important role in generating recoveries.” If academic papers don’t persuade you, check out Japan. The Japanese government has been stimulating its way out of recession since 1992. It hasn’t worked so far, but maybe this year we will both get lucky.
There is an old saw that says if you want to understand what’s going on, follow the money. So instead of spending a trillion dollars to fix the crux of our current economic dilemma (Hint: it’s the banks, stupid) we are going to pursue a stimulus scam that has nothing to do with economics, but is instead a political masquerade designed to replace the invisible hand of the market with the visible hand of government.
In the words of House Speaker Nancy Pelosi, “We won the election. We wrote the bill.” I prefer the words of John Stuart Mill who in his classic work On Liberty wrote, “The most cogent reason for restricting the influence of government is the great evil of adding to its power. For every function added to government converts more of the active and ambitious among us into hangers-on and where everything is done through the bureaucracy, nothing to which the bureaucracy is adverse can be done.”
The power hungry in Washington want us to need them and they know that a crisis is a terrible thing to waste because nothing diminishes reason more than fear. So enjoy the circus because by the time these clowns are done with the country, we are going to need the laughs.
Rich Shields of Scottsdale is a visiting professor of economics at universities around the world.