Thoughts on the stimulus

President Obama is expressing confidence that his economic stimulus package will be passed by Congress sometime in mid-February, which he contends will create 3 to 4 million new jobs. At $825 billion, that works out to about $235,000 per job created.

His optimism is my despair.

Obama has spoken of the need for renewed hard work and sacrifice but this stimulus package represents nothing of the sort. Real solutions and appropriate action to address the economy should produce screams and teeth gnashing out of Congress as the burden is shared, and instead we hear only squeals of delight as the pigs head to the trough.

As others have noted, this economic crisis appears to be rooted in people borrowing and spending money on dubious investments. So the proposed solution is to...borrow a bunch of money and spend it on items of questionable benefit. Here's what über-investor Warren Buffet had to say on the benefit of the stimulus package:

The answer is nobody knows. The economists don’t know. All you know is you throw everything at it and whether it’s more effective if you’re fighting a fire to be concentrating the water flow on this part or that part. You’re going to use every weapon you have in fighting it. And people, they do not know exactly what the effects are. Economists like to talk about it, but in the end they’ve been very, very wrong and most of them in recent years on this.

So, we're just going to spend a bunch of money -- i.e. add to our already crushing debt load -- in the name of doing something, even if we don't know if it will accomplish anything. The Congressional Budget Office performed its own analysis and came to some inconvenient conclusions:

CBO, a group of economists whose head is appointed by Democratic Congressional leaders, reported on Sunday that less than $4 billion of the $30 billion in new highway construction money included in the current Obama "stimulus" package would enter the economy's bloodstream by 2010. Other spending, such as that promoting renewable energy, broadband Internet connections and jobs programs, wouldn't have any impact on the economy for at least a year.

Now, while the impact may be uncertain, it does appears that the hundreds of billions of dollars that have been spent under the TARP program have done little to staunch the bleeding. Also, looking back over history it is difficult to point to even one single example of a country that has spent its way to long-term prosperity. The only possible example I can think of is the U.S. during World War II, but as I recall from my history books that time period wasn't exactly a bowl of cherries with all manners of goods carefully rationed and the country left with a bunch of weapons that didn't serve much purpose once the war had ended.

Indeed, I am amused by the number of people that cite Keynesian economic theory -- such as Joe Biden, who is either ignorant or mendacious -- as a chief justification for the spending. Apparently what occurs in theory is more important than that which takes place in observable reality.

On a related note it is worth pointing out that for all of Obama's talk about tax cutting what his plan actually contains is a $500 per person payroll tax refund for individuals earning less than $200,000. This isn't tax cutting. Tax cutting is when rates are cut. This is simply a handout of money -- something that the Bush Administration did last year to little discernible effect. Repeating the same action in hopes of a different outcome is cited by some as the definition of insanity. It certainly isn't the definition of change.