Freedom New Mexico
President-elect Barack Obama is reportedly committed to signing a massive “stimulus” plan of government spending — some estimates are as high as $850 billion — almost as soon as he takes office Jan. 20.
Yet even Vice President-elect Joe Biden has expressed fear the package will be “Christmas-treed” with all sorts of special-interest projects more suited to buying votes than to creating jobs or repairing infrastructure.
The U.S. Conference of Mayors has presented a $73-billion wish list to Congress heavy on amenities like sports parks and fixing bridges or expanding roadways.
The fear is certainly well-founded. Just last September, the price of passing the $700 billion financial stimulus package that has so far done little or nothing to spur economic activity (and whose details are still hidden behind a veil of secrecy) was almost $150 billion worth of pork-barrel projects. They were calculated more to pad congressional re-election margins than to add economic value. Congress being Congress … well, you know.
Alice Rivlin, who was President Clinton’s budget director, has suggested quick approval of a smaller package that would inject money into the economy quickly, such as aid to the states in meeting the expanding costs of Medicaid and welfare, additional unemployment insurance, reductions in tax withholding and perhaps even a payroll tax holiday. She supports more infrastructure spending but notes that such spending takes time to trickle down to ordinary folks and should be well-designed rather than slapped together quickly.
That would certainly be preferable to a massive pork-laden package. But it ignores the fact that any government spending must come either from taxing productive activity, borrowing, or printing money. None of these is economically sustainable over the long haul.
The only way to increase real wealth in a country is through private, profit-making economic activity that builds capital that can be invested in further economically productive activity. Real stimulus should encourage such activity.
If the new president really wants to encourage sustainable growth, he would start by looking to public-private partnerships for infrastructure, then expand his thinking to the loosening of regulatory strictures that have deterred capital investment. The Sarbanes-Oxley accounting regulations, for example, have not only added to the cost of doing business while doing little or nothing to prevent fraud (hello, Mr. Madoff), they have virtually destroyed the creation of new companies. Repealing or suspending them would liberate billions in venture capital.
Eliminating or suspending the CAF