Monday, February 16, 2009

Final Plea Against The Largest Spending Bill In History

With Obama about to sign this thing at an invitation-only event tomorrow, I'm days, if not weeks, late to post this, but here it goes:  Here are my arguments for why H.R 1, the American Recovery and Reinvestment Act of 2009, better known as the "Stimulus" and gaining recognition as the "Generational Theft Act of 2009" is a really bad idea.

1. $787 billion (that's billion with a B!) is a lot of money.

And all that money has to come from somewhere. The government can either raise it by taxing or taking on debt. Or they can print more money. No one (or few people) are talking about the negative effects of these three possibilities. If we print more money, we get inflation. Borrowing more puts our credit rating at risk and leaves future taxpayers to have to cover the principal and the interest. And raising taxes moves capital from the private sector (the sector we are trying to stimulate!).

2. $787 billion is a lot of money.

OK, so, I repeat myself. But I want you to understand how big that number is. It's $787,000,000,000.00. If you had a pile of that much money in one dollar bills and you stacked it, you'd get about a fifth of the way to the moon. (So, it's literally an astronomical number).

If you had one second for each dollar in that sum, you'd have enough seconds to make up about 24,325 years. Humans started writing things down only 6,000 years ago. 24,325 years is a lot of seconds.

Put yet another way, with Obama's $500,000 executive salary cap now in place, using the $787 billion, you could hire 1,574,000 executives. That's a lot of fat cat executives making a cool half million a year.

Finally, the "Stimulus" costs about $5,700 per taxpayer. How many ways can you think of of how you might prefer to spend $5,700?

3. The government has a really poor track record.

Question: How well did the government do at spending vast sums of money on the Iraq War, Katrina recovery, and Boston's Big Dig?

Let's go ahead, and for the sake of argument, propose that by magic the Congress has really out done themselves here and only a mere 1% of this bill is going to get lost to fraud. But wait, 1% would be nearly 8 billion dollars. Add together the Gross Domestic Product of Nicaragua and Belize. You'll come to about 8 billion. More realistically (based on, say, Katrina figures), we'll see fraud and other waste eat up something like 12% of this bill. So, maybe $100 billion. Yes, billion.

Add on top of this the fact that the government wants to spend much of this as quickly as possible, and we're just setting ourselves up for poor oversight and fraud, waste, more fraud, and more waste.

4. The government doesn't have the information it needs.

Let's guess that between members of Congress, their advisors and the President and his advisors we've had 2,200 people work on this bill. Let's further suppose each of these people had equal weight in putting together the bill such that each person allocated the same amount of money within the bill. That means they each had to allocate more than $350 million. Now consider how you would allocate $350 million dollars - more than a third of a billion - to best help our economy. You probably have no idea. Neither, I'm sure, do they. It's just too much money to know how to precisely use it well. There's too much going on in the economy for an individual to know enough to make meaningful macroeconomic decisions like this. (Note: Arnold King expands on this argument better than I do, here.)

By contrast, when we interact with the economy as private citizens, amazing things happen. We all know our individual niche needs and desires and we can use the information we each individually have to produce some amazingly complex, but still largely efficient, systems. In fact, there are even rewards for being more efficient. But, when a relatively small number (say 2,200 instead of 300 million) are calling the shots they lack this information and these rewards for efficiency.

And to make matters worse, this bill was rushed. The bill was debated for less than an hour in the House to limit input from the Republicans. The pre-conference version of the bill was finalized less than 72 hours before the Senate voted on it. (And, if you could read the bill's legalese at a pace of one page per minute, it would take you more than 16 hours just to read the thing.) And if you divide the bill's cost by the number of seconds spent working on it, you come to one million dollars per second. How do you adequately put in safeguards for prudent spending when the rate is $1,000,000.00 / second?!

5. History says it won't work.

Despite (or because of) the massive spending of the New Deal, the Great Depression lasted ten long years. The Pelosi/Reid/Bush "Stimulus Checks" of last year haven't made a dent in this current recision. Neither have the hundreds of billions used under the TARP program.

Or, looking outside the U.S., Japan spent the 1990s trying to revamp their economy by Keynesian style defecit spending on infrastructure. It didn't work.

And finally, if you look at the historical data - government spending does not create jobs.

6. It's not stimulative.

At least not most of it. Most of it is useless pork. (Here are some more examples.)

Most seem to be putting the "stimulative" portions of the "stimulus" at about 20% of the bill. It makes you wonder why we aren't passing this bill instead.

And for the claims (falsehoods?) about how we, absolutely, positively, must pass this NOW and get money moving NOW, almost half the bill's spending doesn't take place until after 20 months.

Bruce McQuain of QandO puts it well when he terms the bill as "Long On Pork And Relief - Short On Stimulus And Jobs".

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