By the time this issue of the Post hits the streets, the $787 billion stimulus package may well have been passed by both House and Senate. The bill goes 1,071 pages, which virtually no one voting on it will have read. Its proponents freely admit that they don’t know when, or even if, the package will work to end the recession, and it appears that most of the spending will not even take place until after 2009.
Anyone’s analysis of the bill must inevitably conclude that most of its expenditures will have little or no stimulus effect anyhow, but will simply buy stuff that various politicians want regardless of the shape of the economy. (While Speaker of the House Nancy Pelosi and President Obama were denying the existence of special projects and earmarks in the bill, New York Senator Chuck Schumer baldly asserted that Americans didn’t care about a little pork.) Somehow, a recession makes this stuff affordable, when it wasn’t when times were flush.
Why, then, is there this lemming stampede to pass the thing? We know for sure that we have a recession. Recessions are a fact of life. They come around on a cyclical basis. Despite the reckless and hysterical blathering about “crisis” and “catastrophe,” the consensus of economists is that unemployment will peak at about 9% without a stimulus package, whereas the high during the 1981-2 recession was 10.5%. Most economists still think we will start to see positive growth again in the second half of 2009. (Google Lane Kenworthy/Consider the evidence.)
Surely there is pain all around in good measure, and those who lose their jobs or have their hours cut are not likely to be comforted much by the knowledge that it was considerably worse in the early ‘80s. But suddenly incurring a $2 trillion federal deficit, to no predictable good outcome, will have certain, negative effects on our economy and this country for years to come.
Paying interest on this debt will inevitably raise interest rates, and crowd private borrowers out of the credit markets (one of the reasons for our present predicament.) The blizzard of printing-press dollars in the economy will generate serious, massive inflation. Those who were in business back in the early ‘80s will mostly agree that it was harder to deal with the Jimmy Carter double digit inflation than the 10.5% unemployment that ensued when Reagan took office.
There will be little government money to do anything but pay interest on the ballooning debt, and if the same thinking prevails that is behind this rush to pass the stimulus package, it will revert to the discredited notion that a deficit can be paid down by further strangling an ailing economy with tax increases.
And the only safe and well-paid jobs left will be held by the politicians and their special retainers, mostly in government work of one sort or another. This is not the change we were waiting for.