The boneheaded economic stimulus package authored by the president and forwarded by the Democratic Congress aims to push the federal government deeper into debt in order to buy the quiescence of citizens worried about recession. This is a bad idea. Exactly how bad is a matter of some dispute.
The package will send so-called “tax rebate” checks of between $500 and $1,500 to most U.S. households with annual incomes under six figures. The total price tag of this buy- off has been estimated at $145 billion. The final cost may be more.
In early February White House Office of Management and Budget (OMB) director Jim Nussle held a press conference at which he spoke in carefully scripted phrases about the stimulus package:
Obviously, the bipartisan growth package that is pending on the Hill right now – which we include in this budget, at $145 billion, and we hope will soon pass – combined with a sluggish economy, does pose some challenges with regard to the deficit. That bipartisan bill will raise the deficit by $145 billion, and obviously that will have an impact, but we believe that this up tick is temporary….
Nussle’s theory is that the stimulus package will avert a recession, keep the U.S. economy growing and assure more tax revenues coming into federal coffers.
This is like taking a pay-day loan in order to go to Las Vegas, hit the craps table, and come home with enough cash to pay your mortgage and winter heating bills. Sure, it’s possible. But not very likely.
Also, note Nussle’s repeated use of the term “bipartisan.” He pasted that word to any mention he made of the stimulus package, throughout his press conference. The net effect was that even he suspects the buy-off is a bad idea – and he’s get- ting ready now to share the blame later. Here’s more:
… the President decided that he wanted to take 1 percent of the economy – that was the size of the growth package he wanted, 1 percent of the economy, and that’s where we arrived at that $145 billion. And the Congress agreed with that. In fact, it appears, from what we hear, that Congress wants to add to that, driving the deficit even higher than what we’ve done in a bipartisan way.
Adding to the confusion about the ultimate cost of this stimulus: Some OMB projections show the federal budget deficit for Fiscal Year 2008 growing from $162 billion (pre-stimulus package) to $407 billion, counting the package. That suggests the total effect to be more like $245 billion.
Nussle suggested that the extra $100 billion in operating losses comes from lower projected tax revenues and a $70 billion “placeholder” calculation for expenses related to the Iraq war that don’t show up the regular budget. “So,” said Nussle, “it’s not all the growth package, but that’s the most significant part of it…. Some of it is from the excess spending that was done over and above the President’s budget this last year on the part of Congress, but most of it is this bipartisan growth package.”
In other words, in fiscal ’08, we’ll be adding an extra quarter-trillion dollars to our $9 trillion national debt. This is not where many Americans expected to be, near the end of the second term of a president who claimed to be a common-sense, fiscally-responsible conservative. How did Nussle explain all the red ink? With a familiar refrain:
. .. the attacks of September 11th; the emergency spending that went into dealing with homeland security, an entire new department that was created to protect our country and which has protected our country since that attack; a global war on terror; two wars, in Afghanistan and Iraq; the emergencies with Katrina and the tsunamis.
It’s not just the critics of the Bush Administration who complain about these things; Bush’s own OMB director sounds like Ron Paul, connecting international adventures and bureaucratic bloat to our growing debt. The Bushies know that their policy choices have further indebted the country; and they still believe they’ve chosen correctly.
Finally, one of the worst effects of creeping statism is its corruption of all fiscal discipline. In an environment of insolvency, there’s little incentive to be careful. Nussle embodied this corruption. He justified the administration’s spendthrift ways by contrasting them to bigger problems:
We need to do more to keep spending in check in order to balance the budget by 2012 and address the longer-term spending challenges. . . . we need to make sure that mandatory spending, which is overwhelming the rest of the budget, is also held in check. Now, mandatory spending [is] spending that’s on autopilot. … And the current trends are, frankly, not sustainable. In the next 35 years alone, the automatic spending portion of this budget will completely swallow all of the revenue that’s available, which means there will be no money available for some of the basic responsibilities of the federal government, such as national defense and homeland security…. we’re 10 years out now from some of the challenges in Social Security, and that this unfunded $34 trillion liability in Medicare is going to completely consume the budget.
To this end, Nussle boasted about Bush’s efforts “to get Medicare growth under control. ” Specifically the Bush Administration has proposed that Medicare spending only increase 5% a year – instead of the currently-budgeted 7.2% a year. Over five years, this slower growth would”save” some $178 billion.
Which the federal government is borrowing, instead to make people feel less worried about recession.