WaPo's Samuelson savages the stimulus
Economic columnist for the Washington Post, Robert Samuelson has not been known through the years as a friend of free market economists from the "Chicago School" of Milton Freidman. But in this powerful column today , Samuelson lets Obama have it right between the eyes:
Big projects take time. They're included in the stimulus because Obama and Democratic congressional leaders are using the legislation to advance many political priorities instead of just spurring the economy. At his news conference, Obama argued (inaccurately) that the two goals don't conflict. Consider, he said, the retrofitting of federal buildings to make them more energy efficient. "We're creating jobs immediately," he said.
Yes -- but not many. The stimulus package includes $5.5 billion for overhauling federal buildings. The CBO estimates that only 23 percent of that would be spent in 2009 and 2010.
Worse, the economic impact of the stimulus is already smaller than advertised. The package includes an obscure tax provision: a "patch" for the alternative minimum tax (AMT). This protects many middle-class Americans against higher taxes and, on paper, adds $85 billion of "stimulus" in 2009 and 2010. One problem: "It's not stimulus," says Len Burman of the nonpartisan Tax Policy Center. Congress was "going to do it anyway. They do it every year." Strip out the AMT patch, and the stimulus drops to about $700 billion, with almost 30 percent spent after 2010.
The purpose of the stimulus is to keep declines in one part of the economy from dragging down other sectors. The next big vulnerable sector seems to be state and local governments. Weakening tax payments create massive budget shortfalls. From now until the end of fiscal 2011, these may total $350 billion, says the Center on Budget and Policy Priorities (CBPP), a liberal advocacy group. Required to balance their budgets, states face huge pressures to cut spending and jobs or to raise taxes. All would worsen the recession and deepen pessimism.
Samuelson has calculated that money going to states will amount to only 40% of their shortfall. He recommends that the monies be packaged in block grants and given to states to spend as they see fit. Instead, the Obama stimulus has mandated tens of billions of that money for specific spending.
And Samuelson isn't saying anything that Republicans weren't during the debate; that much of the spending is too little, too late and that too much of it was an attempt to bypass the regular legislative process and take advantage of the crisis to pass politically themed provisions rather than what would stimulate the economy immediately.
Reading Samuelson's column will guarantee that you will be gnashing your teeth over the way that Democrats lied to get it passed.
But don't worry. They'll get another bite at the apple when they come back to the taxpayer claiming the first $800 billion wasn't enough and they need a second stimulus for their plan to work.
Hat Tip: Ed Lasky