The View From 1776

New York Times propagandist Paul Krugman and other liberal-progressives are still beating the drums for more and bigger Federal deficit spending.  Unhappily, the fact is that the Democrat/Socialist Party’s $862 billion stimulus, the largest in world history, failed to revive the economy. 

That failure is shared by every such effort, from Franklin Roosevelt’s “pump priming” in the 1930s through the present day.  Results of the latest stimulus program are just as they have been in the past: a failure at reviving business and employment, but a big pay-off for unions and other special interest groups.  John F. Cogan’s and John B. Taylor’s Where Did the Stimulus Go? gives us the numerical particulars.

No one can say there was no forewarning of this fiasco.  See Another Cautionary Report on Stimulus Plans, posted on this website the week before President Obama’s inauguration in January, 2009.  In the same vein, see Government Stimulus Spending: Differing Perspectives.

See also Stimulus Is Vote-Buying, Not Job Creating and Stimulus, Or Squealing Pork?

Small business owners, who cannot mobilize campaign workers and contribute tens of millions of dollars to Democrat/Socialist candidates, are on the losing end (see Stimulus Disincentives). 

The dictionary’s primary definition of investment is to save money from earnings and to put it to use in a property or project that offers a prospect of returning all of the invested funds, together with a profit commensurate with the involved degree of risk and with prevailing interest rates.

Liberal-progressives, however, employ the term to denote deficit spending to benefit special interest groups that are their political allies or are speculative boondoggles such as green energy and green automobiles that cannot survive without massive governmental subsidies.  Another such liberal-progressive investment is showering labor unions, particularly public employees unions, with government privileges or deficit spending cash. 

Money lavished upon teachers’ unions, for example, repays no benefits at all.  The more money applied to special education and to teachers’ medical and retirement benefits, the poorer the educational results. 

If private individuals were to use the liberal-progressive definition of investment, the result would be spending every penny of wages and salaries, then borrowing to the hilt and spending all of it.  As are becoming the Federal, state, and local governments that have pursued this investment course, all private citizens would be destitute at the time of retirement from the workforce.

Stephen Moore’s opinion piece from the Wall Street Journal limns it admirably.

Obama’s ‘Investment’ Charade

Milton Friedman warned that government spending cancels out higher-return private investment.

By STEPHEN MOORE

Words matter in politics, which is why the federal government no longer “spends” (and wastes) money, but rather “invests” it. According to Barack Obama’s State of the Union address, nearly every penny of the $2.5 trillion domestic budget—for installing solar paneling on the roofs of libraries, funding lavish teacher retirement funds, building high-speed rail lines to nowhere, erecting billboards advertising the stimulus plan—is a high-return “investment” in America’s future.

This is all spin. It’s a variation on the theme that brought us the $814 billion stimulus two years ago. That spending—er, investment—was going to create three million jobs. Those jobs never showed up.

As part of the counterattack against Republican plans to cut $100 billion out of the domestic budget, the White House claims that America has been under-investing in infrastructure, education, science, research, transportation, environmental protection, green energy and so on. But if you examine the actual funding record of these programs, you see that there’s been no spending drought. There’s been a deluge.

Total spending on what Mr. Obama’s budget calls “investment outlays,” outside of defense, rose 46% between 2008 and 2010, to $372 billion from $254 billion. Of that, education funding soared 116%, though it’s anyone’s guess how much of that investment found its way into a classroom. Aid to states and localities rose one-third, as did funding for the National Science Foundation. Unemployment insurance, which has been the administration’s highest budget priority, quadrupled to $189 billion from $43 billion.

As far as the infrastructure crisis, that’s a myth too. If our bridges are collapsing and roads and airports are congested, its not for a lack of funding. Transportation financing has climbed just under 40% since 2008. The administration secured a 60% increase in transit dollars in 2010.

Another big winner has been government investment in business—which used to be called corporate welfare. The Department of Commerce’s budget has more than doubled since 2008, which is only slightly faster than the 81% budget hike for the Department of Energy and the 84% jackpot that went to housing programs.

Keep in mind that these budgets have skyrocketed over the same two-year period when household incomes and spending—investment in families and children—have barely budged. If you want new jobs, business investment should get much higher priority than government spending, so the mismatch is distressing. Total private business investment has fallen by 10% since 2008. It’s possible that government investing isn’t adding to the total stock of capital in the country at all but rather, as Milton Friedman used to warn, is merely canceling out higher-return business spending.

The budget blowout comes atop the spending blitz carried out by George W. Bush. In the decade before Mr. Obama took office, inflation-adjusted spending on infrastructure, education and R&D rose by 32%. The education budget soared after the 2001 No Child Left Behind law, and in 2007 Mr. Bush signed a $284 billion highway bill, the largest in U.S. history.

Let’s grant for a moment that all government spending is really “investment.” The question no one dares to ask in Washington is, what is the return on that investment? Can anyone really argue that the schools are better today than they were in the 1950s or ‘60s, before Jimmy Carter created the Department of Education? The U.S. government also spent billions on green energy in 2009 and 2010, but the number of wind projects fell by 50% last year. If that’s an investment, it’s one that any private investor would pull the plug on.

The administration doesn’t want cuts in Pell Grants and other student-loan programs. But the main effect of student aid for higher education has been to raise tuitions, not to make college more affordable.

As Republicans in Congress make decisions about what to fund and what not to fund, they should ask this fundamental question: Is this dollar of funding so valuable to the economy that it is worth borrowing another 40 cents?

That is why the best investment in America’s future now is to bring spending down as rapidly as possible to reduce debt and finance reductions in tax rates—especially on investment.

Mr. Moore is senior economics writer for The Wall Street Journal editorial board.

President Clinton, hammered by mid-term elections in his first administration, sought the middle policy road, triangulating between extreme left and right positions.  President Obama clings to his liberal-progressive-socialist world vision while offering a few feints in the direction of the individualism that characterized the founding generations and nothing in the direction of individual freedom from arbitrary government power that gave birth to the Bill of Rights.

In the president’s world vision, there is, of necessity, little scope for individualism.  People’s standards of living, their jobs, their personal acquisitions all are subject to control by the political state.  Wisdom and efficiency are thought to be the domain of the collectivized, powerful political state.  Individuals unrestrained by regulations are too likely to do things or to head in directions that the government does not approve. 

Bill Clinton said in his first term that he might support a tax cut, but people would just use the money for the wrong kinds of things.  Clinton’s press secretary Dee Dee Myers told reporters that only the government has the power to improve people’s lives.  House Speaker Nancy Pelosi opined that people would come to love Big Brother’s Obamacare, once they had been shackled with it.

The economy is seen by Democrat/Socialist Party leaders, not as the product of millions of individuals pursuing their own aims, but as the property of government to be organized as state planners see fit.

Quote from the President’s State of the Union Address:

...The first step in winning the future is encouraging American innovation.

...Our free enterprise system is what drives innovation. But because it’s not always profitable for companies to invest in basic research, throughout our history, our government has provided cutting-edge scientists and inventors with the support that they need.

...And in a few weeks, I will be sending a budget to Congress that helps us meet that [research and development] goal. We’ll invest in biomedical research, information technology, and especially clean energy technology, an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.

...Already, we’re seeing the promise of renewable energy...we’ve begun to reinvent our energy policy.

...With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015.

We need to get behind this innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies.

...Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling. So tonight, I challenge you to join me in setting a new goal: By 2035, 80 percent of America’s electricity will come from clean energy sources.

...Within 25 years, our goal is to give 80 percent of Americans access to high-speed rail...

The president seems oblivious to voters’ massive rejection last November of such liberal-progressive-socialist ideology.  He hasn’t abandoned his plans for federal control of the healthcare industry.  He still aims to bankrupt the coal mining industry and to trash billions of dollars invested in highly efficient, coal-fired generation of electric power, even though his beloved green power produces little more than one percent of the nation’s power needs.  He remains adamant that “the next big industry” is to be green energy, green automobiles, and high-speed rail, all planned and directed by the government.

Only liberal-progressive-socialists desire this government intrusion.  The general public repeatedly have rejected the expectation that they are, even with massive government subsidies, to abandon their present modes of transportation.

If we are to conform to Obama’s liberal-progressive plans, repressive governmental force will be necessary.  As with Obamacare’s mandatory purchase of insurance, do as government bureaucrats command or face legal action.  Such statism is the diametric opposite of the ethos which brought the colonists to America in the early 17th century and the ethos upon which our nation was founded.

It should be understood that President Obama and his Democrat/Socialist Party fellow leaders stand for a socialized, command economy.  It should be understood that their intentions are merely a continuation of policies imposed in the administrations of Adolf Hitler, Benito Mussolini, and Franklin Roosevelt.

In a 1927 speech, Hitler said,

We are socialists, we are enemies of today’s capitalistic economic system for the exploitation of the economically weak, with its unfair salaries, with its unseemly evaluation of a human being according to wealth and property instead of responsibility and performance, and we are all determined to destroy this system under all conditions (a quote from John Toland’s 1976 Adolph Hitler).

Benito Mussolini’s statement in The Political and Social Doctrine of Fascism (1933):

Fascism conceives of the State as an absolute, in comparison with which all individuals or groups are relative, only to be conceived of in their relation to the State. …The Fascist State has drawn into itself even the economic activities of the nation, and, through the corporative social and educational institutions created by it, its influence reaches every aspect of the national life and includes, framed in their respective organizations, all the political, economic and spiritual forces of the nation.

Franklin Roosevelt in his 1933 inaugural speech:

Our greatest primary task is to put people to work…It can be accomplished in part by direct recruiting by the government itself, treating the task as we would treat the emergency of war… Hand in hand with this, we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in the redistribution, endeavor to provide a better use of the land for those best fitted for the land…

It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definite public character…

…if we are to go forward we must move as a trained and loyal army willing to sacrifice for the good of the common discipline, because, without such discipline, no progress is made…We are, I know, ready and willing to submit our lives and property to such discipline because it makes possible a leadership which aims at a larger good.…With this pledge taken, I assume unhesitatingly the leadership of this great army of our people, dedicated to a disciplined attack upon our common problems.…

From The Unpredictable Past; Explorations in American Cultural History, by Lawrence W. Levine:

Eleanor Roosevelt found her husband’s inauguration a “little terrifying ... because when Franklin got to that part of his speech when he said it might become necessary for him to assume powers ordinarily granted to a president in war time, he received his biggest demonstration.” She could hardly have taken much comfort from the reaction of the nation’s newspapers. Under such headlines as “FOR DICTATORSHIP IF NECESSARY”...

As Obama’s recent chief of staff Rahm Emmanuel put it in November, 2008, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.”

Obama and his Democrat/Socialist confreres have not abandoned that hope for radical change.