Stimulating Spending (and little else)

The Obama spending plan has been passed. The sheer size of this monstrosity should raise eyebrows; even more so when one considers the hodgepodge of new spending contained within it, and the amount by which it will run up our national debt.

The thing with this "stimulus" bill is that, despite the sales job coming from the White House and congressional leaders, many items contained in the bill have nothing to do with stimulating the economy. Even some parts that seem to be more suited for true economic stimulus are probably not going to have the desired impact. Transportation, for example, is typically a good investment, because it builds infrastructure, which expands future productivity. However, a good portion, probably most, of the spending on transportation in this bill is aimed at repairing existing roads and bridges. This is not a bad thing in and of itself; we of course found out through the tragic bridge collapse in Minneapolis that our highway infrastructure is well overdue for repair. However, so far as economic stimulus, the long-term impact comes from expanding infrastructure, not simply from repairing it. So, while repairing highways and bridges is a good thing, its impact on the economy will likely be a short-term boost from the immediate jobs created through the construction projects themselves, with little effect on the nation's long-term productivity.

However, substantial portions of the bill have little or nothing to do with economic stimulus, but are rather a wish-list of programs that liberals had been looking for a chance to implement. For example, $20 billion for digitizing health records will have no stimulative effect on the economy whatsoever, and even if electronic health records do generate benefits for patients, this change in policy should have been considered on its own merits rather than hidden in a massive spending bill that was ramrodded through Congress with little time for examination by legislators. Likewise, preventive care is very important, but the $4 billion allocated should have been considered in another bill; it simply has nothing whatsoever to do with stimulating the economy. $650 million for digital converter boxes (the DTV transition coupon program) and over $1 billion for the National Oceanic and Atmospheric Association (NOAA) are two more examples.

Granted, the bill does contain tax incentives for improving the nation's electrical grid and investing in new energy technology, as well as some tax cuts for families. If the bill had focused squarely on these types of provisions, particularly those aimed at stimulating private investment which is what leads to job creation, it could have had a much smaller price tag and have had a far better chance of actually stimulating the economy. As it is, the massive debt threatens to crowd out private investment and drive up long-term interest rates, and the massive spending will doubtless create significant inflation. Hopefully, the economy will actually start recovering before all of this kicks in (as is often the case with government stimulus programs -- there is a substantial lag between policy implementation and the manifestation of its effects in the economy), but what we have sacrificed with this exercise in exuberance is our future productivity.