Scott Spiegel

Five months after the stimulus bill was passed, we can now say that we’ve witnessed the following under-stimulating results.

Payrolls are falling more than forecast, with employers having cut 467,000 jobs in June, following a 322,000-job decline in May.  Factory jobs fell by 136,000 after dropping 156,000 in May.

Unemployment is at 9.5%, the highest level in 15 years, and is projected to exceed 10% by the end of 2009.  Some economists expect it to remain at historically high levels for years.

The average workweek is at 33 hours, the lowest in 45 years.

Average weekly earnings are down to $611.

The national debt is $11.5 trillion.  The Congressional Budget Office projects the deficit for 2009 to be almost $2 trillion and for 2010 to be more than $1.4 trillion.

The Treasury is increasing its sale of debt to pay for spending.  Treasury offered $1 trillion in notes and bonds in the first half of 2009 and plans to offer another $1 trillion by the end of 2009.

Colin Powell, of all people, is alarmed that Obama’s spending orgy may be swelling government and the national debt: “I’m concerned at the number of programs that are being presented, the bills associated with these programs and the additional government that will be needed to execute them…  [We have] a huge, huge national debt that, if we don’t pay for [it] in our lifetime, our kids and grandkids and great-grandchildren will have to pay for…”  Now he tells us!

Jared Bernstein, chief economic advisor to Joe Biden, whose office is managing the stimulus, says, “It’s working, it’s demonstrably working.”  According to Bernstein, $200 billion in stimulus money has already been obligated or spent.  Case closed!

Note to Bernstein: In order to demonstrate causality, you have to show that: (1) there was a cause, (2) there was an effect, and (3) the cause influenced the effect.  Defenders of the stimulus bill are still stuck on #1: as of June, only 10% of all stimulus funds had been distributed.  Bernstein’s $200 billion “obligated or spent” figure—eerily reminiscent of the administration’s “jobs saved or created” trope—is untrustworthy, because the administration has already been caught lying about money committed to spending projects.

Given the miserable failure of the stimulus bill, naturally Congressional Democrats want… another stimulus bill!  According to House Majority Leader Steny Hoyer, “We need to be open to… further action.”  Democratic Senator Sheldon Whitehouse said that another stimulus would “probably take place towards the end of the year.”  Second-ranking Senate Democrat Dick Durbin said he would leave any decisions on passing another stimulus bill to “the president’s evaluation”—and we all know how cautious Barack “Fiscal Restraint” Obama will be.  Stan Collender, former Congressional budget analyst, said that another stimulus bill may be possible if the economy gets worse: “Right now it doesn’t seem to be justified…  Come September, it might be.”

The first stimulus package was “a bit too small,” according to Laura Tyson, member of Obama’s Economic Recovery Advisory Board.  Paul Krugman writes in the New York Times, “O.K., Thursday’s jobs report settles it.  We’re going to need a bigger stimulus.”  Biden advisor Bernstein says, “There is no conceivable stimulus package on the face of this earth that would fully offset the deepest recession since the Great Depression.”

Let’s see: the stimulus bill committed a record $787 billion in spending.  Tyson says it should have been “a bit” bigger.  Congressional Democrats and Krugman wanted it much bigger.  Bernstein admits it would have to be infinitely big to work.  Can we give Bernstein the award for inadvertent honesty on this one?

The clincher that the stimulus bill was an abject failure—and that another stimulus bill would be a repeat failure—is the fact that Wall Street has just hit a 10-week low after talk of a second stimulus package recently began.  Amateur analysts suggest that chatter about another stimulus bill is making investors nervous, because—get this—it shows that the economy might not be recovering.  According to Hugh Johnson of Johnson Illington Advisors, “When there’s talk about another stimulus plan, that adds fuel to that fire, it intensifies the concerns about the timing and strength of the recovery.”

Is it possible, just possible, that investors are nervous, not because Congress’ hinting at a second stimulus package implies the economy is not recovering—which I think they can figure out on their own—but because Congress is hinting at a second stimulus package?

If Democrats aren’t persuaded by Republicans’ argument, backed up by ample historical data, that spending vast quantities of wealth not yet created does not stimulate the economy in the long term, could they at least admit their little experiment failed and try the Republican option for a change?

Paul Krugman’s recent column, “An Affordable Salvation,” gushes about how, now that the “junk science”-loving (and Nazi-hugging) former occupant of the White House is gone, we can finally start saving the planet.  And it won’t cost much, either!  That is, if only we can get cap-and-trade skeptics to stop practicing “junk economics.”

“The best available estimates,” according to Krugman, suggest that turning industrial civilization green will basically be painless, and in the end will actually be good for us.  Perhaps his “best available estimates” include the recent, breathless press release from the Environmental Defense Fund: “For about a dime a day we can solve climate change, invest in a clean energy future, and save billions in imported oil.”  New EDF slogan: Saving the planet and 90 cents will get you a cup of coffee!

In the Rube Goldberg scheme of alternative energy sources, permits, taxes, carbon credit swapping, and rebates known as “cap-and-trade,” I count at least six additional charges consumers will directly or indirectly face.  First, there is the cost of less efficient “green” energy production, which will be passed on to consumers.  Second, there is the charge for emissions permits, which will also be passed on to consumers.  Third, there are the private and governmental bureaucratic costs of administering this system.  Fourth, there are costs from lobbying and inefficient allocations of carbon credits to congressional districts in exchange for pro-cap-and-trade votes, to industries in exchange for union support, and to companies in exchange for campaign contributions.  Fifth, there are inefficiencies that will result from the illegal selling and trading of credits and the costs of prosecuting this corruption.  Finally, there’s the cost of industry leaders and investors’ uncertainty regarding possible cap-and-trade regulations the government could decide to introduce or expand any time it wants.

But, Krugman reassures us, carbon credits would become a “scarce” resource, just like oil, land, and water; he adds that the “magic” of the free market should allow it to “cope” with emissions limits just fine.

Any idiot realizes that natural resources are not the same thing as artificial, government-imposed restrictions.  The former allow us to be productive; the latter prevent it.  Legal leg irons are not amenable to expansion through scientific innovation.

Mocking laissez-faire capitalists for believing the free market is “magic” is a straw man—no one ever said the marketplace could compensate for unpredictable, industry-destroying, government-imposed limits, which preclude the very existence of the free market.  How’d the “magic” of the marketplace do in overcoming “scarce” resources in the former Soviet Union?

In case we’re still not persuaded that cap-and-trade isn’t suicidal folly, Krugman tempts us that “committing ourselves now might actually help the economy recover from its current slump.”  This, from an “economist” whose patron saint is John Maynard Keynes, who once famously said that the government could stimulate the economy by putting money in jars, burying them, and paying unemployed people to dig them up again.

If “green” business were profitable, wouldn’t companies already be doing it?  If alternative forms of energy were so efficient, would they need massive government subsidies to keep the companies that produce them from going bankrupt?

Krugman argues that cap-and-trade would “create major incentives for new investment—investment in low-emission power plants, in energy-efficient factories and more.”  All of which, of course, are less efficient and less preferable to investors.  Cap-and-trade might allow for “major technological innovation,” as he claims, but at the cost of discarding already profitable, more efficient innovation.

The “argument from economy” is designed to reassure those who think cap-and-trade is necessary that it is affordable, and those who think cap-and-trade is not necessary that it at least will not hobble our economy.  But those who are rightly skeptical of cap-and-trade should be aware that it is anything but a harmless indulgence.