I’ve argued for a long time that stimulus bills are poorly named; it implies that they stimulate the economy. “Spending bill” is a non-loaded term that has the added advantage of being accurate. Both parties have passed spending bills over the years in the hopes of stimulating the economy. Intentions being different than results, Democrats are finally starting to agree with me on this misuse of language, as The Hill reports:
Democrats are now being careful to frame their job-creation agenda in language excluding references to any stimulus, even though their favored policies for ending the deepest recession since the Great Depression are largely the same.
The article continues:
Recognizing the unpopularity of the 2009 package, however, Democratic leaders have revised their message with less loaded language – “job creation” instead of “stimulus” and “Make it in America” in lieu of “Recovery Act” – in hopes of tackling the jobs crisis.
Spending bills work by taking some money out of the economy and then putting it back in, minus transaction costs and political malfeasance; one can see why they don’t have much effect. The thinking is that Congress can invest money more wisely than private investors. If Solyndra is any indicator, that isn’t true.
Public opinion has soured on spending bills after some initial optimism. That same public also wants its politicians to do something, anything to get the economy going.
But the only tool available to Congress is spending. That’s why politicians insist on following the same failed policy over and over – it is their only tool. The only alternatives are doing nothing, or actively paring back spending and regulations. And those don’t look nearly as glamorous on camera.
Stimulus, spending bill, job creation bill – a rose by any other name has thorns just as sharp. And this particular rose refuses to bloom. That means it’s time to try something else. Maybe reducing spending to sustainable Clinton-era levels, which isn’t even particularly austere. Congress should also try a deregulatory stimulus sometime.
Over at the American Spectator, I explain why it won’t, but a deregulatory stimulus would. Main points:
-Anything that Washington giveth, it must first taketh away from somewhere else. The jobs bill is a zero-sum game.
-When government borrows more, less investment capital is left over for the productive sector.
-Taxes will have to be raised later to pay for today’s increased borrowing.
-Deregulation is a better approach. The biggest obstacles to job creation and economic growth are all in Washington.
Posted in Business Cycles, Economics, Publications, regulation, Spending, Stimulus
Tagged american spectator, deregulate to stimulate, deregulation, deregulatory stimulus, jobs, jobs bill, regulation, regulations, unemployment
The Senate just passed an $18 billion spending bill. Since the House already passed it, the legislation is now headed to President Obama’s desk to await his signature and become law.
The hope is that the spending will create jobs. If you’re reading this blog, then you probably know enough about economics to know that isn’t what will actually happen. Remember: anything that Washington giveth, it must first taketh away from somewhere else. It’s a zero-sum game. All those new jobs that politicians will be touting for the cameras will have come at the expense of other jobs elsewhere. On net, they’re not creating a thing.
Take the payroll tax break for small businesses that’s in the bill. Yes, those small businesses benefit. Maybe the money they save will even be used to hire more workers. That’s easy enough to see. But that money had to come from somewhere. That is harder to see. Too hard for the Senate to see, at the very least.
The reason is this: the government is foregoing some payroll tax revenue. But since it isn’t cutting spending to match, it has to borrow more. And there’s only so much investment capital to go around. Because Washington is borrowing more, less is left over for private investment opportunities. At the very least, companies will have to offer investors higher interest rates to lure them away from government bonds.
That makes getting loans more expensive. And when something gets more expensive, there tends to be less of it. Because of today’s bill, about $18 billion less capital will be available for the private sector to create jobs.
The legislation the Senate passed today is no jobs bill, at least on net. It is a spending bill. It doesn’t create jobs, it only redirects them.
Posted in Economics, Spending, Stimulus
Tagged barack obama, billions, creating jobs, Economics, jobs, jobs bill, jobs saved or created, obama, overspending, president barack obama, president obama, profligate spending, senate, spending, Stimulus, unemployment, us senate