Obama economic adviser Laura Tyson has suggested that the U.S. should consider a new economic stimulus package because the $787 billion bill enacted in February was "a bit too small." Right. That $787 billion came just months after the Bush stimulus of $150 billion (how quaint it seems in retrospect), the $700 billion TARP program, the $60 billion auto bailout, and a $3.6 trillion budget for the next fiscal year among other spending orgies. President Obama has declined to rule out another gargantuan transfer payment from the future to the present. Other Democrats, Roll Call suggests, are less enthusiastic. "Bailout fatigue has settled in -- and it would be very difficult to get such a bill through the Senate," an aide told the paper.
If this massive hemorrhage of tax dollars doesn't provoke second thoughts, people have forgotten how to think. Though the Obama administration insisted that the stimulus was too urgent to permit debate, too pressing to permit time to read the legislation, only a fraction of the money allocated has actually been pushed out the door five months on. And while Americans were encouraged to conceive of the stimulus as a latter day Civilian Conservation Corps, with platoons of shovel-shouldering men marching out to repair roads, build bridges, and sing catchy folk songs, the reality is otherwise.
Ninety billion dollars of the stimulus funds are allocated not to infrastructure but to increasing the federal matching portion of state Medicaid expenses through Jan. 1, 2011. As President Obama's OMB Director Peter Orszag acknowledged in congressional testimony last year, "if federal assistance merely provides fiscal relief by paying for spending that would have occurred anyway and does not affect state and local revenues in the short run, then it provides no economic stimulus." Transferring check writing from Trenton and Sacramento and Augusta to Washington, D.C., may ease state budget crises, but by no stretch can this be considered a jobs program or anything but a trifling stimulation of economic activity. Besides, it rewards states that have failed to budget prudently and punishes those who have shown self-restraint. Will those states, most disastrously California, that got themselves into a fiscal mess by failing to control spending, be more or less likely in the future to act responsibly now that they are receiving a federal subvention?