Wayne Winegarden

You wanna know how to get Capone? They pull a knife, you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue. That's the Chicago way! And that's how you get Capone. Now do you want to do that? -Jim Malone (Sean Connery), “The Untouchables”

President Obama is certainly taking Jim Malone’s advice when it comes to his spending programs. John Kyl (R-Arizona) has rightfully acknowledged that the stimulus plan is not stimulating the economy. Nor, should we have expected that it would have. The $787 billion stimulus bill was a pork-laden spend-fest with more than half of the spending not even occurring for 2 years. Even for those analysts that believe government spending is stimulative (it is not) spending billions of dollars in 2011 surely cannot increase economic growth in 2009. In fact, it creates real and significant economic damage.

However, the crime of opposing the administration’s stimulus program (metaphorically pulling a knife against the administration) apparently has costs. The “gun” the Obama Administration has pulled is a thinly veiled threat against Governor Brewer of Arizona.

As far as weapons go, the IRS is the most powerful weapon of all – a lesson Al Capone learned too late. According to the administration, if Arizonans agrees with Senator Kyl that the stimulus bill is not stimulating their economy, the Obama Administration would happily have the millions of dollars the state is receiving this year in stimulus funds sent back to the IRS.

It is troubling to see the administration threatening the viability of our federalist system. The Arizona example shows that if a state or its representative offends or disagrees with the administration, then the offenders, and all of the offender’s associates, risk the beneficence of the Obama Administration. And the Senator Kyl case is not unique. The Obama administration has also threatened California Governor Arnold Schwarzenegger with lost stimulus funds if he went through with proposed spending cuts that were desperately needed but would have hurt a favored Obama constituency – labor unions. Eric Cantor (R-VA) has also been criticizing the stimulus package and has caught the attention of the president’s Chief of Staff Rahm Emanuel – a thinly veiled threat may now be on its way to Richmond Virginia as well.

Wayne Winegarden

Wayne H. Winegarden Ph.D. is a partner in the firm Arduin, Laffer & Moore Econometrics.

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