Fantasies and Obamanomics

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In addition to tax cuts for businesses that won’t create jobs, the president is proposing that we spend $50 billion over the next 6 years on “infrastructure.”

“Over the next six years,” Mr. Obama promised “we are going to rebuild 150,000 miles of our roads — that’s enough to circle the world six times; that’s a lot of road. We’re going to lay and maintain 4,000 miles of our railways — enough to stretch coast-to-coast. We’re going to restore 150 miles of runways and advance a next-generation air-traffic control system to reduce travel time and delays for American travelers — I think everybody can agree on that.”

Mr. Obama vowed that the plan, which would include work on high-speed rail lines, would be “fully paid for” and not add to the deficit.

The president didn’t say if taxpayers would have to foot the bill for all those pretty signs that will identify each project as part of the “Son of Stimulus” plan. Nor did he give us any clues about how he was going to fully pay for this sequel. Maybe he thinks we’ll forget about it and not bother him. After all, what’s a measly $50 billion when you’ve already spent us into penury?

That rebuilding of 150,000 miles of road sounds impressive. Around and around the world 6 times, Obama tells us in one of those baby-brain metaphors he likes to use because his contempt for the intelligence of the American people is near total. Since the mileage of paved roads in the US is about 4 million miles – enough to go back and forth to the moon 15 times -thinking about resurfacing less than 5% of that total just doesn’t cut it.

You can be similarly unimpressed with the track mileage the president wants to “lay and maintain.” There is about 150,000 miles of mainline track in the US – track that is already largely maintained by the rail companies themselves to the tune of $320 billion spent on capital expenditures and maintenance.

So what are we doing spending money on railroads? Almost certainly, the money will go to the high speed rail boondoggle that the unions are crying for. There is no earthly reason to build another passenger rail system that will lose money – and lose it faster and to a greater degree than Amtrak. But Japan and Europe have one so it must be necessary and good.

You will note that both the “infrastructure” spending and the tax credit idea play into the president’s larger theme of “transforming” America. We may go broke but at least we’ll have a smooth road driving to the poor house. And the Treasury may be empty with more IOU’s than can be found at a convention of Gamblers Anonymous, but at least we’ll save 40 minutes on the train ride from Washington, D.C. to Philadelphia. Our subsidized ticket will cost as much as a cross country airline flight, but think of all the new friends Joe Biden will make as rides the rails in his new, ultra-kewl choo-choo?

It’s no accident that these billions of dollars will be going to heavily unionized industries like road building, railroads, and aviation. Those industries are already dependent on government to keep their heads above water so it makes sense for Obama to keep the subsidies flowing in this, the worst economy in more than a generation. How many jobs will this money create? Berkeley economist Brad DeLong:

With a multiplier of 2, $50 billion in the first year is 0.3% on the unemployment rate–and it’s not clear if we can ramp up an extra $50 billion of infrastructure spending in the first year.

Don’t get me wrong: boosting federal infrastructure spending is almost certainly a very good idea. Tax cuts for “small business” much less so–unlikely to reduce wedges between social and private returns on a micro level, and likely to have a low bang-for-buck on the macro level.

But the thing that stands out–again–is the radical disjunction between the scale of the economy’s problems and the proposed solution.

DeLong would get an argument from many economists about small business tax cuts but his notion that there is a titanic disconnect between what the president is proposing and the size and scope of the problem rings true. The administration is out of ideas. They are desperate and panicky. They see the coming catastrophe in November and are paralyzed with fear over what that might mean not only for Democrats in 2010 but Obama’s own re-election chances.

So instead of coming up with something new, they simply put out a sequel to the stim bill of 2009, hoping that the voter will, like the moviegoer, swallow the the same story with a few different plot twists and be satisfied that their money wasn’t wasted.

Given recent polls, it should be evident to all that we are far beyond that point and that voters will tell the president and the Democrats no more sequels to movies that weren’t even successful the first time out.

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  • Chezwick_Mac

    Doesn't anyone in this Administration remember the example of Japan in the 90s?

    The Japanese consider the 90s to be the "lost decade" because while everyone else was riding high on the dot-com bubble, Japan was mired in a decade-long recession. In 1990, Japanese GDP had climbed to 60% of the USA's….by 2000, it had fallen back to close to 40%, so stark was the difference in growth for the two economies in the 90s.

    The Japanese tried stimulus package after stimulus package, most of it spending on infrastructure. Nothing worked because – like America today, the real problem was depressed real estate values and bad bank loans.

    The massive spending only succeeded in putting Japan in a league of its own vis-a-vis debt-to-GDP ratio. And now, Obama seems hell-bent on emulating the failed Japanese model.

    There's an old saying: "A wise man learns from the folly of others, but a fool will only learn from his own." Our President is given high marks by so many for his supposed intelligence. One wonders why?

    • Jim Johnson

      You got it right. Japan was good at selling cars. That brought them in a great deal of money. Japanese workers were paid ok. The problem was that the Japanese did not want other peoples non auto imports. Thus the worker paid a higher price than he should have for daily living. While the pay wasn't so bad it was thought that low pay would enable Japan to prevent lay offs in bad times. This worked in the 1990s as the unemployment rate in Japan was about 5%. However it slowed foreign business entry into Japan and slowed creation of Japanese business that could have made new markets created by the hypothetical higher paid worker. What was left was to invest in the US which scared Americans or Loan in Japan. The banks loaned for office buildings which would have no occupants eventually . The Bank repossessed but empty buildings yielded no in come. Pouring money into the banks wouldn't solve the problem as that was what caused the problem. Sharing the money with the worker and creating new markets might have worked. But the program of avoiding lay offs of workers was of some help as it provided liquidity for the lower and middle rung of
      society ;which kept the unemployment rate from rising as high as it would have in America. Of course we created a desperate bubble to save political face. The we created another bubble that hit the fan,

  • Barry Cooper

    The whole point of Keynesian economics is to eradicate private wealth–private capital–and to put everyone on the government payroll. They then own you.

    To the point on this particular iteration of the plan, it needs to be said that some $275 billion of the first Stimulus remains unspent. We are ALREADY going to spend far more than the $50 billion he is proposing, and that money is already allocated and fit into the budget.

    Our President is a liar, quite simply, for pretending he thinks this new "stimulus" is either necessary, or that it will create more than short term jobs.

    • MMcFM

      I think he keeps pumping money into areas where the only jobs funded by the stimulus money are union jobs. That is to force the work force into handing their livelihood over to union control. Eventually, if he does not get off the backs of American investment and entrepreneurship, he is hoping to change unemployed America's desperate need for a job into unionizing the nation. Unions exploit workers, skim their paychecks for personal gain and political favor, and treat them like their personal slaves. My experience in life: I detest unions.

  • Patrick Henry

    Keynesianism is the Progressives' (i.e., Fabian Socialist) preferred method of wealth redistribution. It doesn't work because its based on Marxist fallacies, specifically capitalism's alleged exploitation of labor, that public spending is more efficient than private investment, and that recessions are inherently bad (all of which have been debunked by von Mises. Keynes's key method of transforming the economy was counter-cyclical deficit spending to "prime the pump," whose effect was to displace private investment, inflate the currency and ultimately transfer wealth and power from the private sector to the public sector. Its Communism in slow motion, but it takes you to the same rat hole. Or as Hayek said: the road to serfdom.

  • QuantumSam

    Way to go bashing Hollywood creativity and then forgetting Avatar and Inception. Woo hoo! I love it when facts are omitted to make theories come true.

  • Marcus

    Avatar was a kids story marketed to adults, and while Inception was at least an original story, it is but one movie in a sea a sequels. The author's original point is still valid. Avatar and Inception hardly disproved the point.

  • bubba4

    You just show that it doesn't matter what Obama does….

    He's lowered taxes on almost all of you. He wants to make the middle class tax cuts permanent but not the ones for the rich. So all this tax scare stuff you just have to make up now…it's ridiculous.

    Who can trust FPM to write a real article?

  • Jim Johnson

    However the extent of unionization of employees goes it is a hollow victory when there are no people who have money to spend, Businesses are failing because there is no liquidity in the consumer level. Tax cuts ,depreciation schedules and other pro business benefits will have no effect until the customer shows up at the door.
    There is plenty of liquidity in company treasuries . But what are they do with it. No Matter what they do it can't bring customers to the door. The customer has no money, This is in fact a chronic situation that has existed for decades. The lack of customer buying power has been masked by ever easier access to credit. The customer was no richer than before but now he couldn't pay back the loans. To keep he facade of prosperity going loans were made to hopelessly unqualified applicants finally loans were made to the non existent. As no money came into the holders of the loan bonds the credit markets froze.
    The loan bonds were pushed on the the bigger fool. The there were no bigger fools and the greatest of all banks had to act as the biggest fool of all.
    Now the consumer has no money and no credit so the economy is frozen. All that is left is the bailed out ones is to play the market in a huge financial eddy that goes no where,

  • MARY