Fantasies and Obamanomics

The president's new "stimulus" proposal offers a sequel to a movie that wasn't successful in the first place.

This past summer has been a good one for Hollywood. Ticket sales surpassed last year's May-August numbers by a healthy $100 million while Americans, as they did in the 1930's to escape the harsh economic realities of the time, wandered into darkened theaters where, for a couple of hours, they could lose themselves in the Dream Factory's ritzy, glitzy fantasies and jaw-dropping special effects-laden blockbusters.

But in a twist that is a metaphor for the "Summer of Recovery" that has been touted by President Obama, the number of actual movie goers fell by 2%. The gains at the box office occurred as a result of rising ticket prices and the explosion of 3-D pictures and Imax showings where moviegoers paid a premium to view the film. In fact, there were 11 million fewer tickets sold this year than in 2005.

If you think that sounds like Obamanomics, you win a cookie. The president barnstormed the country this summer touting rising jobs numbers despite the underlying weakness of the labor market that produced few private sector jobs, and employment numbers that included hundreds of thousands of temporary census workers. Unlike moviegoers, however, American workers are unable to lose their troubles in Obama's fantasies about how much better things are getting.

In recent years, summer for Hollywood has also meant the regurgitation of hit movies from the past in the form of the sequel (many are sequels to sequels). And when you run out of sequels, you can always steal material from comic books or old TV shows. Hence, the biggest grossing movies this summer turned out to be the third incarnation of Toy Story, a sequel to a comic book knock off (Iron Man 2), the umpteenth Shrek sequel, and the third go-around for the teenage vampire love story The Twilight Saga: Eclipse.

Add the TV retread The A-Team, the updating of the Ralph Macchio franchise The Karate Kid, and the truly awful Sex in the City 2 and you begin to get the idea that there hasn't been a lot of creativity in Hollywood since Howard Hughes found a way around the censors to show as much of Jane Russell in The Outlaw as could be squeezed out of her ill-fitting bodice.

Our president must be channeling his Hollywood friends because when it comes to originality and creativity in trying to get the economy moving again, Barack Obama has decided to produce a sequel to the gargantuan, $787 billion error he made in pushing through his pork-laden "stimulus" bill in February of 2009. His thinking is that if at first you don't succeed, and you've run out of ideas anyway, simply repeat the mistake that made things catastrophically worse in the first place.

We've all heard the definition of a crazy man; someone who does the same thing over, and over expecting different results each time. Well, the president may not be certifiable, but one wonders what happened to that Ivy League brain of his when you hear that he is proposing tens of billions of dollars in additional "stimulus" to get the economy off the schneid. And as a kicker, Obama is going to offer a modest $100 billion in tax credits for business over the next decade by extending the expired research tax credit.

That latter idea is intriguing, but a $10 billion a year credit that will hardly affect the real engine of job growth -- small businesses -- seems a lot like using a garden hose on a three alarm fire. The research tax credit would, according to the Washington Post, "increase and permanently extend research and development tax credits for businesses, rewarding companies that develop new technologies domestically and preserve American jobs." It's not enough to make much of a difference to the 8 million Americans who are out of work, but at least it sounds as if the president is doing something.

No word on extending the Bush tax cuts for all despite economists from both sides telling us that raising taxes in 2011 would be suicidal. Also, not a peep on the idea of giving workers a payroll tax holiday which some Republicans have said might be a top priority next year if they take control of Congress.

The president swears that this new tax gambit will not add to the deficit because he is going to close other "loopholes" for business to pay for it. Not only will Congress have the final say on that idea, but do you trust Obama to know the difference between a "loophole" and something valuable? Considering that bunch of rabid Keynesians he has running around the White House with their hair on fire, we should doubt it. These folks view corporate profits as evil, and it shouldn't surprise us if they take away legitimate deductions in order to pay for their "transformational" scheme.

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.