Human Events Blog

Barack Obama: Slayer of Stimulus Theory

One never knows if the American people will conclusively learn a painful economic lesson, but recent polls suggest they’re waking up to the Keynesian “stimulus” scam.  The Obama years are blowing a hole in one of the sacred tenets of Big Government.  If Americans aren’t spun back to sleep, we’ll be feeling the aftershocks for decades.

I sometimes hesitate to attach the name of John Maynard Keynes to what has been going on for the past few years.  Defenders of his theories insist they aren’t properly understood or practiced by politicians who claim his mantle… which puts Keynes squarely in the company of every other theorist dragged into political debates.  Let’s leave him out of it, and focus on what the politicians have been saying.

The guiding principle of Obamanomics is the superior economic wisdom of the State.  Individuals and corporations cannot be trusted to spend and invest wisely, for the maximum benefit of society, so the government must do it for them.  This belief has been practiced with furious intensity since Obama took office, and the results are dismal: persistent high unemployment, anemic economic growth, and skyrocketing national debt.

According to the official pronouncements of the President and members of his administration, the two most potent forms of economic stimulus are unemployment insurance and food stamps.  How much have we spent on these two powerful blends of job-creation rocket fuel?

The Consolidated Federal Funds Report from the U.S. Census Bureau says “the federal government spent $85.8 billion on unemployment compensation in 2009, an increase of 114.6 percent from 2008.   Forty states saw increases in unemployment compensation of more than 100 percent.  Meanwhile, 27 states allocated more than $1 billion for unemployment compensation.”

There’s no Consolidated Federal Funds Report for 2010 yet, but an April 2010 report from The Hill stated “Federal spending on unemployment benefits could eclipse $165 billion this year, five times greater than in 2005, adding to growing budget woes, according to a study released Monday by the Pew Fiscal Analysis Initiative.” 

There’s no reason to think 2011 will prove to be less expensive than 2010 when it comes to unemployment benefits.  The 13-week extension of unemployment benefits passed in December 2010 cost another $35 billion.  If 2011’s unemployment costs turn out to be comparable to 2010, it means we’ve spent about $360 billion on unemployment benefits from 2009 through August 2011.

As for food stamps, the Food Stamp President has got a record 45 million Americans using them now, which represents a good 15% of the population.  A recent Reuters report says the cost of this program “doubled to reach $68 billion in 2010,” which means it cost about $34 billion in 2009.  ABC News says food stamp appropriations for the next fiscal year would be $71 billion.  That would put the total spent on food stamps, from 2009 through August 2011, at a little under $150 billion.

Add unemployment to food stamps, and you’ve got $510 billion in high-octane stimulus “investment” by the federal government since 2009.  Much more money has been “invested” in the name of “stimulus,” of course, but that’s $510 billion of the very best stimulation the taxpayers of the future can buy.  Speaking of which, since a third of our federal spending is now financed by deficit dollars, you should probably add a couple of years worth of interest payments to that $510 billion cost to get the true, final number.

How good is unemployment and food stamp stimulus supposed to be?  When Agriculture Secretary Tom Vilsack recently expounded the stimulus benefits of food stamps, he claimed they produce $1.84 in enhanced production for every dollar the government spends.  Back in October 2010, then-Speaker Nancy Pelosi said it was $1.79… so either these people pull numbers out of thin air, don’t study their crib sheets from Berkeley very carefully, or think food stamps are becoming more effective as a stimulus, despite all evidence to the contrary.)

At roughly the same time, Pelosi was claiming unemployment benefits “create jobs faster than almost any other initiative you can name,” so she must think they’re at least comparable to the awesome 1.84 stimulus multiplier of food stamps.  The Congressional Budget Office has released figures claiming the multiplier for unemployment insurance could be as high as 1.9.

Okay, so that gives us $510 billion of primo stimulus spending, with promised benefits of $1.84 in extra productivity per dollar spent.  That’s $938.4 billion of the most powerful, fastest-acting Keynesian stimulus imaginable since 2009.  Do you see prosperity in today’s headlines?

What a crock.  Can we put this dismal fantasy to bed once and for all now, and resume the lives of wealth, risk, economic liberty, and self-reliance our Founders envisioned for us?

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