Stimulating Hope and Change

How could it happen? How could all the promises about Hope and Change get buried in the dust of politics-as-usual so quickly? Is it really impossible for our political leaders to do anything without covering it in political chicanery and ethical lapses. Can’t we stimulate the economy without a christmas tree bill that shovels money at every liberal special-interest gropup in the nation?

My answer is: What do you expect when the government is handing out $5.5 trillion a year in goodies? Here’s the gory details from usgovernmentspending.com.

United States Federal

State and Local Government Spending

Fiscal Year 2009

Amounts in $ billion



Pensions: $891.1

Health Care: $958.2

Education: $873.7

Defense: $806.1

Welfare: $467.7

Protection: $325.0

Transportation: $247.8

General Government: $193.3

Other Spending: $403.6

Interest: $361.7

Balance: $24.3

Total Spending: $5,552.4

Gross Public Debt: $12,969.0

This isn’t rocket science. When government is spending all that money then inevitably the people in politics want to use that money to build political support. If you don’t want them doing that, then you must give them a lot less money to play with.

Now the question is: Did President Obama know all this, but just told the American people what they wanted to know? Or is he just naive, and believed that by introducing new ethics rules he would really clean up government?

It really doesn’t matter. But with every cloud there is a silver lining. By creating ridiculously high expectations for hope and change President Obama has handed conservatives and Republicans a much-needed helping hand. So let’s get the word out to the American people. Do you want government and a governing class that are less corrupt? Then you must start voting for people who will reform government by dismantling the vast patronage system we call the welfare state.

Because the welfare state is cruel, corrupt, wasteful, unjust, and the people that believe in it are deluded.

Welfare Reform, Part 2

Whatever happened to welfare reform? Last we heard, President Clinton had signed welfare reform in summer 1996 after vetoing two bills from the Republican Congress. Democrats had all predicted disaster. But by the year 2000 welfare rolls had dropped to 6 million—from a level of 13 million in 1995—and child poverty had gone down too. After that, silence.

Well, it turns out that, right under our noses, the incompetent Bush administration has been doing welfare reform part 2, and it’s working, according to Steve Malanga in City Journal.

The reason you haven’t heard about this new welfare reform push is that it was implemented in the 2005 Budget Reconciliation Act. These days you can’t reform anything in a regular authorization bill because the liberal moss-backs in the Senate will filibuster any reform of the welfare state. So you slip it in under the radar in the budget process where you only need 51 votes in the Senate.

The new reforms put the states back under the gun to move welfare recipients from welfare to work. Writes Malanga:

The federal government also tightened the definition of what counts in fulfilling the work requirement: no longer would spending time in psychological counseling or in traveling to job training do the trick. And the feds urged states to enroll more welfare recipients with physical or mental disabilities in job-training and job-placement programs.

In case some liberal states didn’t get the point, the Bushies spelled it out for them.

“Individuals who happen to have disabilities should be afforded the same opportunities to engage in work—to find work-related training, work experience, and employment—as those who do not have a disability,” the Bush administration’s Department of Health and Human Services wrote in its new regulations.

As is the common practice, Malanga tells the story of a welfare poster girl, Debra Autry, who had, in social-services jargon, “multiple barriers to work” and “been out of work and on public assistance from more than two decades.”

First they had Autry cleaning out government offices, but she didn’t like that. So she got a job at a Revco drugstsore (later bought out by CVS).

[S]he enrolled in the company’s program to learn how to become a pharmacy technician and eventually began working in that position, which typically pays between $25 and $30 per hour.

Well, that’s nice. Think of that: a former welfare recipient earning $60K a year. But there’s more.

Autry’s hard work inspired her children. Her daughter just earned a degree as a physical therapist, while one son is in college and another is working full-time. “I was on welfare because there were no jobs that interested me,” she recalls. “But once I had to go back to work, I realized there’s a future if you want to better yourself. It was the best decision I ever made.”

Don’t expect to be reading much about this in the New York Times, old chap. After all, this is another success of the Bush administration, and we wouldn’t want people to get the wrong idea.

Unfortunately, we are not yet home free on welfare. Writes Malanga:

Ominously, Democratic foes of welfare reform have gathered power both in Congress and in President Obama’s cabinet.

No doubt. No doubt there are careers, power, and the love of beautiful women at stake.

Like I say. The welfare state is cruel, corrupt, wasteful, unjust, and the people that support it are deluded.

It's Not As Bad As That

With President Obama safely inaugurated, the experts are looking at GOP prospects and they are painting a gloomy picture. Both Michael Barone and John J. Pitney see a gloomy short-term outlook.

Barone notes that Republicans are doing dismally with black and young voters and are even losing the educated voters in the affluent suburbs.

Pitney worries that Democrats have a lock on congressional districts that are black, Hispanic, New England, and New York.

So how do Republicans have a chance?

They have a chance because things will change. Republicans are losing because voters are fed up with them, particularly upscale, educated voters that are influenced by upscale media. The upscale media has been running hard against Republicans ever since 1998 and the disgrace of Bill Clinton. (Plus there is also the fact that many educated voters work for the government.) On top of that, President Bush asked Americans to have patience while he solved the problem of Iraq. Who needs patience?

But Republicans are not running for office in the springtime of Obama’s adminstration. They will be running in 2010 and 2012. In 2010 they will be running against the first two rookie years of Obama. And in 2012 they will be running against four years of Obama. Given that the early signs are that Obama aims to govern as a patronage president, handing out goodies to the Democratic faithful, you couuld build a case that many swing voters are going to swing against the president and the Democrats in the near future.

After years of media drumbeat the voters now believe that the Democrats are the center-left middle-class party and the Republicans are dominated by the right. Well, they would, wouldn’t they? That’s all they’ve heard for ten years.

In fact, it’s probably more accurate to say that the Democrats are a center-left party that would like to be leftier. And the Republicans are a center-right party that would like to be more libertarian. But as we get into the Obama administration it will be easier and easier to make the argument that the Republicans are a center-right party that works for the middle class and that the Democrats are a bunch of corrupt left-wing loonies that sneer at the middle class behind their back.

When Republicans start to make that argument hit home then all of a sudden upscale voters will start listening to Republicans again and New Englanders will stop looking down their noses at them.

And all of this is assuming that the advancing recession doesn’t cause significant hardship and anger and prompt a broad political realignment.

Be of good cheer! When the other guys are in power then there is everything to play for, and the only way is up.

New Deal Put "Great" in Depression

You can’t say this often enough. The New Deal prolonged the Great Depression. If you want a book-length treatment, a good one is Amity Shlaes readable Forgotten Man, now out in paperback.

And today there’s a good article in the Wall Street Journal by Harold L. Cole and Lee E. Ohanian: “How Government Prolonged the Depression.”

The New Deal is widely perceived to have ended the Great Depression, and this has led many to support a "new" New Deal to address the current crisis. But the facts do not support the perception that FDR’s policies shortened the Depression, or that similar policies will pull our nation out of its current economic downturn.

Then the authors talk numbers.

Total hours worked per adult, including government employees, were 18% below their 1929 level between 1930-32, but were 23% lower on average during the New Deal (1933-39). Private hours worked were even lower after FDR took office, averaging 27% below their 1929 level, compared to 18% lower between in 1930-32.

Let’s put that in a table, to make it all even more clear.

Total hours worked per adult 1929 1930-32 1933-39 Private and public sectors 100% 82% 77% Private sector only 100% 82% 73%

It’s not very pretty is it? And the reason is pretty simple. In the NRA, the government operated a wage-and-price control program to keep wages and prices up. You may remember the wage-and-price controls of the 1970s. It was different from the NRA in that it intended to keep wages and prices down, not up. The result? Inflation, big time. Not surprisingly, the NRA had the opposite effect. It kept deflation going. Fabulous job, guys.

Cole and Ohanian mention another disaster: the recession within a depression of 1937-38..

The downturn of 1937-38 was preceded by large wage hikes that pushed wages well above their NIRA levels, following the Supreme Court’s 1937 decision that upheld the constitutionality of the National Labor Relations Act.

You see, in 1935 the New Dealers passed the Wagner Act that mandated monopoly rights for organized labor. Not suprisingly, workers organized into labor unions in autos and steel racked their wages up substantially. And that impoverished the rest of the country.

This is not rocket science. When the government sets up privileges and monopolies for favored special interests, fixing prices, setting barriers to entry, mucking around with the relations between worker and employer, the people suffer. These special interests could be evil bankers, or they could be honest working stiffs. They could even be hard-working teachers in inner-city schools. The result is still the same. The people suffer.

Can Obama Stimulate Republicans?

After the thunder of the Wall Street Journal conservative edit-page folks, now we get the opinion of the liberal news side (don’t ask why the Journal has two opinion pages).

Today the Journal’s Gerald F. Seib wonders whether President Obama will be able to sweeten the stimulus pot enough to attract some Republican votes. President Obama’s heart is in the right place, but the stimulus package creates a conflict between the need for fast action on the economy and his promise of an end to partisan wrangling.

The passage of the bill without a single Republican vote showed the tension between those dual Obama goals. By ceding so much authority to House Democratic leaders to write and then steer the initial version of the big stimulus package — as opposed to offering his own version and trying to dictate legislative strategy — Mr. Obama got action quickly. But he also got a bill with fewer concessions to Republican wishes than the president himself seems willing to make, and the vote showed it.

A stimulus plan without Republican support would be a replay of the first year partisanship of the Carter and the Clinton administrations. In neither case did the overt liberal partisanship turn out too well for the president and his party. That contrasted with President Reagan, who did get bipartisan majorities for his proposals.

Preventing a similar outcome now likely requires expansion and modification of the tax portion of the stimulus package to accommodate Republican wishes for a more business-friendly mix, and further reduction of the questionable spending provisions in the House bill. Republicans need a reason to swim against the tide in their party.

But here’s an idea. How about a stimulus package that actually stimulates the economy? Loyal partisan that he is, Seib rather dances away from the fact that the stimulus plan is nearly 90 percent to-the-victor-goes-the-spoils. There really is no reason for Republicans to sign on to any stimulus package that doesn’t genuinely stimulate the economy.

So far all we’ve seen from the Obama adminstration is silly subsidies and tax credits. That sort of thing reduces the real economic issues into special interest goodies.

If the Obama adminstration wanted to do one thing to help Americans rather than Democratic supporters (who really don’t work in the real economy, if they work at all) it would be to lower the corporate income tax rate. If it did that it could at least hold its head up at liberal dinner parties because it had avoided the awful sin of lowering personal income tax rates on the rich. And it would lower the water level in the economy so that more corporations could get their feet on the bottom of the pool.

Meanwhile here’s some unsolicited advice to Congressional Republicans. Don’t cave unless you get something that really helps the economy and really helps ordinary Americans.

That Stimulus Sickness

Everybody now knows what happens when the government decides to give everyone “affordable housing.” It takes a while, but eventually it takes down the whole financial system. That’s because, Virginia, when worthy Democratic voters that don’t pay their bills get mortgages, banks and Fannies and Freddies end up with toxic assets and nobody knows if they are worth anything..

So now our Democratic friends are proposing to stimulate the economy with a spending bill that, wait for this, increases the subsidies for health care. That’s according to the Wall Street Journal edit page.

The more we dig into the pile of spending and tax favors known as the "stimulus bill," the more amazing discoveries we make. Namely, Democrats have apparently decided that the way to gun the economy is to spend even more on health care.

The intriguing thing about all this is that experts now agree, both from the left and the right, that life-style is the key ingredient in health and life expectancy. This means that when the government increases the subsidy for health care they are gunning the engines on the national cigarette boat. So now we are heading towards the sound of the next big economic waterfall, the point at which government will have to cut back on health care, even faster than before.

The provisions are innocent enough. The Feds are going to increase the federal share of Medicaid reimbursement. They are going to offer Medicaid to the unemployed. They are going to subsidize Cobra benefits for people laid off. This is all very compassionate and thoughtful. Except for one thing:

When you subsidize people not to work, you get more nonworkers.

That’s the problem with the whole welfare state. People work because they have to. They work for food, for housing, for health care, for transportation. When the government subsidizes it then more and more people, especially the low-skilled, low-paid, decide against work. You can’t blame them. Who would work unless they have to?

We’ve been saying here for a while that the only way we are going to reform the welfare state is after it “hits the buffers.” We have mixed feelings about this. Good people, ordinary people are going to be hurt. And even people that never gave into the temptation of the welfare state are going to be hurt.

On the other hand, if you believe that “free” health care or “free” education isn’t going to cost you in the end, we’ve got a bridge we want you to look at.

Stimulating Democratic Voters

Here’s a thought for you eternal optimists. Maybe the Democratic stimulus bill is so egregious that it will give stimulus a bad name.

Any Republican that wanted an excuse to oppose it now surely has enough ammunition. You could get all the ammo you needed just from today’s Wall Street Journal.

First, there is the top editorial. The Journal edit page folks point out that there isn’t much economic stimulus in the bill at all.

Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.



Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus.

Twelve cents on the dollar of stimulus ain’t exactly going to stir the sleeping beast.

Next, there’s supply-side economist Alan Reynolds. He points out that the stimulus is mostly going to sectors of the economy that aren’t suffering too much from the recession. Like government employees.

The December unemployment rate was only 2.3% for government workers and 3.8% in education and health. Unemployment rates in manufacturing and construction, by contrast, were 8.3% and 15.2% respectively. Yet 39% of the $550 billion in the bill would go to state and local governments. Another 17.3% would go to health and education — sectors where relatively secure government jobs are also prevalent.

Well, OK. No serious person imagines that the stimulus is much more than a payoff to Democratic voters. Of course, you needn’t expect the MSM to point that out to alert voters. Move along there; nothing to see here. In fact you might even expect a loyal MSMer to worry that there wasn’t enough money for government in the stimulus.

Lastly, there is the Journal’s house liberal. Wouldn’t you know that Thomas Frank chooses this exact moment to criticize the notion of privatizing roads and bridges. He’s worried about the danger that the stimulus bill might include incentives to privatize infrastructure development. He sneers at privatization lobbyists who urge that governments lock in private investment before private investment money gets committed to other projects.

But there’s good reason to be reluctant to privatize. It doesn’t take an MBA to figure out that we didn’t build our Interstate highways in order to create opportunities for venture capitalists. The purpose was public service.

Oh really. I thought the whole idea of infrastructure development was to give jobs to union workers, fees to investment bankers and kickbacks to state and local politicians. Silly me.

It is the canard of “public service” that fuels the self-dealing monstrosities like the current stimulus bill in Congress. When can we ever hope for a time in which politicians (and particularly Democrats) stop dumping these wasteful proposals on the American people with the assistance of willing accomplices in the media like Thomas Frank? It ain’t public service, Mr. Frank. It is just politics as usual.

The idea behind bridges and highways is not “public service.” It is economic development. We want to build economic infrastructure that will help move goods and services around and save human and natural resources in doing so. It is, if you like, public service to build a road in Yellowstone National Park so people can drive around in an area of natural beauty. But for regular infrastructure, the purpose is economic. Modern political and economic theory and practice tells us that profit-seeking businessmen are much better at doing this than vote-seeking politicians.

Some day even dyed-in-the-wool liberal MSMers like Thomas Frank will admit this. But probably not before liberals bring the entire economic house down around our ears.

The truth is that almost everything the government does is a cruel waste of scarce natural and human resources. And it looks like the current victory-lap stimulus bill of President Barack Obama and Speak Nancy Pelosi and liberal commentator Thomas Frank is no exception.

But there is always Hope for Change. Maybe the more that ordinary Americans get to see of the stimulus bill the less they will continue to Hope that the Obama Administration and the Pelosi-Reid Congress represent anything within a country mile of Change.