Rescind Obama’s remaining ‘stimulus’

This Thursday, Feb. 17, marks the two-year anniversary of the signing of the American Recovery and Reinvestment Act, more commonly known as the “stimulus” package, into law. Unfortunately for American taxpayers, the day is not a cause for celebration, but one they would rather forget.

Democrats promised their trillion-dollar spending and debt package would keep the unemployment rate below 8 percent and “save or create” 3 million jobs. Two years later there are 6.8 million fewer jobs than promised and the unemployment rate has been at or above 9 percent for 21 continuous months, the longest stretch since the Great Depression.

{mosads}While supporters of the “stimulus” point to last month’s drop in unemployment as a sign of success, they overlook the mass exodus from the labor force that afforded the drop. As an indicator that more Americans have given up looking for work, the size of the labor force shrank by 504,000 this January alone, leading the labor force participation rate to reach a new 26-year low.

For those who have remained in the labor force and found employment, it often isn’t enough. The current underemployment rate of 16.9 percent, which includes part-time employees who would prefer a full-time position and persons who have given up looking for employment, paints an even worse picture for the American workforce.

The only place in the country that actually achieved the Obama administration’s job creation projection is Washington, D.C., where the federal workforce has exploded under “stimulus” munificence.

On average, each new federal bureaucrat costs the country $4 million over the course of their career. By increasing the federal payroll by over 200,000 employees, the president has committed the next generation of taxpayers to almost a trillion dollars in new spending. 

Judging the “stimulus” by its own glorified benchmarks, the law has objectively been a failure. But this should be no surprise to students of history and economics.

From 1933 until 1940, President Roosevelt’s New Deal increased real per capita spending by 74 percent, and yet the unemployment rate remained at a staggering 14.6 percent prior to World War II. Reflecting on its failure, Roosevelt’s Treasury Secretary Henry Morgenthau lamented in April 1939 that “we are spending more than we have ever spent before and it does not work … after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!”

The principles of Keynesian economics on which the theory of government “stimulus” relies says government spending will have a positive multiplier effect and stimulate economic activity far beyond its initial point of purchase. The government, in theory, adds value to the power of the dollar, beyond what that dollar could have accomplished on its own in the private sector.

However, this ignores the reality that government spending does not occur in a vacuum; every dollar the government spends has to be acquired through taxation or borrowing from the public, both crowding out a more productive private sector.

Indeed, Harvard University professor Robert Barro has shown the historical Keynesian multiplier effect to be less than one, meaning that government stimulus spending will likely raise GDP by less than the increase in government spending.

To date, President Obama’s guaranteed failure of a “stimulus” has cost American taxpayers over a trillion dollars in spending and debt without an end in sight. On the heels of the Congressional Budget Office releasing its updated baselines reflecting a $1.5 trillion federal overspending problem for 2011, it is imperative that congressional leaders enact real reform to restrain the explosive growth in government authored under the Obama-Pelosi-Reid watch.

Voters sent a clear message last election that the ways of Washington must come to an end, and lawmakers must learn the lessons of the failed “stimulus” experiment. Luckily for taxpayers, freshman Congressman Sean Duffy has gotten the message.

Duffy, who replaced retired House Appropriations Chairman David Obey in Wisconsin, is quite appropriately introducing a bill today to rescind the remaining “stimulus” funds, which would save taxpayers over $45 billion.

While real spending reform requires serious efforts to permanently alter the bias of Washington profligacy, righting the wrongs of the past two years is a good first start.

Colin Hanna, president of Let Freedom Ring, Grover Norquist, president of Americans for Tax Reform, and Alex Cortes, chairman of the Restore the Dream Foundation, are leaders of the DefundTheStimulus.com initiative.