Obama's phony stimulus

The Wall Street Journal throws some common sense, a commodity in short supply in Washington, on the Barack Obama economic stimulus boondoggle.

With the economy weak and the labor market continuing to decline, there is now talk of a second stimulus (which is actually the third, counting President Bush's 2008 tax rebates). This would be a mistake. The truth is there hasn't been any stimulus to speak of so far this year. Moreover, what's being called stimulus is just a smoke screen for a permanent expansion of government. (Emphasis mine.) Let's start with some facts.

By June 26, about $56 billion was spent on the stimulus from the American Recovery and Reinvestment Act of 2009, passed Feb. 17. A large proportion of that actually reflects mere transfers from the federal government to state governments, so the amount that has gotten into the economy is significantly lower.

But even if we call all of the $56 billion spending, it's still not enough to make a meaningful impact. By this point of the year in 2008, the Bush administration's tax-rebates got out about $80 billion. Most economists believe the rebates had a positive but hardly dramatic effect on the economy.

The Obama stimulus, being significantly smaller, cannot possibly be expected to turn the economy around. The economy will improve. But it will do so because the financial sector is recovering, largely due to the Fed policies to enhance liquidity and the success of the Bush administration's Troubled Asset Relief Program, continued by the Obama team, in helping to recapitalize the banks.

Like the national energy tax bill, the stimulus bill was hurried through Congress even though most legislators who voted for it hadn't read what was in it.

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