By Investor's Business Daily
June 08, 2009
Stimulus: With the votes tallied from a weekend election, it's now apparent that the European Union has taken another step to the right. There's a message in this for both the White House and the U.S. Congress.
Results from the vote for the EU Parliament showed huge disaffection among Europeans for state-directed answers to the economic crisis — specifically, for the kinds of massive stimulus programs pushed by the U.S.
Parties allied with German Chancellor Angela Merkel and French President Nicolas Sarkozy — who have both made a point of opposing any kind of U.S.-style stimulus — made big gains. Even Italy's Silvio Berlusconi, embroiled in a scandal in his home country, saw his party increase its strength in the Euro Parliament.
We mention this because, just one day after this sweeping repudiation of statism in Europe, the White House is doubling down on a losing bet, moving to "accelerate" stimulus spending and claiming it'll "save or create" up to 600,000 jobs.
Pardon us if we're skeptical. Earlier this year, the White House predicted the jobless rate would top out at 8% if Congress passed the $787 billion stimulus package. Well, since then, 1.5 million jobs have been lost, and unemployment just hit a 26-year high of 9.4%. So, by the administration's own yardstick, it hasn't worked at all.
Ignoring this reality, the new "Roadmap to Recovery" unveiled Monday seeks to accelerate stimulus spending on 10 major projects, ranging from road and airport repairs to hiring 135,000 teachers to finding 125,000 summer jobs for youth.
It sounds noble, but it's just plain foolish.
As we've written before, the economy's already on the mend and likely to show positive GDP growth before the end of the year — and perhaps as early as the third quarter. The $787 billion stimulus, which is only 6% spent, has nothing to do with this. It won't even start being spent in significant amounts until early next year.
Virtually all of the jobs in Monday's stimulus do-over are nonproductive government jobs — not productive private sector ones. Virtually all economists agree: Real job creation means permanent jobs in the private sector, not make-work jobs for government.
The short-term recovery that looks under way was baked in the cake when the Fed cut interest rates to a record low 0% last December. Still, with economic policy favoring high taxes and government over the private sector, the rebound's not likely to be a strong one. And looking long term, the outlook is troubling. With an estimated $13 trillion in new spending planned by 2019, the U.S. government is fast becoming a bloated leviathan.
Americans will pay for this through higher taxes, more regulation, fewer jobs, lower incomes and less freedom. The surge in government spending and taxes will significantly hurt our productivity, damaging our economy's long-term growth.
Just half a decade ago, it was commonly assumed that U.S. GDP could grow indefinitely by 3.5% or more, thanks to surging productivity. Now economists think we'll be lucky to get 2% growth.
When Europeans trooped to the polls, they gave a definitive "no" to more and bigger government. Maybe Americans are ready to do the same; last weekend, a Gallup Poll showed most Americans for the first time view President Obama unfavorably when it comes to "controlling federal spending."
There's a lesson in this for the White House, if it's willing to listen.
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