This is one of those “I told you so” moments conservatives should really be out publicizing: The $787-billion stimulus passed early 2009 – it’s not working.
And on CNBC’s June 25 broadcast of “The Call,” CME Group floor reporter Rick Santelli explained that all government spending is not created equal, and President Obama’s so-called stimulus spending was for government payrolls and not the infrastructure improvement is was sold to be.
“Well, you know, it's all about, in my opinion, definition and choice,” Santelli said. “Definition, I don't disagree with our guest, Richard [DeKaser, president of Woodley Park Research], about stimulus, but I haven't seen any stimulus. I've seen a lot of spending. And in terms of choice, austerity isn't something people are going to volunteer for. The creditors are going to force it on them. I think these issues are much different than we're selling them. You know, we don't have a new Hoover Dam. We don't have a new electric grid. We paid a bunch of salaries and benefits and extension benefits, unemployment with a lot of that money that you save jobs because you paid teachers because states couldn't afford it I don't think any of that really falls under a definition of stimulus.”
“The Call” co-host Larry Kudlow offered a more technical analysis of this Keynesian economic policy implemented by the Obama administration. He explained an International Monetary Fund study, analyzed by the Hoover Institute’s John Taylor, shows Keynesian policy doesn’t translate into the most efficient way to jumpstart a lagging economy.
“The IMF has done a study that for every dollar of government spending, you only get 70 cents more in GDP, and after year two it goes to zero,” Kudlow said. “Now, I think we're going to zero. No wonder our borrowing ratios are so high. When are we going to learn that this kind of stimulus isn't even what Keynes argued for many years ago?”
DeKaser, one of the segment’s panelists, argued that 70 cents of GDP growth was better than nothing, which Kudlow questioned.
“You borrow a dollar to get 70 cents, and you lose 30 cents?” Kudlow said. “Boy, that sounds like a bad deal, my friend. I wouldn't want you trading my account. I mean, the whole thing could go deeper into debt.”
Santelli argued that even if one subscribes to the 70 cents per dollar economic growth figure theory as a positive, this government didn’t get it right in its approach.
“I mean, the notion of stimulus is you want capital in the system, but when you have artificial stimulus, you give capital to the people that aren't really creating an expansive employment scenario or creating something that's actually positive for a society,” Santelli said. “What you end up doing is putting capital to businesses that on their own couldn't get capital and that's for a reason. The market didn't allocate it because they didn't deserve it.”
CNBC senior economics reporter Steve Liesman questioned Santelli’s
“Rick, why is it artificial to keep teachers in the classroom and cops on the beat and firemen in the firehouses?” Liesman said. “To me that's not artificial stimulus. That's just good policy.”
But that led to a vintage Santelli rant – why should taxpayers all over the country be held responsible for the woes of a local government brought on by its own irresponsibility.
“Because that's what people pay property taxes for, and if the state of California when the bubble was going on raised boatloads of property taxes, why should the value of somebody's house make collecting garbage more expensive, running transportation more expensive? It doesn't. They spent all the money. So, why does my share have to pay for their teachers?”
Like this article? Sign up for “The Balance Sheet,” BMI’s weekly e-mail newsletter.
