Thursday, February 5, 2009

Stimulus Update/What Are We Stimulating II

Earlier today the Senate adjourned without any deal on the stimulus package, contrary to very recent predictions by the Senate leadership that the final vote on the plan would take place this evening.

Perhaps some Senators are reading the polls showing that only 37 percent of Americans support the bill in its current form.

Meanwhile, Daniel Henninger at the Wall Street Journal has (inadvertently) echoed the question I asked late last month about the House Bill, viz. "What are we stimulating," or, as Henninger puts it: "What is Congress Stimulating?"

Meese (Late January)

Henninger (Today)

Among other things, Henninger notes that the money allocated for refurbishing Federal Buildings has risen from $6 Billion in the House Bill to $9 Billion in the Senate Bill ! There is also money for refurbishing hiking trails and "remediation of abandoned mines and well sites." Moreover, as readers likely know, the overall cost of the Senate version has ballooned to $900 Billion. As with the TARP legislation, the Senate has (thus far) piled on even more spending.

As noted in my earlier post, Keynes argued that one can "stimulate" the economy (at least in the short run) by paying people to dig holes and then fill them up again. Apparently the Senate has modified this slightly by proposing to pay people to fill up old mineshafts as a way of stimulating the economy. Stimulation or not, however, such refilling, like refurbishing Federal buildings, will have NO impact on our national productivity, thereby leaving us with additional debt but not additional ability to pay it off. This is a bit like borrowing large sums of money for College and then graduating with a major in a subject that offers no employment prospects !