Stimulus fizzle has Democrats worried

posted at 12:49 pm on July 8, 2009 by Ed Morrissey
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And well they should.  Democrats put down an $800 billion bet and locked Republicans out of the room in placing it.  They know their party and their President completely owns the results — and those aren’t looking good at all.  And like any bad gambler, they want to double down on a lost hand:

Five months after Congress approved a massive package of spending and tax cuts aimed at reviving an ailing economy, the jobless rate is still climbing and the White House is scrambling to reassure an anxious public that President Obama’s prescription for economic recovery is on the right track.

Yesterday, Obama took time out of his first presidential trip to Moscow to defend the $787 billion stimulus package, arguing that the measure was the right medicine at the right time. “There’s nothing that we would have done differently,” he told ABC News.

Back in Washington, senior Democrats on Capitol Hill were nervously contemplating whether additional government stimulus spending may be needed to pull the nation out of the worst recession since the 1930s. Senior administration officials acknowledged that the effects of the stimulus package have been overshadowed by an unexpectedly sharp drop-off in employment since the measure passed in February. But they reported that only about $100 billion has so far been spent and that as increasingly large sums flow out of Washington, the program is on pace to save or create 600,000 jobs over the next 100 days.

“It is clear from the data that there needs to be more fiscal stimulus in the second half of the year than there was in the first half of the year,” White House economic adviser Lawrence H. Summers said. “Fortunately, the stimulus program designed by the president and passed by Congress provides exactly that.”

But that wasn’t what the White House or the Democrats promised when they passed Porkulus.  Barack Obama’s economic advisers demanded fast action, rather than reasoned debate and negotiation, to adopt their recommendations in order to avoid a spike in unemployment in the near term.  They got what they wanted — a spending plan that funded just about every liberal fantasy of the last 30 years, save universal health care — and it didn’t do anything to stop rapid unemployment.

Why did it fail?  Michelle links to a GAO report that shows that the White House lost control of Porkulus spending from the very beginning.  States receiving Porkulus money used it to hide budget deficits instead of creating jobs, and the GAO cannot effectively track the money in any case:

Overall, states reported using Recovery Act funds to stabilize state budgets and to cope with fiscal stresses. The funds helped them maintain staffing for existing programs and minimize or avoid tax increases as well as reductions in services.

States have implemented various internal control programs; however, federal Single Audit guidance and reporting does not fully address Recovery Act risk. The Single Audit reporting deadline is too late to provide audit results in time for the audited entity to take action on deficiencies noted in Recovery Act programs. Moreover, current guidance does not achieve the level of accountability needed to effectively respond to Recovery Act risks. Finally, state auditors need additional flexibility and funding to undertake the added Single Audit responsibilities under the Recovery Act.

Here’s where we get into the “saved or created” dodge of the Obama administration.  The Porkulus money may have “saved” jobs, but they were government jobs, not the private sector.  Most government employees have union representation, primarily by the SEIU.  The only jobs Porkulus may have saved were those of bureaucrats in state government, and mostly to make sure the unions stay on the side of the Democrats.

None of that money went into promoting growth in the private sector, which is why unemployment skyrocketed.  Capital stayed out of the market, in part because of fears of confiscatory tax increases and in part because of the amount of regulation threatened by the Obama administration, and what capital was left will get eaten up by the cost of Porkulus eventually.  And the GAO says it will take months just to get effective reporting on how that money gets spent, regardless of where it goes.

Now, Democrats want to do this all over again, saying that all they need to do is bet just a little more to erase their losses.  I’d say we need to cut our losses, and the Democrats as well.

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