Dan Mitchell has another excellent video from the Center for Freedom and Prosperity explaining the folly of Barack Obama’s stimulus plan. He notes that the idea of increasing government spending is nothing new. In fact, the Bush administration expanded government spending at a rate unmatched over the last decade. If that stimulated the economy, why are we in the mess we’re in now?
If government spending stimulated national economies, as Obama proposes, then “North Korea would be Nirvana,” Mitchell exclaims. In fact, we don’t have to go to those extremes to see the end result of massive government spending and jacked-up taxation. All we need to do is study Western Europe, which has stagnated for years on those policies, and Eastern Europe, which has thrived on low tax rates and better fiscal discipline.
Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $92 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.
In addition, CBO and the Joint Committee on Taxation (JCT) estimate that enacting the provisions in Division B would reduce revenues by $76 billion in fiscal year 2009, by $131 billion in fiscal year 2010, and by a net of $212 billion over the 2009-2019 period.
Ten years? This looks less and less like a short-term stimulus and more like a long-term change in the way government interacts with the economy — in the failed European model.