Barack Obama says he doesn’t want to “relitigat[e] the past,” but what he should avoid is litigating the present. CNS News presents this clip of Obama’s press conference yesterday, in which Obama insisted that his stimulus package worked to save and create jobs, and that the proof of this can be found in, er … layoffs. No, really:
Now, without re-litigating the past, I am absolutely convinced and the vast majority of economists are convinced that the steps we took in the recovery act saved millions of people their jobs, or created a whole bunch of jobs. And, part of the evidence of that, as you see instances of the recovery act phasing out. When I came into office and budgets were hemorrhaging at the state level. Part of the recovery act was giving states help so they wouldn’t have to lay off teachers, police officers and firefighters. As we’ve seen that federal support for states diminish, we’ve seen the biggest job losses in the public sector — teachers, police officers, firefighters, losing their jobs. So, my strong preference would be for us to figure out ways that we can continue to provide help across the board.
Yes, because it worked so well the first time! If the state bailouts had really saved those jobs, the layoffs would never have happened. What did happen was that the bailouts allowed states to paper over serious structural gaps in their budgets for a very short period of time, putting off much-needed budgetary reform at the state level. The influx of cash gave states some breathing room during the sharp downturn of the Great Recession, which they should have used to reform their budgets and especially their underfunded pension plans. With the federal bailout in the form of block grants in Porkulus, the pressure to do so simply shifted two years in the future — to now.
Porkulus didn’t save any jobs in state and local government. It only postponed the inevitable day of reckoning. That’s what has been proven in the latest round of layoffs — the failure of Porkulus. We spent a lot of money to see those jobs disappear anyway. The bailout was yet another temporary gimmick in an economic policy that consists of nothing else.
States have to figure out how to fund their own operations from their own revenues. If a state can’t generate enough revenue to pay for its bureaucracies and employees, then the state and its citizens need to find a way to scale down their public sector. They shouldn’t expect other states to pay for its staff, and other states should refuse to accommodate them. What Obama proposes is to eventually have all states dependent on federal revenue while even the federal government can’t pay for its own operations without massive borrowing from home and abroad. Not only does that erode state sovereignty and local control of government, it erodes the very notion of fiscal sanity.
Addendum: I wrote about the inevitable outcome two years ago.
Update: Even Paul Krugman won’t make this argument — at least not anymore.