Saturday, December 27, 2008

Of sewers and stimulus

A VOA News article presents some current Democratic and Obama-team economic thinking. According to Obama adviser David Axelrod:
"Every economist from left to right agrees that we have to do something big in terms of job creation . . .
Is that really true? Jacob Sullum deconstructs "Obama's job fetish":
Obama wants to spend $150 billion on "developing and deploying advanced energy technologies, including solar, wind and clean coal." He says this plan "will reduce greenhouse gas emissions, decrease our dependence on foreign oil and create jobs that can't be outsourced."

Leaving aside the desirability of "energy independence" and the merits of Obama's approach to reducing carbon dioxide emissions (which has the government, rather than the market, picking the most efficient methods), the fact that he lists "jobs that can't be outsourced" as a distinct goal is troubling. Paying people to dig holes and fill them in again also creates "jobs that can't be outsourced," but that doesn't mean it's a smart investment or an appropriate use of taxpayers' money.
The sort of thinking described here seems to be really rampant. Accroding to the VOA article:
. . . Ohio Senator Sherrod Brown expressed the views of many Democrats: that the economy cannot recover without receiving a significant boost, and that the only entity capable of providing it right now is the federal government.

Brown also spoke on This Week, saying "When you see what has happened with consumer spending, in Christmas especially, with [low] holiday sales, and you understand that 70 percent of the economy is all about consumer spending, we need a real stimulus to get people to spend money. And that means putting money in infrastructure, water and sewer."
Did I miss something there? Sewers are important, but I am not sure what building sewers is supposed to do for consumer spending. Both ends of the political spectrum agreed, for the most part, on propping up the major banks, but there are convincing voices out there arguing that Obama's stimulus package is likely to make things worse.

Peter Schiff asks "what can we expect from the coming avalanche of federal activism?" He answers:
By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.
According to Fred Barnes, Obama has some "unusual ideas about the economy":
"The American economy has worked in large part," he said last week, "because we've guided the market's invisible hand with a higher principle: that America prospers when all Americans can prosper." That's not exactly the way Adam Smith described the invisible hand of free markets.

When he announced his picks for top energy and environmental posts, Obama praised California for adopting the most stringent emission standards in the country. "And rather than it being an impediment to economic growth, it has helped to become an engine of economic growth," he observed.

At best, it hasn't helped much and more likely has hurt the California economy, which is currently cratering.
Right, I wouldn't promote California as the model of sound policy.

Crossposted on Soccer Dad

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