Crisis or excuse?

“You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.”  — Rahm Emanuel, President Obama’s Chief of Staff.

Steve Horowitz gets it exactly right,

One of the (correct) complaints about the proposed stimulus plan is that it’s full of all kinds of programs that would appear to have nothing to do with any accepted economic theory about what sorts of spending could even possibly lead to recovery.  The best example of this is the funds for family planning policy that are in the bill.  Of course to those who understand public choice, none of this is a surprise. …

This isn’t just your run-of-the-mill pork.  What we are seeing happen right now is that Congress sees this crisis as an opportunity to enact a whole variety of programs that they’ve wanted to pass for years, especially (but not only) the Democrats who no longer fear a veto, and now finally have the chance.  Just as the Patriot Act was a bunch of laws waiting for a political “crisis,” so is much of the stimulus package a bunch of programs waiting for an economic “crisis.”  The current crisis is just a convenient excuse.

As it happens, the family planning provision has now been deleted from the bill.  The bill is over 1,500 pages long. There’s money for ACORN in there. What else? Will the administration comb through the bill to remove pork, or will they be content to react only to the most egregious examples that get media attention?

Peter Boettke explains the basic economic principles at work,

Government can raise revenue in one of three ways: (1) tax, (2) borrow and (3) inflate.  The natural proclivity of democratic governments is to pursue public policies which concentrate benefits on the well-organized and well-informed, and disperse the costs on the unorganized and ill-informed.  And there are strong reasons why this bias in policy making will also be biased toward shortsightedness — pay out the benefits now, and worry about the costs down the road.  Thus, the natural tendency for elected government officials is to borrow (rather than tax) and then inflate (rather than tax).  Deficit financing, accumulating public debt, and monetization of the debt. …

The US has made a lot of bad policy choices that violate the teachings of basic economics and common-sense for over half a century.  We have not yet destroyed the US economy through these choices, but we are potentially on that path. The most effective way to get off that path would be to establish new restraints on the natural proclivities of elected politicians (take away discretionary powers in fiscal and monetary policy) and unleash the private sector and the creative powers of entrepreneurs. We can still pull out of this current crisis, but first government must stop making matters worse by catering to the natural proclivities of elected officials (from whatever party).  As James Buchanan once summed up the policy wisdom of public choice: “Don’t let the fox guard the chicken coop.”

And from Ilya Somin,

These days, we are repeatedly told that we have to pass a massive new infrastructure spending bill in order to fix our “crumbling” roads and bridges. Everyone seems to have forgotten that just three years ago, in August 2005, Congress enacted the biggest federal public works program in American history, spending a massive $286.4 billion on the 2005 highway bill. At that time, President Bush and congressional leaders from both parties told us that the new highway bill was needed to fix our infrastructure problems.

Before passing a new and potentially even bigger infrastructure spending bill, I would just like to know what happened to all that money Congress appropriated for the same purpose back in 2005? If that act succeeded in its purpose, it’s not clear why we need another huge federal infrastructure bill now, less than four years later. If it failed, we need to know why.

One reason why the 2005 bill may have failed is that much of the money was spent on various porkbarrel projects, such as the notorious “Bridge to Nowhere,” which is the only thing most people now remember from that bill. It’s certainly possible that the 2005 money was largely wasted because most of it went to politically connected interest groups and districts rather than genuinely valid infrastructure priorities. But if the 2005 bill indeed failed for that reason, why would we expect a different result this time around? You have to be a very committed partisan to believe that today’s Democratic Congressmen and senators are any less committed to lining the pockets of their favored interest groups than their Republican predecessors were in 2005. Certainly, Democrats such as Barney Frank have been more than willing to do that with the funds allocated in the bailout bill. Whether Congress is controlled by Democrats or Republicans, it is almost inevitable that much of the money appropriated in in large spending bills will be allocated on the basis of political power rather than economic rationality. Congressmen who refuse to channel money to politically influential constituents are unlikely to hold onto power long.

It’s simply impossible for the federal government to spend $900 billion effectively, efficiently, or even sensibly. The numbers are too large and the opportunities for graft too numerous. The potential rewards for gaming the system are simply too large for us to imagine–for even a moment–that vast amounts of money won’t be completely and utterly wasted.

If a stimulus we MUST have, then why not a simple moratorium on tax withholding? Why not simply take less from the American public for two months?

Because that leaves no opportunity for graft, and Congress lives on graft.

Here’s a link to a full page ad opposing Bailout ’09 taken out by Cato and signed by 200 economists.