So what IS Obama offering? Well let’s start with the, apparent, good. Tax cuts. According to the Washington Post these are 22% of the package, although the Obama Administration claims it is 33%. Why the difference? Well because some of the cuts are tax credits given to people who pay no net taxes at all. That isn’t a tax cut, it’s welfare! I’ll be generous and say that the 22% is a good thing, it is good for the US Federal Government to take less money from people, but the rest? Well it is complicated, but who am I not to try to summarise it all:
The biggest lump is spending called “health, education and labor”. US$91.3 billion worth. It includes money to “renovate schools”, which I’d say the federal government shouldn’t own anyway. It also is money to the Department of Health and Human Services. This means subsidised healthcare, welfare programmes and a large number of other government “public health” initiatives. You might wonder how much of that is sucked into this huge bureaucracy, and indeed how much of the education spending isn’t just going to be absorbed by Obama’s unionised friends.
US$89.7 billion is boosting Medicaid temporarily, the socialised healthcare scheme for children of poor families, the disabled and other categories of low income people. Again, unlikely to stimulate the economy.
US$79 billion for the state fiscal stabilisation fund, essentially bails out states so they can keep spending money on education primarily. Again, unlikely to stimulate the economy.
US$62.3 billion for transportation, housing and urban development. Half is to build roads, but the US has an appalling system for deciding how to build roads. Politicians set priorities, so again this could be money down the plughole if unnecessary roads are built. The rest is public transport and housing assistance, again more money down the drain. The best housing assistance is the one provided by the deflating market.
US$48.9 billion for energy efficiency and renewable energy systems, including subsidising electricity infrastructure. You might think there would be more efforts by individuals at energy efficiency if they paid themselves for the cost of core electricity infrastructure. Again another fundamental failing in how the US does infrastructure.
US$45.7 billion Essentially a boost to unemployment benefits.
US$40.8 billion Welfare so the unemployed can buy health insurance (don’t laugh, they’ll get better care than New Zealand or UK unemployed people using socialised medicine).
US$26.9 billion. Agriculture, nutrition and rural. More money for foodstamps (welfare) and subsidising broadband to rural areas. US$4.1 billion included for “rural development” whatever that means.
The rest are smaller (!) sums for all sorts of pork like:
- Improving national parks
- Improving water infrastructure (couldn’t just privatise it or run it commercially so users pay? No this is the United Socialist States of America)
- Science and technology grants.
All in all, change? Hardly, it’s just throwing money at bureaucracies to spend money like they always have done. No confrontation of why the Federal government thinks it should pay for water or electricity or education. No change to how transport is funded, just throw money at the bureaucracies that spend money where politicians think, while bridges collapse because there aren’t votes in maintenance.
Oh and investment? Yep there will be jobs, bureaucratic unproductive ones. They wont be jobs that are better than those created by people spending that money themselves. They wont be better than setting free the government regulated (and in most cases owned) power, water and road systems, which are America’s tribute to socialism in how badly they are all run.
Obama is just trying to kick the recession into the future again. His soundbite moment of capping chief executive pay for subsidised banks will be popular, and understandable, but he's pouring money down the fat pig laden hides of congressmen and women, state governors and others who leech off of the productive, and by and large show little interest in changing the USA to fix the most badly run parts of the economy.
Never mind that he never had any great new ideas for reform, his personality cult lives.