Mandating No Growth: Obama and Pelosi Work to Make a Bad Situation Even Worse

Who are these crazy people claiming the $787 billion stimulus bill hasn't worked? It already achieved its main objective: a bigger federal government for you and me.

And we've only just begun. The Obama 10-Year Plan (also called the federal budget), the Obama Healthy Government Initiative (usually referred to as health care reform in the ministries of propaganda formerly known as newsrooms), and the Heroic Obama Save the Planet Now Scheme (Cap'n Trade) could one day combine to make government in America nearly as large as the private economy.

The Obama administration has played coy about the scope of the expansion. Over the past half-century, federal expenditures have typically taken about 20 percent of the overall economy (as measured by gross domestic product). Spending has bounced around in a relatively narrow band over that period, almost never dropping below 17 percent or rising above 23 percent.

This year, spending may reach 30 percent of GDP, a jaw-dropping 50 percent above the levels that funded the enormous growth of the federal government since 1960. The Obama budget claims that spending will then settle in somewhere around 24 percent of the total economy -- about 20 percent higher than the average over the past 50 years.

But that claim relies on bogus budgetary gimmicks, such as $606 billion in savings over the next 10 years from "new, unspecified benefits from health reforms," according to the Congressional Budget Office analysis. This is the same CBO whose director, appointed by Democrats, recently said health reforms proposed by the White House would actually increase federal spending. Who knows by how much?

The administration also assumes a solid revival in GDP growth and a sharp drop in unemployment over the next few years.

Anything's possible, but with (1) massive federal borrowing that crowds out private investment, (2) government-mandated increases in everyone's energy expenses, (3) payroll-tax hikes that would dramatically raise the cost of hiring new employees, and (4) crippling increases in the tax burdens for entrepreneurs, investors, and business owners -- stagnation seems the likeliest scenario in the foreseeable future.

That's not to say that the recession won't end soon -- if it hasn't already -- but the odds of a robust and lasting recovery seem remote as long as the federal government insists on punishing innovation, investment, hard work, and risk-taking.

The overall economic pie might not get any bigger, but the government's slice of it will. So don't be surprised if the federal share of GDP stays close to 30 percent for years to come.

Add to that the very conservative estimate of state and local government expenditures, after subtracting federal contributions, consuming about 13 percent of GDP -- and it's suddenly clear that President Obama and House Speaker Nancy Pelosi really are pushing America dangerously close to becoming a society in which the public sector equals the private.

Which brings us back to the stimulus package. It was Obama's first legislative victory -- and one that might end up costing his party control of Congress and the White House.

Yes, we all know that Obama inherited a nasty recession and a badly damaged financial system. And he responded with an utterly politicized spending bill that has succeeded primarily in saving state and local government jobs (not an unworthy goal in a recession, but never a source of stimulus), scaring the bond markets, and making it impossible to take actions that might actually boost growth and encourage job creation in the private sector.

Worst of all, it sent a message to markets, businesses, and consumers that the new president is not serious about helping revive a shrinking economy. That impression was amplified when he touted climate change legislation and health care reform as cures for the ailing economy -- as if either had anything thing to do with the recession.

The economy may still get a jumpstart from the Federal Reserve mainlining money into the patient for most of the past year, but mounting unemployment rolls suggest that the stimulus package not only has not helped spur growth through fiscal policy, it has actually deferred and diminished the expected benefits of hugely expansionist monetary policy.

Let's hope Republicans have learned from their recent mistakes (most of which involved too much government spending and meddling, as well) because they may be back in charge much sooner than anyone expected even a few months ago.

One of the great things about change is that it is so rarely permanent.

Contact Bob Rayner at (804) 649-6073 or .