Everyone Loses

In a sports contest, there is always a winner and a loser.    Some football games used to end in ties, but the rules now require the teams to keep playing until one team wins and the other loses.     In the political arena, it is not always clear who won and who lost when a controversial matter is finally resolved through the passage of legislation to deal with it.  In some cases, it may take years for the winners and losers to be determined.   In other cases, the water gets so muddy it will never be clear who won and who lost. 

Despite the uncertainties and ambiguities, members of the news media cannot resist the temptation to designate the winners and losers when Congress enacts a controversial piece of legislation.  After all, the members of the news media have appointed themselves to be the final judges when matters of public policy are being debated and decided by our politicians.  Today, it appears that most reporters and commentators are declaring that President Barak Obama achieved a major victory when Congress approved the American Recovery and Reinvestment Act, which is the pretty term for the $782,000,000,000 stimulus package promoted by Obama as the center piece of his plan for returning the nation’s economy to good health.    

In my view, everyone is a loser as a result of the newly approved stimulus package.   It is not a win-win package, as it should be, and it is not a win-lose package, with clear winners and clear losers.     It is a lose-lose package.    Everyone has lost something valuable and important to him or her. 

Although Obama got what he wanted, I think he is a loser for many reasons.    First, he based his campaign for President on the promise of bringing hope and change to the country he is now leading.    In order to get the stimulus package approved, he became a fear monger and a spokesman for a “gloom and doom” outlook for the country.   Second, Obama promised to govern in a bipartisan manner and to seek bipartisan support on all major issues.   Despite these promises, the stimulus legislation was railroaded through Congress and was approved almost exclusively by Democrats, with every single Republican in the House and all but three Republicans in the Senate voting against it.   Third, the process by which the stimulus legislation was developed and approved was downright ugly.  Obama promised openness and transparency.    Instead, the single most expensive and expansive piece of legislation ever enacted by Congress was rushed through the system in less than a month.   Although the bill contains 1,073 pages and weighs more than five pounds, it was not available until early in the morning on the same day it was approved by both the House and the Senate.  It is safe to say that not a single member of Congress read the bill before voting on it.   I am sure President Obama has not read the bill.   Provisions involving billions of dollars of taxpayer money were never discussed or debated.  For the next several weeks, we will be reading about provisions in the bill that even those who supported it did not know about.    Finally, it is inevitable that the stimulus bill will result in billions of dollars of wasted taxpayer money.    It will not be long before we will be hearing about inefficient government spending, new government contracts being awarded to those with the best political connections, and allegations of fraud on the part of government employees and contractors.   The stories of waste and fraud to come will tarnish the Obama Administration. 

The Republicans also must be classified as losers.    First, as the minority party, they were unable to have any significant influence over one of the most important pieces of legislation ever enacted by Congress.   The three moderate or liberal Republicans in the Senate who voted for the legislation may have received a few modest concessions, but overall the Republicans were powerless.    Second, the Republicans did not have any credibility as champions of fiscal conservatism after spending taxpayer money like drunken sailors when they controlled Congress.  They also did not have any credibility when they complained about the heavy-handed tactics of Speaker of the House Nancy Pelosi, who was simply following the example set by former Republican Speaker of the House Tom DeLay.   Finally, the Republicans now face the same dilemma the Democrats faced when they were out of control.    When President Bush was in office, many Republicans charged—correctly in my opinion—that the Democrats wanted bad things to happen to the country so they could regain power.   When Bush was President, it was very clear that many Democrats were thrilled when the War in Iraq was going badly, and they could not control their excitement when the economy went into the tank.   These developments, which were bad for the country, were good for the Democrats.    The tables are now turned.    The Republicans claimed the stimulus package would not work, and many of them will now be hoping it fails because failure will prove they were right and will pave the way for them to regain the power they have lost.   There is something wrong with a political system where the hopes and dreams of the minority party depend on developments that are bad for the country. 

The American public also lost.   Ed Feulner, President of the Heritage Foundation, said the stimulus legislation will result in a “massive expansion of the federal government’s reach into the day-to-day life of virtually every citizen, business and civic organization in the nation.”   As examples, Mr. Fuelner said the bill among other things (1) “reverses the bipartisan and highly successful welfare reforms of 1996 and drastically expands the welfare state,”  (2) “does extreme violence to the concept of federalism—bailing out states that have spent irresponsibly at the expense of taxpayers in states that have been fiscally prudent,” (3) “greatly shifts the responsibility and power over health care delivery and decision making from individuals to government” and “creates a new federal health board to decide which medical services are ‘effective’ in America, paving the way for government effectively to overrule the clinical decisions of private physicians,” and (4) “deliberately censors religious speech and worship on school campuses by prohibiting any ‘stimulus’ funds for facilities that are used for sectarian instruction, religious worship, or a school of divinity.”    According to Mr. Fuelner, all of this was accomplished through legislation “cloaked in secrecy” and “withdrawn from open public exposure and honest debate.” 

Perhaps the biggest losers were the shrinking number of Americans who pay federal income taxes.     According to the U.S. National Debt Clock, the current federal debt is $10,765,538,572,361 as of today, February 14, 2008.   The federal debt has been increasing at a rate of approximately $3.48 billion per day since September 28, 2007.   These numbers do not include the new debt to be incurred by the federal government to pay for the stimulus package.    As a result of the stimulus package, the federal deficit this year will easily exceed $1,000,000,000,000 and will probably approach $2,000,000,000,000, which will be added to the federal debt.   On top of all of this, the government has massive unfunded future liabilities under entitlement programs such as Social Security and Medicare.    There is no free lunch.    All of this money eventually will have to be repaid, and the burden of repayment will fall on those who pay taxes rather than on the politicians who have created this mess by freely and recklessly spending other people’s money.  

Will the stimulus package work and get the economy moving again?    The truth is that no one will ever know.    The economy eventually would have recovered even without the stimulus package.   The stimulus package may expedite the recovery, or it may delay it.   There are so many factors affecting the economy that it will be difficult to assign credit or blame to a single factor, even a factor as large as the stimulus package.  Regardless of what happens, all politicians, Democrats and Republicans alike, will make the arguments that are necessary to advance their interests. 

There are several reasons why I believe it is highly likely the economy will improve between now and the next election.   First, psychology plays an extremely important part in the economy.    Now that the stimulus package has been passed, Obama will have an incentive to talk positively rather than negatively about the economy.   He will highlight every positive development.    The members of the news media love Obama, and they will accommodate him by emphasizing positive news about the economy just as they emphasized negative news prior to the election and prior to the passage of the stimulus package.   Second, recessions don’t last forever, and the current recession won’t last forever.    History shows that periods of negative economic growth and high unemployment are generally followed by periods of high growth and job creation.   Finally, the stock market is likely to recover from its dismal performance in 2008 and early 2009, and this recovery will boost confidence in the overall economy.    According to a report issued by Goldman Sachs, 2008 was one of the three worst years in the stock market since 1825.    The other two years were 1931, when the market was down between 40% and 50%, and 1937, when the market was down between 30% and 40%.   The market’s dismal performance in 1931 was followed by a loss of between 0% and 10% in 1932 and a gain of 50% to 60% in 1933.    The market’s 1937 performance was followed by a gain of 30% to 40% in 1938.   

Obama bet the farm on the stimulus package, and he paid a heavy price to get it passed.   He violated almost every principle on which he based his campaign for President.    In the short term, his bet will probably pay off because the economy will improve and he will be able to take credit for it.   In the long run, the stimulus package, in my opinion, will have an extremely detrimental effect on the future of the country because the government will be more involved in almost every aspect of our lives and because the government debt, which was already huge, is now totally out of control.    In the long run, you can look forward to the higher interest rates and higher inflation that will inevitably result from our huge government debt.