Keep on missing each other, missing each other. Our world’s out of order, all I see – Missed Opportunity. Hall & Oates saw the future when they sang this song in 1988. Last weekend I flew back home to Colorado out of New York’s LaGuardia airport. It was (as is every day on the east coast it seems) raining and it took me an hour and a half to drive the 8 miles to the airport mainly because the highway was flooded. For those of you who have not flown out of LaGuardia, it is kind of something out of a Dickens novel. The terminal that I flew out of had not been updated in at least 40 years, the roof was leaking into buckets and the jetway was rusting away. LaGuardia is the visual definition of the missed opportunities that the recent recession provided our state and local governments, and is a shining example of why so many people in the country are so darn angry.
Since the recession began in 2008, the federal government, through two administrations and three congresses, has been laying on stimulus with a trowel. Now President Obama is looking to continue the saga with his Cinco de Stimulus.
That’s right, there have been four – count them four – fiscal stimulus packages since President Bush and congress passed the first $168 billion package in February of 2008. At that time the pundit economists all said that this spending (mostly in the form of tax rebates) would prevent the downturn from becoming a crisis. Add to that the $388 billion TARP program (also signed by President Bush), President Obama’s December 2010, $858 billion tax cut package, and the mother of all Stimulus’s the $787 billion American Recovery and Reinvestment Act of 2009, and in total the federal government has spent – or given up in tax revenues – $2.2 trillion dollars since the economy began to go into recession in 2008. On top of this, the lapdogs at the Federal Reserve have added in negative real interest rates for at least the last three years, which is really another stimulus package.
Over $2 trillion dollars spent (or not taxed), and the key business airport in the nation’s premier business city has a leaky roof. What gives?
What gives is a massive missed opportunity. Both Keynesian and Classical economists (save for those who would like to see an alien invasion to pull us out of recession), most business people, and nearly everyone with a functioning cerebral cortex understands that recessions – when the demand for credit falls and interest rates are at their lowest – are an excellent time for the public sector to invest in key infrastructure. Now infrastructure can mean anything from new roads (or in the case of New York City actually maintained roads), repaired bridges, new research, better parks or upgraded air transportation facilities. Recessions are a great time for the public sector to invest. Unfortunately, the federal government is not the government of Theodore Roosevelt, or Dwight Eisenhower, or John Kennedy. No. Today the federal government is simply a giant cash machine for people who do not work. Nearly 70 percent of every dollar that the federal government spends (and three fourths of what it borrows) goes toward transfer payments from one group of people to another. Most of the tax cuts that the Republicans pushed for in the various stimuli and nearly all of the spending that the Democrats added were simple transfer payments. Nearly none of the $2 trillion went toward investments in the future, and nearly none of it actually stimulated the economy – since a transfer payment is at best a wash.
The country missed a huge opportunity to spend $2 trillion fixing things, building things, studying things, inventing things and dreaming things. Even with the dysfunctional and wasteful government procurement process this would still have helped to generate future growth and might have actually had the effect of creating jobs and ending the recession. Unfortunately, all we got from Washington was a pile of debt, a drawn out recession, and yet another missed opportunity.