WASHINGTON -- Economic policy which became startling when Washington began buying automobile companies has become surreal now that disappointment with the results of the second stimulus is stirring talk about the need for a ... second stimulus.
Elsewhere it requires centuries to bleach mankinds memory; in Washington 17 months suffice: In February 2008 President George W. Bush and Speaker Nancy Pelosi who normally were at daggers drawn agreed that a $168 billion stimulus -- this was Stimulus I -- would be the booster shot the economy needed. Unemployment then was 4.8 percent.
In January the administration shiny as a new dime and bursting with brains said that unless another stimulus -- Stimulus II wound up involving $787 billion -- was passed immediately unemployment which then was 7.6 percent would reach 9 percent by 2010. But halfway through 2009 the rate is 9.5. For the first time since the now 16-nation Eurozone was established in 1999 the unemployment rate in America is as high as it is in that region which Americans once considered a cautionary lesson in the wages of sin understood as excessive taxation and regulation.
Everyone guessed wrong about the economys weakness says the vice president explaining why Stimulus II has not yielded anticipated benefits. Joe Biden is beguiling when unfiltered by calculation as he often is and as he was when he spoke about guessing (Meet the Press June 14) and how everyone misread the economy (This Week July 5). To be fair economics is a science of single instances which means it is hardly a science. And it is least like one when we most crave certainty from it -- when there is a huge and unprecedented event and educated guessing is the best anyone can do.
But before embarking on Stimulus III note that only about 10 percent of Stimulus II has yet been injected into the economy in 2009. This is not the administrations fault the administrations defenders say because government is cumbersome sluggish and inefficient. But this sunburst of insight comes as the administration toils to enlarge governmental control of health care energy finance education etc. The administration guesses that these government projects will do better than the Postal Service (its second-quarter loss $1.9 billion was 68 percent of its losses for all of 2008) and the governments railroad (Amtrak has had 38 money-losing years and this years losses are on pace to set a record).
Lets guess: Will a person or institution looking for a place to invest $1 billion seek opportunities in the United States where policy decisions are deliberately increasing taxes debt regulations and the cost of energy and soon will increase the cost of borrowing and hiring? Or will the investor look at say India. It is the least urbanized major country -- 70 percent of Indians live in rural areas 50 percent on farms -- so the modernizing and productivity-enhancing movement from the countryside to the city is in its infancy. This nation of 1.2 billion people has a savings rate of 25 percent to 30 percent and fewer than 20 million credit cards. Which nation India or the United States is apt to have the higher economic growth over the next decade?
Yet while government diminishes Americas comparative advantages liberals are clamoring for ... higher taxes. Partly because of changes endorsed by presidents from Ronald Reagan to Barack Obama approximately 60 percent of taxpayers now pay either no income tax (43 percent) or less than 5 percent of their income. Because one cannot raise significant money by that tax without nicking the middle class or without bringing millions of people back onto the income tax rolls attention is turning to a value-added tax.
A VAT is levied at every stage of production. Like the cap-and-trade regime being constructed a VAT is a liberal politicians delight: It taxes everything but opaquely.
Before he became an economic adviser in the Obama White House where wit can be dangerous Larry Summers said: Liberals oppose a VAT because it is regressive and conservatives oppose it because it is a money machine but a VAT might come when liberals realize it is a money machine and conservatives realize it is regressive.
At the June 29 White House briefing press secretary Robert Gibbs was asked with reference to health care legislation if the presidents pledge not to raise taxes on couples making less than $250000 is still active. Gibbs answered: We are going to let the process work its way through. What is your guess?
George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
WASHINGTON -- Economic policy which became startling when Washington began buying automobile companies has become surreal now that disappointment with the results of the second stimulus is stirring talk about the need for a ... second stimulus.
Elsewhere it requires centuries to bleach mankinds memory; in Washington 17 months suffice: In February 2008 President George W. Bush and Speaker Nancy Pelosi who normally were at daggers drawn agreed that a $168 billion stimulus -- this was Stimulus I -- would be the booster shot the economy needed. Unemployment then was 4.8 percent.
In January the administration shiny as a new dime and bursting with brains said that unless another stimulus -- Stimulus II wound up involving $787 billion -- was passed immediately unemployment which then was 7.6 percent would reach 9 percent by 2010. But halfway through 2009 the rate is 9.5. For the first time since the now 16-nation Eurozone was established in 1999 the unemployment rate in America is as high as it is in that region which Americans once considered a cautionary lesson in the wages of sin understood as excessive taxation and regulation.
Everyone guessed wrong about the economys weakness says the vice president explaining why Stimulus II has not yielded anticipated benefits. Joe Biden is beguiling when unfiltered by calculation as he often is and as he was when he spoke about guessing (Meet the Press June 14) and how everyone misread the economy (This Week July 5). To be fair economics is a science of single instances which means it is hardly a science. And it is least like one when we most crave certainty from it -- when there is a huge and unprecedented event and educated guessing is the best anyone can do.
But before embarking on Stimulus III note that only about 10 percent of Stimulus II has yet been injected into the economy in 2009. This is not the administrations fault the administrations defenders say because government is cumbersome sluggish and inefficient. But this sunburst of insight comes as the administration toils to enlarge governmental control of health care energy finance education etc. The administration guesses that these government projects will do better than the Postal Service (its second-quarter loss $1.9 billion was 68 percent of its losses for all of 2008) and the governments railroad (Amtrak has had 38 money-losing years and this years losses are on pace to set a record).
Lets guess: Will a person or institution looking for a place to invest $1 billion seek opportunities in the United States where policy decisions are deliberately increasing taxes debt regulations and the cost of energy and soon will increase the cost of borrowing and hiring? Or will the investor look at say India. It is the least urbanized major country -- 70 percent of Indians live in rural areas 50 percent on farms -- so the modernizing and productivity-enhancing movement from the countryside to the city is in its infancy. This nation of 1.2 billion people has a savings rate of 25 percent to 30 percent and fewer than 20 million credit cards. Which nation India or the United States is apt to have the higher economic growth over the next decade?
Yet while government diminishes Americas comparative advantages liberals are clamoring for ... higher taxes. Partly because of changes endorsed by presidents from Ronald Reagan to Barack Obama approximately 60 percent of taxpayers now pay either no income tax (43 percent) or less than 5 percent of their income. Because one cannot raise significant money by that tax without nicking the middle class or without bringing millions of people back onto the income tax rolls attention is turning to a value-added tax.
A VAT is levied at every stage of production. Like the cap-and-trade regime being constructed a VAT is a liberal politicians delight: It taxes everything but opaquely.
Before he became an economic adviser in the Obama White House where wit can be dangerous Larry Summers said: Liberals oppose a VAT because it is regressive and conservatives oppose it because it is a money machine but a VAT might come when liberals realize it is a money machine and conservatives realize it is regressive.
At the June 29 White House briefing press secretary Robert Gibbs was asked with reference to health care legislation if the presidents pledge not to raise taxes on couples making less than $250000 is still active. Gibbs answered: We are going to let the process work its way through. What is your guess?
George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
