Our Vision

Building an America where freedom, opportunity, prosperity, and civil society flourish.

QuoteHome

BannerWingLeft Become a Member Today BannerWingRight

SideBarBase

How Does the Obama Administration’s Spending and Regulatory Expansion Affect the Economy?

Today, President Barack Obama will attend a groundbreaking ceremony in Holland, Mich., for a South Korean-owned factory that will make batteries for electric cars. The purpose of the trip is to highlight the “success” of the President’s $862 billion economic stimulus package which the White House claimed yesterday has already “saved or created” 3 million jobs. Specifically, this factory is being subsidized by $151 million of stimulus funds from an even larger $2 billion honey pot of stimulus money set aside for electric car battery investments. This one plant is expected to employ 300 workers. That works out to more than $500,000 per job created. $500,000 per job. This plant, in a nutshell, explains why the President’s stimulus plan has been an objective failure.

The American people know the President’s stimulus has failed. A new CBS poll out today shows that 74 percent of Americans believe the Obama stimulus either damaged the economy or had no effect. And a Washington Post poll released Tuesday again showed that a majority of Americans disapprove of President Obama’s handling of the economy. So how on earth can the White House claim they “saved or created” 3 million jobs? By rerunning the same economic models that predicted the stimulus would prevent unemployment from ever rising above 8 percent. That’s right. The White House’s 3 million jobs number is not based on any real world data.

So what does the actual objective real world data show? When the President first began selling his stimulus plan to the American people in November 2008, he promised it would create 2.5 million jobs. But as employment fell at the end of 2008, President-elect Obama increased his employment promise by one million to 3.5 millions jobs created. At the time, employment stood at about 135.1 million. Using these two data points, one can objectively establish the Obama jobs target for December 2010 at 138.6 million. Fast forward to July 2010 and the latest jobs report shows total U.S. employment at almost 130.5 million. This means President Obama’s stimulus has failed to meet its own standard for success by 7.4 million jobs.

Why has the President’s $862 billion stimulus failed by 7.4 million jobs? Because government spending does not stimulate economic growth. All it does is move resources away from one sector of the economy to another. And government has a horrible track record at efficiently allocating resources. All that really happens is that, on net, jobs get destroyed in the transfer process.

That brings us back to Holland, Mich. Maybe this new battery plant is worth investing millions of dollars in. Maybe it will eventually turn a profit. But maybe not. The issue is, “Why is this any of the government’s business?” We used to be a capitalist country. We’re supposed to have vibrant capital markets that make these decisions using market principles. Instead we have the Obama administration acting as a venture capital fund picking winners and losers not based on economics, but on political priorities (in this case, global warming).

And this is where the President’s war on the rule of law and audacious domestic agenda come into play. The White House claimed yesterday that the Obama stimulus has encouraged $280 billion in private sector spending. The facts do not support this. In reality annual private fixed nonresidential investment has fallen by $327 billion since the recession started — a 19 percent drop. Businesses are not investing because of the vast economic uncertainties the Obama administration is creating.

Will secured creditor contracts be honored in court? Or will the Obama administration rip up those contracts? How much does it cost to hire a new employee? No one will know until thousands of pages of Obamacare regulations emanate from the IRS and HHS. How much will energy cost? That depends on how draconian the Obama EPA global warming regulations are. What are the rules for financial markets? You better have the cash for an army of good lawyers because the 2,300-page Dodd-Frank bill touches every aspect of financial markets and requires 243 new rule-makings by 11 different federal agencies.

The Obama administration’s massive spending and regulatory expansion is not helping economic recovery. It is actively thwarting it.

Other Questions