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Editorial: Start over
Stimulus plan should focus on private-sector jobs, not increased social spending
Tuesday,  February 3, 2009 3:00 AM
Republican senators vow to dramatically change Democrats' economic-stimulus package -- or defeat it. Good for them.

In the House, majority Democratic leaders failed to gain a single Republican vote, even though President Barack Obama sought bipartisan support. Clearly, Republicans believe the plan wasn't fully vetted in the House debate.

The package is heavily loaded with giveaways to various Democratic constituencies. Any plan that plunges the nation so much further into debt should be the product of the best ideas of both parties and should generate a broad consensus that the money will be spent effectively. This plan fails both of those tests. In fact, it would do more to expand federal benefits than it would to stimulate the economy.

With the nation already $10.6 trillion in debt, critics rightly question the size of the plan: $819 billion in the House and $900 billion in the Senate version. And even if this nearly $1 trillion were approved, it's not structured to bring about the desired effect: an increase in spending that will get the economy back on its feet.

Also, the $300 billion targeted for social programs, many of them Democratic favorites, would not generate much immediate economic activity. Improving teacher quality, providing additional cash for Head Start and promoting wellness, for example, are standard government social-spending items that have little to do with stimulating instantaneous economic activity. Democrats are simply expanding spending on their traditional priorities under the cover of an economic emergency.

In fact, only about 5 percent of the plan's spending is aimed at the immediate creation of jobs through infrastructure projects, such as repair and construction of roads and bridges. But if the goal is to blunt a wave of job losses as Obama has said, this is where the money should be spent. It also is the only kind of spending that represents a lasting investment, one that will benefit the future taxpayers who will be footing the bill for this borrowed spending.

More fundamentally, government spending is a zero-sum game. The only way the government can spend a dollar to stimulate the private sector is by taking a dollar out of the private sector. That can be a good idea only if one believes that politicians and bureaucrats know better how to invest that money than do consumers, businesses and entrepreneurs.

When government takes vast amounts out of the private sector and spends it on government priorities, it sucks the oxygen out of the private sector. Perhaps the stimulus plan would create 1 million make-work jobs. But what is not known is how many jobs the private sector might have created with that money. Four years from now, in his re-election campaign, Obama can declare, "I created 1 million jobs." What nobody can know is whether the stimulus plan prevented an additional 1 million jobs that might have been created if the stimulus money had been left in the private sector.

The Senate's second-ranking Republican, Jon Kyl of Arizona, contends that the plan also would funnel more money to the states than is needed.

He has a point: All but a handful of states are facing fundamental, structural budget problems. That's because they are committed to more spending than their revenues can support. This requires painful retrenchment to get state spending into balance with revenues. Billions of dollars in federal aid simply allow state lawmakers to temporarily dodge this responsibility and will generate requests for more such aid in the future.

Surveying the week ahead, Senate Majority Leader Harry Reid, D-Nev., accurately predicts a "long, hard slog" in the Senate, because Democrats lack the 60 votes needed to close off a filibuster, forcing them to deal with GOP concerns. If that slog produces a bill that is more focused on producing concrete results and comes with a smaller price tag, it will be worth it.



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