THE SUNDAY TIMES: The new administration's economic stimulus plan may undo reforms that cut the dole queues, critics say
RONALD REAGAN started it, Bill Clinton finished it and last week Barack Obama was accused of engineering its destruction. One of the few undisputed triumphs of American government of the past 20 years – the sweeping welfare reform programme that sent millions of dole claimants back to work – has been plunged into jeopardy by billions of dollars in state handouts included in the president’s controversial economic stimulus package.
As Obama celebrated Valentine’s Day yesterday with a return to his Chicago home for a private weekend with family and friends, his success in piloting a $785 billion (£546 billion) stimulus package through Congress was being overshadowed by warnings that an unprecedented increase in welfare spending would undermine two decades of bipartisan attempts to reduce dependency on government handouts.
Robert Rector, a prominent welfare researcher who was one of the architects of Clinton's 1996 reform bill, warned last week that Obama’s stimulus plan was a “welfare spendathon” that would amount to the largest one-year increase in government handouts in American history. >>> The Sunday Times | Sunday, February 15, 2009
THE SUNDAY TIMES: No Excuses if Obama Can't Fix 'His' Recession
If, like John Maynard Keynes, you believe that spending, any spending, will revive a flagging economy, the freshly minted, 1,000-page American Recovery and Reinvestment Act of 2009, calling for $504 billion in deficit-financed spending, is for you. Well, not quite. It seems that most of the money will not be spent very soon. About 30% won't hit the economy until 2011, and the balance is likely to be tied up in the procurement processes of the federal and state governments until well into 2010, and beyond. Besides, much of the spending will end up boosting other economies — subsidies for wind machines will benefit workers in the other countries in which such machines are manufactured, not our very own horny-handed toilers. And much of the spending will not create jobs for the unemployed: laid-off car workers do not have the skills to design the software to manage the "smart grid" that is the apple of the greens' eye.
If you have not jumped onto the new Keynesian spending bandwagon, but believe with Christina Romer, chairman of Barack Obama's Council of Economic Advisers, that tax cuts are more certain than spending to turn the economy round, you should love this bill, with its $286 billion in tax cuts and credits. Well, not quite. True, individuals earning less than $75,000 a year and families earning less than $150,000 will receive credits of $400 and $800, the earned income-tax credit for working families with three or more children is increased, and there is something for pensioners, disabled veterans, families of college students and a host of others.
Reflection suggests, however, the tax-cut contingent is doomed to disappointment. Much of the money will be saved or used to pay down credit-card balances, not bad things, but not very stimulative. Much will be spent in Wal-Mart, earning Congress the applause of Chinese trainer and t-shirt manufacturers. And much will never be claimed: the specific subsidies for college education are simply too small to have much effect on college enrolments. If you are a supply-side enthusiast… >>> Irwin Stelzer*
*Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute
The Dawning of a New Dark Age (Paperback – USA)
The Dawning of a New Dark Age (Hardcover – USA)
