The hidden cost of “stimulus”

There was a disturbing piece in the Wall Street Journal, The Real Stimulus Burden, and it paints a pretty grim picture.

Make no mistake, the overt cost of the stimulus package is enormous. Somewhere around $800,000,000,000 is not a drop in the bucket. But the real cost comes from the Washingtonian reality that once you move what the Wall Street Journal calls the budget baseline, it is nigh impossible to get it back down again. In other words, once you increase the base budgets for emotional programs you cannot decrease them again. For example, using random numbers, if we spent $100 on food stamps in 2008, and then spent $125 on food stamps in 2009 as part of the stimulus, a suggestion in 2010 that we spend $110 is seen as a mean-spirited slashing of food for poor kids even though it is more than we spent in 2008. Once money is allocated for something, even spending alleged to be a temporary measure, it is set in stone.

The deficit or surplus of the U.S. government has fluctuated in a pretty narrow range as a percentage of the gross domestic product for the last 30 or so years from a positive 2% surplus to a negative 6%. With this upcoming enormous increase in spending in the face of an economy in deep distress, the deficit as a percentage of GDP explodes to almost 14%, more than double the proportion we have had since the early 80’s. It is an increase that is said to be the biggest increase in the size of the Federal government since World War II and it will change the face of American culture, politics and the economy irrevocably.

The size of the Federal government only goes one way: it gets bigger. You cannot realistically say that we are going to dramatically increase Federal spending and size now and then reduce it later because it never does. The only way to limit the size and scope of government is to stop it from growing in the first place. With declining birth rates, increased life expectancy and a pending huge increase in the Federal budget we are going to be hard pressed in future generations to pay for this. If 100 people contribute $1000 now but we expect 75 people to contribute $2000 in the future, it holds true that those who are contributing will have to pay an ever increasing portion of their wages to support the system. The problem is that there is a finite percentage of wages that a person can pay because eventually they get to 100%. Then what do we do? Tell the Chinese we aren’t going to repay the debt we owe them? We had better keep spending on national defense if that is the strategy.