This analysis of the House stimulus bill was put together by the Washington Post, and it is a great public service. (HT: Mark Perry) It's not exactly representative of the final bill that will be voted on this week, but it's good enough to give you an idea of the absurdity of this whole enterprise. This is what jumps out at me: very little of the bill involves immediate stimulus or anything that might be actually stimulative; only a little over 10% of the money gets spent this fiscal year, and about 30% gets spent next fiscal year (so much for the argument that we needed to pass this thing urgently); about 30% of the money goes to transfer payments (taking from one person and giving to another); only $20 billion would be spent over the next 18 months on highway construction; and about 20% of the bill doesn't get spent until 2012-19.
This means the bill amounts to a gigantic spending spree, and has very little to do with providing immediate stimulus to an economy that, in Obama's words, would face a catastrophe if it weren't passed. And I'm not making this up. When asked about "... GOP criticism that the stimulus had turned into a spending plan, (Obama) replied, 'That's the point. Seriously, that's the point.'"
The bill is just a gigantic Democratic wish list and will do more to permanently expand the size of government than to stimulate the economy. The real tragedy will be that a permanently larger government will require permanently higher taxes, and an increased tax burden will almost surely mean less growth and a slower advance in our living standards. This bill should be called an "Economic Destruction Bill" because it will end up hurting the economy much more than it helps.
President Obama has started out his administration in the worst way imaginable. His stimulus is not a a stimulus. His calls for bipartisanship in crafting the bill were phony. His understanding of economics is zero. Instead of hope, he used fear of disaster to promote his bill. He has squandered much of his credibility in just two weeks. If this bill emerges from Congress in anything like the form represented in this chart, I predict it will go down in history as one of the most egregious examples of government waste in history.
Does this mean that investors should turn pessmistic and sell their stocks? I don't think so, because I believe that the market has already factored in a future that is absolutely miserable. This bill won't give us a depression, but it will reduce the chances of a sharp or quick recovery, and it will mean sub-par growth for the foreseeable future.