The American Recovery and Reinvestment Act is bloated, wasteful, and unnecessary, and it should be recalled by an angry population. It was passed in early February before any person in Congress could read it, much less debate its contents. It authorized spending $787 billion dollars on projects that were deemed essential, at the time, to avoid an economic catastrophe.
Three months later, as of May 22nd, our government reports that only $37 billion of the money has been spent, less than 5% of the total. Meanwhile, signs of recovery are appearing everywhere. Job losses have stopped rising, and corporate layoffs have fallen by half. Commodity prices are up across the board. Energy prices are up 70%. Global trade is reviving. Global equity markets are up by a third. Credit spreads have fallen significantly. The housing market appears to have hit bottom in the most distressed areas, and home sales are surging. Bond yields have soared as deflation fears have been erased. Car sales are turning up.
The stimulus spending was never designed to take immediate effect, yet it was sold to the public and to Congress as an emergency measure so critical to avoiding an economic depression and financial makret meltdown that there was no time to debate its contents. As we now know, it was most likely unnecessary, since the economy seems well on its way to recovery with virtually zero help from stimulus spending.
We also know that the spending contained in the bill, in combination with other rescue and bailout measures, will cause the federal deficit, as a percent of GDP, to soar to levels not seen since WW II. The deficit is likely to approach $2 trillion this year, and seems likely to exceed $1 trillion per year for the foreseeable future. Already the world is beginning to worry about the enormous financing needs that are piling up. Gigantic deficits today will only make solutions to other looming deficits (e.g., social security, Medicare) that much more difficult to handle.
Many of the programs in the bill are likely to continue forever, resulting in what could well be a 25% permanent increase in the size of the federal government. That in turn will require an equally large and extremely burdensome increase in tax burdens on our economy. The prospect of significantly higher tax burdens is already depressing our financial market.
Let's recall the Stimulus Bill! We don't need it, and real truth is that we would be much better off without it. Our government and our tax burdens need to shrink, not expand.