In the wake of the miserable May jobs report and the even more miserable first-quarter GDP numbers, Hillary Clinton revealed her long-awaited agenda to fix the economy: Raise the minimum wage; hike taxes on the rich; and spend a quarter-trillion dollars more on public works. Clinton is calling for “the biggest infrastructure investment since Dwight Eisenhower’s interstate highway system.”
One can be forgiven for experiencing a wave of déjà vu. Doesn’t this sound exactly like President Barack Obama’s $840 billion stimulus plan circa 2009? All that is missing from this spending blitz manifesto is the mythical rhetoric of “shovel-ready” projects.
The left insists on replaying this vinyl record though President Obama’s mega-stimulus failed in every measurable regard. Over the period 2009 to 2013, job creation was significantly below what the White House promised. Unemployment was higher each year than what the White House had projected it would be without the stimulus. If Obama had simply done nothing in 2009, the economy would have produced more jobs.
Even worse was growth much lower than expected. The combined loss of GDP in these years from what was predicted adds up to a growth deficit of over $2 trillion. This is the equivalent of losing a year’s output from the states of Michigan, Ohio, and Pennsylvania.
These are, for the left, embarrassing facts. But they have a response: Things would have been even worse, don’t you know, without all the president’s infrastructure spending. This may have been the weakest recovery since the Great Depression, the left demurs, but given the magnitude of the financial crash in 2008-09 it was the best we could do.
What they won’t admit is that nearly everything we were told by the Keynesian economists during the early years of the Obama recovery has proved to be wrong.
What, for example, happened to the magical “multiplier effect”? “Economists agree that unemployment benefits remain one of the best ways to grow the economy,” Nancy Pelosi told us. “For every dollar spent on unemployment benefits, the economy grows by, according to one estimate, $1.52; by others, $2.” None of it worked. Just as with FDR’s failed New Deal experiment, every dollar the feds spent and borrowed was offset by a dollar less in private spending and investment. As economist David Malpass of Encima Global reported, the burst in federal borrowing under Obama was canceled out by a steep decline in corporate borrowing and investing. And it is business investment that is much more valuable to the economy than government make-work programs.
Our neo-Keynesians now claim the effort failed only because it wasn’t ambitious enough—the sort of thinking that got Greece and Puerto Rico where they are today. Japan, too: Tokyo has all but paved the entire island, an extravagance that’s done nothing to dent Japan’s decades-long recession.
Still, it should come as no surprise that Clinton argues for bigger deficits and more public works—it has a certain political appeal. Road builders, unions, and municipal bond traders all get their share.
For all the money spent in the last massive stimulus, our roads are still a wreck. And that’s just existing roads—we need to build more roads and highways to keep up with the explosion of traffic volume, congestion that wastes hundreds of billions of dollars in lost time and productivity. It isn’t a problem of having enough money, just what that money is used for. Hillary says she wants to spend like Eisenhower; even accounting for inflation the Obama administration has spent three times more on infrastructure than the entire $150 billion the interstate highway system cost to build in the first place.
So where did all the money go? One answer is that billions of dollars of the money never actually went into roads but got siphoned off into welfare benefits, wind and solar energy projects such as Solyndra (which famously went bankrupt), and mass-transit boondoggles such as the more than $60 billion California high-speed rail project few are likely to ever ride. The dirty little secret is that the left hasn’t spent money on road modernization because green groups hate roads and cars. They like traffic congestion and any other inconvenience that discourages driving.
We don’t need more money for roads, we just need to spend on roads the money we already collect for them. The real transportation scandal is that Congress keeps taking almost 20 cents of every dollar drivers pay in gas taxes to fund mass-transit projects.
There is one other area of vital public infrastructure neglect. America needs a massive network of pipelines to transport our increasing shale oil and gas output across the nation. Keystone XL and nearly a dozen other cross-country pipelines have been blocked by Obama’s regulators. Pipelines would mean jobs and lower fuel costs, but Hillary is so beholden to radical green groups that she has no intention of allowing them.
Don’t forget that the pipeline projects would be privately funded. By far the most important infrastructure in America is private spending on factories, plants, machinery, computers, fiber optic cables, satellites, and the like. Chris Edwards of the Cato Institute notes that private companies spend three to four times on infrastructure what the government does.
But private capital spending has fallen, and remains, far below normal trends. This is the real infrastructure crisis. Hillary would make it worse by raising the capital gains tax to as high as 43.4 percent (the highest rate since the Jimmy Carter years). And she has no plans to cut corporate taxes. Business leaders consistently say these are the things strangling private-sector infrastructure investment.
The last stimulus delivered a dismal recovery and falling middle-class incomes. And now Hillary wants to do the whole thing over again.
Stephen Moore is an economic consultant with FreedomWorks and a Fox News contributor.
