Epstein: Why the Obama Stimulus Plan Must Fail

Why the Obama Stimulus Plan Must Fail
Richard A. Epstein
July 21, 2009

As we now cross the six-month mark in the Obama presidency, it is becoming ever more difficult for the president to distance himself from a long string of lackluster economic reports. Exhibit A are disappointing unemployment numbers to which the president consciously did not refer to in his July 11 speech to the country. But the basic position is this: Congress passed the President's $787 billion package this past February with no Republican support in the House and only three Republican defections in the Senate. At the time, brave presidential words promised that this package could create some 4 million new jobs, so that the unemployment rate would top at around 8%. Alas, there are 2.6 million fewer jobs today than when the bill passed, with an unemployment rate of 9.5%, which is still inching upward.

Something is amiss. Naturally, the president now counsels patience, insisting that improvement will come in the long run. No such luck. Stimulus bills are rotten to the core. To be sure, they are supposed to, as the president insists, pump dollars into the hands of cash-starved Americans whose spending will jump start the economy. But we don't need to wait for empirical reminders to realize that this claim is, theoretically, dead on arrival. Ex nihil nihilo: out of nothing, nothing comes. It is as though corporations could work their way to greater wealth by making stock dividends to their shareholders. One might as well increase the size of a cherry pie by increasing the number of slices.

Richard A. Epstein