Pogo Schtick: My Two Cents on Over-Stimulation

Spare Change | February 13, 2009 | David J Aland

[Natty Bumppo@frontier.net]

Pogo, the eponymous possum of Walt Kelly’s timeless cartoon strip, once famously declared that “We have met the enemy, and they is us.” Quoted so often that Al Gore probably thinks he wrote it, one can only conclude that the statement is just as true today as when the cartoonist first penned it – particularly as we watch the putative stimulus bill waddle its way through Congress this week.

The evolution of this bill, if nothing else, stands as a firm refutation of evolution in economics. Rather than “survival of the fittest”, this bill enshrines revival of the fattest, plumping up more sacred cows than the designer beef farm that supplies the stimulus bill victory parties at the White House. Deliberate diddling has replaced natural selection in the American marketplace, but one hesitates to call such meddling “Intelligent Design.”

Pogo pegged it: the Obama administration is about to embark, once again, on something proven throughout American history to be disastrous – racing to dramatically increase government spending without due diligence or consideration – making us our own worst enemy. Here’s a few things to consider, even if the President and his Party will not:

- A recent Haver Analytics comparison of government spending and unemployment shows that increases in government spending are historically followed by directly proportional increases in unemployment. The graphs are telling, showing unemployment and spending pogo-sticking up and down pretty much in tandem since 1960. For example, spending peaked in 1982 at 23% of GDP, and unemployment peaked shortly thereafter at 11%. When spending dropped, so did unemployment. It doesn’t take an economist to conclude what the effect will be of increasing government spending a whopping 10-12% of GDP through this bill, TARP, and TARP II (not the movie – but be afraid anyway).

- It should come as no surprise then to read the conclusions of the 2004 study by Cole and Ohanian of UCLA, in which they concluded that FDR’s “New Deal” may have been instrumental in slightly shallowing the Depression, but also prolonging it, and making the impact much worse. What was, at least before this week, the most massive increase in government spending in American history, clearly turned an economic depression into the legendary Great Depression. Given the Haver analysis, this new porked-up package is likely to stimulate nothing except more losses, and more fear-filled rhetoric.

What can be worse than repeating the spend-and-sink mistakes of yesteryear? How about doing it in a rush, substituting fear and speed for the insight and deliberation a move of this magnitude demands? Nancy Pelosi sneers “we won”, and Chuck Schumer muses most citizens are too stupid to care about a little pork. Oversight is almost non-existent in this rush-to-bankruptcy bill, filled with loopholes for illegal aliens and stealth provisions for government intervention in health care. If Congress is trying to prove we really can be our own worst enemy, they have clearly succeeded. To paraphrase the President, the only thing worse than doing nothing, is doing this.

The problem with pogo sticks is that they take a lot of energy, produce a lot of noise and motion, but almost never result in significant forward progress. Playing pogo stick with the economy, spending trillions of dollars to produce noise and motion without any forward movement is a very dangerous game. With bipartisanship thrown to the curb and broken promises about transparency, the Democrats have staked everything on this pork-laden party favor, and they refuse to listen to anyone who disagrees, including a large number of economists who (a) didn’t drive banks into insolvency and (b) paid their taxes (which, apparently, makes their advice moot).

As a therapist once pointed out, self-destructive behavior is the gift that keeps on giving. Obviously emboldened by their spendthrift predecessors, the Democrat majority has chosen to experiment with entirely new highs in government excess with no regard for the new lows in economic performance that have been proven, time and again, to result from such profligacy. With a new and charismatic President leading the charge and ridiculing principled objections as “dated ideology,” we are sentenced to re-live our past mistakes. We have met the enemy, indeed.