The Inevitable Waste and Corruption of “Stimulus” Spending

A good theory has predictive power. A prediction doesn’t automatically make a theory true, but it’s a good first test in my opinion.

Quite a while ago, I made the case, based on praxeological reasoning, why bureaucracy can’t ever accomplish its stated objectives in the long run.

Based on that theory I suggested many times over that government stimulus programs will not be a panacea to economic sluggishness, quite the contrary.

In particular I wrote almost 3 years ago:

The $800 billion spending bill that is currently being discussed will not fix the US economy.
(…)
This bill was never [Obama’s] bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him.
(…)
To ignore [those who oppose it] would be the biggest mistake Obama could make now.
(…)
If he continues doing it, the political retaliation will ensue sooner or later in the next Congressional elections and maybe in the next presidential elections. This is an unnecessary, harmful, and avoidable political gamble.

Here we are, almost 3 years later, with an unemployment rate higher than it was at the time (~9% now vs. ~8% then), which I would submit as one piece of evidence that the stimulus did not work. (My readers will know that there are many more, but that’s not the main point of this post!)

(And yes, I know the good old argument that “it would have been much worse, had it not been for the stimulus” etc. I would only kindly ask that anyone wanting to submit such an argument please logically refute the counter arguments that I have already laid out very clearly in The Trouble With Bureaucracy, and empirically supply specific examples that corroborate this thesis and that outweigh any evidence that may exist to the contrary.)

But in addition to that, I would say that the corruption, scandals, waste, and the ensuing political backlash that I predicted above, have only just begun to unravel: The case of Solyndra is suddenly a big thorn in the administration’s side, and it doesn’t seem to be going away any time soon:

Pressure on the Obama administration over the loan guarantee given to Solyndra ratcheted up after the discovery of e-mails from a White House official warning of possible political ramifications of the loan. As Carol Leonnig and Joe Stephens reported:

A White House official fretted privately that the Obama administration could suffer serious political damage if it gave additional taxpayer support to the beleaguered solar-panel company Solyndra, according to newly released e-mails.

(…)

Solyndra, the first renewable-energy company to receive a loan from the stimulus law creating the guarantee program, had its headquarters raided by the FBI last week. As AP reported:

The FBI raided Solyndra’s headquarters last week and interviewed company executives at their homes. A U.S. official, who spoke on condition of anonymity because the case is under seal, said the search was related to a fraud investigation into whether Solyndra filed inaccurate documents with the government.

The Silicon Valley company was the first renewable-energy company to receive a loan guarantee under the stimulus law, and the Obama administration frequently touted Solyndra as a model for its clean energy program. President Barack Obama visited the company’s headquarters last year.

Even as Obama declared that “the future is here” during a May 2010 visit to Solyndra, warning signs were being sent from within the government and from outside analysts who questioned the company’s viability.

At least three reports by federal watchdogs over the past two years warned that the Energy Department had not fully developed the controls needed to manage the multibillion-dollar loan program.

… and as was predictable, Republicans are happy to pounce:

“What did the stimulus give us last time? It gave us Solyndra,” Bachmann said to cheers at a packed Tea Party fundraiser this week in liberal Marin County. “Wasn’t that great?”

Bachmann is among the growing ranks of Republicans, including the lineup of 2012 GOP presidential candidates, who are increasingly salting their stump speeches, press releases and talking points with references to the Fremont firm that once was a poster child for the Obama administration on alternative energy jobs before it shut down last month.

The Minnesota Congresswoman and Tea Party darling delights audiences when she dryly quotes Vice President Joe Biden’s past observation that the federal government’s $528 million loan to Solyndra “was exactly what the stimulus act was all about.”

“It’s exactly true,” she said to cheers and applause from conservative activists in Marin on Thursday. “I tell you … we have so much material, it’s going to be a joy.”

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/09/16/MNED1L5MRI.DTL#ixzz1YAbztAT7

I would actually be shocked if this will remain the only example of blatant stimulus waste that will come back to haunt the president.

Actions have consequences; stupid decisions, whose long term impact you are unable to assess, will come back to bite you in the ass, particularly during election year. From the Republicans’ viewpoint, Obama could not have picked a better time for pushing the stimulus bill, since it usually takes at least a few years for all the filth and corruption of giant government programs to build up and trickle through the shiny, pompous, and mindless facade of politics.

But as I have come to realize about politics a while ago, the best thing to do in my opinion is to abstain from participating in these spectacles, sit back, relax, and don’t hurt your head too much about petty, boring, and small minded sociopaths who aspire to exercise power over millions of people year after year.

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Obama vs Obama on Raising the Debt Ceiling

Senator Obama in 2006 when the debt ceiling was at $8,965 billion or 64.2% of GDP:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

And of course as a standup and incorruptible agent of change, President Obama in 2011 (via spokesperson), with a debt ceiling at $14,294 billion or 92.1% of GDP:

Obama “thinks it was a mistake,” presidential spokesman Jay Carney told reporters. “He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration’s policies, you can play around with.”

Ah, the idiocy of politics in all its beauty …

I wonder if this is the kind of “CHANGE” he was talking about all along. ;)

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Collapsing America – Chavez and Obama Go Hand in Hand

Excellent piece on Mish’s blog:

Collapsing Venezuela

Flashback January 21, 2007: The Washington Times nails it with Collapsing Venezuela.

If Venezuelan President Hugo Chavez President Obama deliberately intended to sabotage his nation’s economy, he would be hard-pressed to do anything different from what he is now doing to his country.

It has been widely reported that Mr. Chavez President Obama has been increasingly taking control of the oil, telecommunications and energy housing, banking, auto, and insurance sectors, as well as the media. What has not been reported is the full extent of the corruption in Venezuela the United States and how this ultimately will destroy the economy.

The financial scandal taking place is far bigger than Enron, and may ultimately even exceed the U.N. “oil-for-food” scandal, the biggest financial disgrace of all time.

Since 2004, the Venezuelan Central Bank Fed has transferred about $22.5 billion untold $billions to accounts abroad by the Chavez government held by foreign governments, and about $12 billion all of that remains unaccounted for. It has also been reported that the gold reserves have been removed from the Central Bank.

While the rest of the world has been moving away from socialism for the last quarter-century for good reason, Venezuela the United States is becoming socialist. We know governmental use of central banks to basically print money to cover expenditures results in rising inflation and eventually monetary meltdown.

And, finally, we know that when a state becomes totally corrupt an economic collapse always follows. Mr. Chavez President Obama and his cronies had already been spending far more than they were taking in and you can bet the blood from the innocent Venezuelan people United States citizens will be drained long before those on the take from Mr. Chavez President Obama agree to have their looting stopped.

The original Washington Times article was extremely good, but a few minor changes would have made it the most prophetically accurate post the world had ever seen.

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The Laws of Obamanomics a.k.a Interventionism

The Examiner writes in a book review Obamanomics defined: Big Government in service of Big Business:

The Laws of Obamanomics

Underlying Obamanomics are some basic economic facts and political realities. These are the Four Laws of Obamanomics, paired below with some of the lobbying strategies that exploit these laws.

1) During a legislative debate, whichever business has the best lobbyists is most likely to win the most favorable small print. Similarly, once a bill has passed, the business with the best lawyers and lobbyists will best be able to craft the regulations and learn how to game them. A big business, counting on this fact while lobbying for more government spending or control, is employing The Inside Game.

2) Regulation adds to overhead, and higher overhead crowds out smaller competitors and prevents startups from entering the industry. When corporations, knowing this, lobby for more regulation of their industry, I call this the Overhead Smash.

3) Bigger companies are often saddled by inertia, meaning robust competition is a threat. Adopting regulations that stultify the economy is the equivalent of raising the basketball hoop to twenty feet at half-time: it protects the lead of whichever team is ahead. When Big Business seeks to stultify the economy to hold back smaller competitors, I call it Gumming the Works.

4) Government regulation grants an air of legitimacy to businesses, boosting consumer confidence, often beyond what is warranted. This is The Confidence Game.

While I agree that all these laws do accurately describe the current US economic policy under the current president, I ask: How did those laws differ under Bush, or under Clinton for that matter, or under Bush Sr., or under Reagan??

People have to realize: What is outlined above does not outline some new phenomenon. These are, simply put, the laws of interventionism, the system that has dominated the entire past century. All the problems we are facing today can be traced back to it, all the cures prescribed to fix our problems are just more of very things that caused our problems.

It is a system under which, during all the bogus back and forth, all the talk in the media from left or from right, all the discussions about tax hikes by 4% or by 5%, about whether or not we should send 30,000 or 40,000 hitmen into a foreign country, about whether we should spend $5 billion or $7 billion in yet another foreign aid bill, about whether this or that government institution should oversee banks, or whether centrally decreed interest rates should be .25 or .5 percent, one thing has remained consistent and uncontested by the blind public for decades: the growth of government.

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Mr. Obama – End the Fed

Despite all warnings by the founders, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote:

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.”

These were the warnings he did not heed:

“All the capital employed in paper speculation is barren and useless, producing, like that on a gaming table, no accession to itself, and is withdrawn from commerce and agriculture where it would have produced addition to the common mass… It nourishes in our citizens habits of vice and idleness instead of industry and morality… It has furnished effectual means of corrupting such a portion of the legislature as turns the balance between the honest voters whichever way it is directed.” –Thomas Jefferson to George Washington, 1792. ME 8:344″

“[The National] Bank of the United States… is one of the most deadly hostility existing, against the principles and form of our Constitution… An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries. –Thomas Jefferson to Albert Gallatin, 1803. ME 10:437


(The National Bank can roughly be described as the predecessor to the central bank. It was a private bank that had a multitude of government privileges and monopolies granted to it and protected.)

“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” -James Madison

Mr. Obama, are you going to change things? Will you listen to our founders? Will you abolish the Federal Reserve and return the nation to the Constitutional money system, the Gold Standard, again?

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