Let's Face the Truth: The Stimulus and Bailouts Failed

Let's Face the Truth: The Stimulus and Bailouts Failed
by Iain Murray
06/08/2011

You'd think last Friday’s terrible jobs numbers would cause honest elected officials to admit that their economic policies have failed. They would tell the American people that bailouts only saved companies that should have gone under and that the billions of dollars in stimulus money were wasted.

Unfortunately for us, President Obama is making no such admission. We know that our hard-earned tax dollars have been thrown down a rat hole. President Obama won’t admit it, but he is quickly running out of excuses.

Let’s look first at the job numbers. Just 54,000 net jobs were added to the economy in May. Yet about 150,000 new job seekers come on the market every month, because of demographics and immigration.

Luckily for the President, large numbers of people who were formerly looking for work give up every month in this economy, so the numbers aren’t as bad as they could have been. Nevertheless, according to official data, more than half of these new jobs were provided by one employer—McDonald’s.

Remember when liberals loudly decried “McJobs” in the Bush years? They failed to realize then that jobs at McDonald’s and the like are vital to the economy, often providing new job holders with their first real exposure to the discipline of the workplace. They seem to be thankful for McJobs now. Ironically, without companies such as McDonald’s, which many liberals like to demonize, the economy would be in even worse shape—and the President in even worse political trouble.

The main reason for the stalled economy is overregulation. Today, it is incredibly hard to start or expand a business due to the legions of bureaucrats overlooking an entrepreneur’s every move. Even a business with just one employee has to comply with 10 onerous federal regulations. By the time you reach 100 employees, you have to deal with 20 such regulations for every single employee. Regulatory compliance costs small businesses proportionately more than it does big businesses—more than $10,000 per employee. That’s a huge deterrent to entering the marketplace and offering jobs to people.

For big business, this is probably the most business-hostile administration in living memory. Obama has sought to placate his allies in organized labor by stacking the National Labor Relations Board (NLRB) with union partisans. The result has been the insanity of the NLRB telling Boeing it cannot open a new factory in South Carolina, a right-to-work state.

Over at the Environmental Protection Agency, Obama’s environmentalist allies are working to impose hugely expensive new emissions regulations—which even they admit would bring the economy to a halt if applied strictly to the letter of the law.

In finance, the Dodd-Frank and Sarbanes-Oxley Acts have made it extremely difficult for smaller companies to raise capital, stalling job creation. Provisions of both laws are estimated to cost the economy as much as $1 trillion in direct and indirect costs.

All the stimulus money was supposed to make up for this regulation. Yet that money has been handled by bureaucrats, who, as bureaucrats like to do, have spent it largely on themselves. In Los Angeles, the city’s Public Works and Transportation departments received $111 million in stimulus money, which it used to “save or create” a mere 55 jobs—many within the departments themselves. The number of private sector jobs created with this money is tiny.

When news of the weak job numbers came out, President Obama was on his way to Toledo, Ohio, to boast about the auto bailouts having added 115,000 jobs in the auto industry. Yet even here there is no substance. GM and Chrysler, the bailed-out companies, have lost about 16,500 jobs between them since the bailouts. The new auto industry jobs all come from the non-bailed-out Ford and foreign competitors, many of which build cars in right-to-work states. Moreover, they can concentrate on making the sort of cars Americans want to buy, rather than those the government wants us to buy.

The only thing the stimulus program actually stimulated was government. By my calculations, about one in four Americans in the labor force now works for federal, state or local government, either directly or as a contractor or grantee.

The President has paid lip service to the idea that the economy is too tightly constricted by red tape. Yet his agency heads have only come up with a handful of ways to ease the regulatory burden. Regulation is stopping America’s economy from starting again. It is a first-order problem and should be treated as such. Anyone who won’t admit that should be out of a job.