Where Are the 'Hard Choices'? The Heritage Foundation Comments On Obama's Speech

Conn Carroll, Morning Bell, The Foundry: Just like all his other speeches, President Barack Obama’s inaugural address delivered lofty rhetoric yesterday, but as is often the case with Obama, the speech provided more heat than light when it came to tough issues. Seeking to set a tone of accountability, Obama said:

Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. … The state of the economy calls for action, bold and swift, and we will act. … The question we ask today is not whether our government is too big or too small, but whether it works.

The “bold and swift” action the president is referring to is the currently priced $825 billion economic stimulus package that the House introduced last week. Everybody expects that number will only go up after the Senate introduces their own bill, but let’s crunch the numbers on Obama’s plan as is. If Congress passes an $800 billion, two-year stimulus bill, the deficit in 2009 could stand at $1.31 trillion and could be $1.27 trillion for FY 2010. As a percent of GDP, the FY 2009 deficit will be 9.2% of GDP, and the FY 2010 deficit will be 8.7% of GDP. Moving to the total obligations of the federal government, if the stimulus passes our national debt will be $13 trillion in FY 2009 (92% of GDP) and $14 trillion in FY 2010 (95% of GDP).

Obama seems to believe that deficit spending will expand the economy. If that were true, then the current $1.2 trillion deficit — the largest in history — would already be rescuing the economy. It’s obviously not. So why would $800 billion more of the same suddenly end the recession? How is borrowing and spending money at faster rates a change from our past “collective failure”? It is not.

Worse, there simply is no evidence that massive government spending will work. What the evidence does show is that Japan’s massive infrastructure spending in the 1990s did nothing to help their economy and that studies on infrastructure spending in our country show it does next to nothing in terms of net job creation. And even if infrastructure spending could result in net job creation, it would come too late. The Congressional Budget Office recently released a study showing that only about $136 billion of the $355 billion that House leaders want to allocate to infrastructure and other so-called discretionary programs would be spent by 2010, long after the CBO and most economists predict the recession will have ended.

Obama’s deficit spending stimulus is the exact opposite of making “hard choices.”As Politico points out today, while “Obama frequently talks of the need to transcend partisanship … In fact, there are few examples of him making decisions during the campaign or the transition that offended his own party’s constituencies.”

If the president is interested in ushering in an age of what works, he could suspend the Davis-Bacon “prevailing wage” rules for all infrastructure stimulus spending. A 2008 study by Suffolk University and the Beacon Hill Institute found that Department of Labor estimates for the “prevailing wage” in cities are about 22% above the actual wages paid in these cities and that taxpayers could save almost 10% in federal building costs if they were suspended. If Obama spends $400 billion on infrastructure, he could save taxpayers $40 billion. But the unions that Obama is beholden to would never allow this.

Our country is facing tough economic times, but they are no worse than Ronald Reagan faced in 1982. Reagan did make some unpopular choices, but those choices set the stage for 20 years of economic growth. We sincerely hope President Obama chooses a similar path.

---

Tags: Barack Obama, Davis Bacon, deficit spending, Heritage Foundation, National Debt, presidential inauguration, speech To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!