There's a scene in the comedy "This is Spinal Tap" in which Nigel Tufnel, the lead guitarist of the fictional heavy metal band, explains the secret to his group's success and its legendary loudness. Pointing to an amplifier the band uses on stage, he notes, "It's very, very special. If you can see, the numbers all go to eleven."
The volume on most amplifiers only goes up to ten, Tufnel explains. Does that mean Spinal Tap's amplifiers are louder? "Well, it's one louder, isn't it? It's not ten." As President Obama and Democrats in Congress sell an economic stimulus plan to an increasingly skeptical American public, they could do worse than hire Nigel Tufnel as their spokesman.
After all, we've already had the Economic Stimulus Act of 2008, which cost $150 billion. We've had the Troubled Asset Relief Program another economic lifesaver that is now burning through its second installment of $350 billion. Those have been such economic smash hits that the geniuses who produced Fannie Mae and Freddie Mac want to pump up the volume.
It started in September, with a $61 billion stimulus plan. Then House Speaker Nancy Pelosi cranked up a proposal to match the 2008 stimulus $150 billion.
Not nearly enough, screamed disgruntled stimulus fans such as New York Times columnist and former Enron adviser Paul Krugman. "My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent."
Team Obama belted out a new tune in the $675 to $775 billion range. Mere ear candy, according to Rep. Lynn Woolsey, D-Calif., co-chair of the Congressional Progressive Caucus. "It's got to be big and bold ... anything much less than $1 trillion would be like trying to put out a forest fire with a squirt gun."
So now the Obama administration will do what no budgetary band has had the audacity to do before turn the spending volume up to eleven and blast the stimulus price tag to an earsplitting level of $825 billion and beyond!
Before the nation becomes deaf to the brain-addling immensity of Spinal Tap economics, it's worth pondering how the nation arrived at this juncture: too many institutions and individuals borrowing too much money, piling up debt without any consideration for the future, and doing so with the encouragement of the government, which itself has been on an eight-year, bipartisan bender.
The Congressional Budget Office now forecasts the federal budget deficit for 2009 will be, conservatively, $1.2 trillion. three times the 2008 deficit. That's before adding in any stimulus package. Rather than turning the deficit amplifier from ten to eleven, it's like going to thirty. That money has to come from somewhere. It will either be borrowed from foreign nations who will have to be enticed to buy American debt with higher interest rates, taxed from future generations with more confiscatory policies, or both.
That's the first reason to question the wisdom of the proposed stimulus it may do more long-term harm than good. The second is that no one really knows if a massive fiscal stimulus actually works in a depression. The evidence from the 1930s is that the Great Depression persisted despite or perhaps because of the New Deal.
Nigel Tufnel economists see this as proof that Obama must break the sound barrier with a stimulus that would shatter Franklin Roosevelt's monocle. Even Krugman acknowledges, "What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy's needs."
Are there other ways to stimulate the economy? Rep. Louis Gohmert, R-Texas, has proposed giving American workers and businesses, rather than government, a direct stimulus by temporarily suspending personal income and payroll taxes. Sound crazy? Maybe. But not as crazy as following the economic logic of a make-believe heavy metal guitarist.