So, we have a new Congress and administration who are tasked with strengthening our financial system and economy which, on many fronts, is in dire straights. With that in mind, the new House of Representatives delivered to the Senate for their consideration an $818 billion bill that is its answer to economic stimulus, called the “American Recovery and Re-investment Act.” It doesn’t take long, nor a degree in economics, to see that this bill could never be mistaken for a stimulus package and, sadly, is nothing but a pork-barrel spending spree. With interest, it’s generally accepted that this bill will reach $1.3 TRILLION - that’s right, with a “T.”

Wouldn’t a reasonable person think that a stimulus package would be front-loaded to have its intended effect in 2009 and 2010? But according to a Congressional report, only $26 billion would be spent in 2009 and $110 billion in 2010. That’s less than 17% in the first two years. Some of the money in this bill would be spent as late as 2019. Shouldn’t a stimulus bill be designed with a greater sense of urgency?

And wouldn’t that same reasonable person think the goal would be to actually stimulate the economy by encouraging employers to keep their employees and create new jobs? So, what does the bill provide for the largest job creation sector in the economy, small businesses? Primarily an extension of existing tax deductions, like the ability to expense up to $250,000 of capital items in one year instead of depreciating them over time. Plus, less than a handful of other tax provisions, none of which will free up the credit market or encourage a business to hire or at least not lay off. That’s it for small business - more of what we already had.

But there is $550 billion in NEW spending (a/k/a Pork) and $90 billion for infrastructure, most of which won’t hit the economy in the next 12 months. Then there’s $87 billion for Medicaid and $79 billion for schools, just to name a few. Now, reasonable people can disagree about whether this money should be spent on these things, but no reasonable person could argue that this money will stimulate the economy very much, and certainly not in the next critical 12-18 months.

At this time, the bill is in the Senate where it will be modified to produce that body’s version. Then it will go to the Conference Committee for final editing before going to the President. Let’s hope that somewhere along the way those who understand the difference between pork and stimulus will prevail and the new bill will have more of the latter and less of the former. Otherwise, we’ll be better off with no bill.

Recently, on my small business radio program, The Small Business Advocate Show, I discussed this issue with several public policy experts who are members of my Brain Trust, including Ray Keating, Chief Economist for the Small Business and Entrepreneurship Council (sbecouncil.org); Giovanni Coratolo, Director of Small Business Policy at the U.S. Chamber of Commerce(uschamber.com); and Rich Galen, creator of the cyber-column, Mullings.com and political strategist (Republican). Here are the links to each of those interviews. Don’t miss what these smart men have to say. Also below is a link to my individual thoughts on the so-called economic stimulus package.
For Ray Keating:
For Giovanni Coratolo:
For Rich Galen:
For Jim Blasingame: