How is more money for roads–$50 billion a year–going to kickstart the economy?
That is the question Hoover Institution Senior Fellow John Cochrane poses after reading Hillary Clinton's speech yesterday on her economic proposals. Mrs. Clinton called for raising taxes on “Wall Street, corporations, and the superrich.”
The cornerstone of her program is “the biggest investment in new, good-paying jobs since World War II.” You see, Mrs. Clinton, who has brilliantly monetized her public service but never worked in the private sector, thinks that government creates jobs. If that were true, we'd be in the clover after the $700 billion plus stimulus at the dawn of President Obama's tenure in the White House.
Cochrane identifies our top economic problem as slow growth:
America’s foremost economic problem is sclerotic growth. If the economy continues to expand at only 1% to 2% a year, instead of the historical 3% to 4%, then current economic and political problems will become crises. Almost everything depends on growth: progress for the middle class, hope for the unfortunate, solvency for social programs, environmental protection, defense.
. . .
So, how does Mrs. Clinton diagnose and suggest to cure the country’s stagnation? Her central pro-growth proposal is “infrastructure” spending, $275 billion over five years, financed in part by some sharply higher taxes.
Sure, America’s roads and bridges could use patching. But how does this fix the growth problem? Nobody thinks that stagnant growth is centrally the fault of bad roads and bridges. No, the economic argument behind Mrs. Clinton’s proposal is simply the endless drumbeat of fiscal stimulus: Spend taxed or borrowed money on anything, and the “multiplier” will increase “demand.”
Politicians will get to pick the infrastructure projects, which will be bogged down by regulatory and legal challenges. Cochrane predicts that Clinton will look favorably on legal roadblocks set up by, say, the Sierra Club.
With so many Republicans already pledging fealty to her, Mrs. Clinton doesn't have to sweeten all this spending with proposals to appeal to them:
In return for more spending, Mrs. Clinton could have offered serious structural reforms: repeal of Davis-Bacon, time limits on environmental reviews, serious cost-benefit analysis, and so forth. Such a package would have been irresistible.
And the Clinton economic agenda doesn't get any better:
The rest of Mrs. Clinton’s economic agenda is a thousand-course smorgasbord of government expansions, with the same deficiencies. A random sample: Higher taxes on capital gains and corporations. New taxes on financial transactions. A corporate exit tax. Paid leave. Free college. A higher minimum wage. More federal training programs. Tax credits for apprenticeships and profit-sharing programs. A “new markets” credit. Rural business investment cooperatives. The Paycheck Fairness Act. “Make it in America Partnerships.” And on and on.
Moreover, much of it is merely aspiration, without (yet) concrete action: “Restore collective bargaining rights.” “Strengthen overtime rules.” “Make quality affordable childcare a reality.” “Ensure that the jobs of the future in caregiving and services are good-paying jobs.” “Break down barriers to make affordable housing and homeownership possible for hard working families.” And on and on and on.
The “plan” offers neither a strategy for enactment, nor thought about why these are problems in the first place. Yes, it’s hard to find quality affordable childcare. Why? Could licensing, zoning, teachers unions, minimum wages, ObamaCare mandates, employee time rules, taxes, immigration restrictions and the like have something to do with it? Apparently, every problem in America occurs because the president did not “fight” hard enough for new programs and against the dark forces that oppose progress. Like a hyperactive overachiever approaching a mock-U.N. debate, Mrs. Clinton seems to trust that the opposition will wilt from the sheer volume, detail and righteousness of her proposals.
Cochrane urges:
Mrs. Clinton: Please don’t do it. Find a few simple governing principles. Listen to your opponents. Fix the structure of government. Ask why things are broken, despite good people’s best efforts. Spend a little time cleaning up old programs too.
Despite his criticisms of Clinton, Cochrane does not endorse what he calls Donald Trump's "economic musings." Instead he regards Speaker of the House Paul Ryan “A Better Way,” and Libertarian candidate Gary Johnson's economic policies as the key to the future.
He predicts that after a landslide victory for Clinton in November, Johnson and Ryan's ideas will "define the opposition."
The next four years may not look any better than the last eight.