The faltering economy is the major concern of most Americans.  According to a recent AP poll, 47 percent of us are at least somewhat worried about losing our jobs, up from 28 percent one year ago.  And 71 percent know a friend or relative who has lost his job within the past six months.  Thus far, the Obama administration’s response to these economic worries has been the $787 billion stimulus package, signed into law on February 17 as the American Recovery and Reinvestment Act of 2009.  Despite the grandiose title, there is little reason to believe that it will help the economy to recover from recession.

Even those who accept the controversial premises of Keynesian economics doubt the bill will do much.  Economist and New York Times columnist Paul Krugman wrote on February 9 that, even before cuts were made in the stimulus package to win over Sens. Arlen Specter, Olympia Snowe, and Susan Collins—the only Republicans in either house to vote for it—“it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.”  Krugman also criticized the stimulus package as being “too heavily reliant on tax cuts.”  The bill’s largest tax cut is a $116 billion payroll-tax credit, which will provide a credit of $400 per year per taxpayer, with only individuals earning under $75,000 per year, or joint filers earning under $150,000 per year, receiving the full amount.  It is hard to see how a tax credit amounting to a little over a dollar a day will encourage a populace increasingly fearful of job loss to open its wallets and start spending again.

More importantly, this recession is revealing the systemic problems in the economy long analyzed in these pages by David Hartman and others, which Obama’s stimulus package does little to address.  As Kevin Kearns and Alan Tonelson of the U.S. Business and Industry Council argued before the stimulus package was passed, “Strategies emphasizing only repairing financial markets and restoring credit flows will simply re-create the house of cards, bubble economy that existed prior to the current crisis—in which America and its citizens borrowed and consumed until the bubble burst. . . . Unless the production and use of domestic goods is maximized in the economy, any federal stimulus programs could primarily reflate the over-borrowing and over-consumption cycle—without repairing the economy.”  The long decline of U.S. manufacturing, which accelerated during the Bush administration, has resulted in a situation in which “consuming, borrowing, inflating assets, and reshuffling paper wealth” have been treated as adequate substitutes for “creating genuine wealth by producing.”  Paul Craig Roberts is even more blunt: “The American economy has gone away.  It is not coming back until free trade myths are buried six feet under.”

There is, however, some dim recognition of these problems in the stimulus package.  Despite Republican opposition and much angst at the Wall Street Journal, the stimulus package provides that, with certain exceptions, “None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods in the project are produced in the United States.”  Similarly, even though the bill failed to mandate the use of E-Verify to ensure that any jobs created would not go to illegal aliens, it did limit the use of H-1B visa holders by any entity receiving TARP funds, causing George Pieler and Jens Laurson of to liken this restriction to “protectionism” and wail that “The idea that native Americans . . . deserve special status in hiring is a deliberate slap in the face of globalization.”

Unfortunately, it is only a small slap in the face of globalization, and the main purpose of the stimulus package seems to be to cement the allegiance of the liberals who flocked to Obama.  Despite the media focus on the construction jobs the stimulus package is supposed to create, and Robert Reich’s worry that too much government money will flow to “white male construction workers,” the bill sets aside only $80.9 billion for infrastructure, as opposed to $147.7 billion for healthcare, including $86.6 billion for Medicaid reimbursements for the states, and $90.9 billion for education, of which $44.5 billion is earmarked for aid to local school districts.  There are also massive subsidies to higher education, including $14 billion for an expanded college-tuition tax credit, $15.6 billion for an increase in Pell Grants, and $1.3 billion for university research facilities.  What this money will achieve is uncertain, at best.  Many are now beginning to question the value of a college education for most Americans.  Charles Murray, author of Real Education, and I agree that for most Americans a college degree today is equivalent to a high-school diploma from a good public school in 1960—the major difference being that the former costs many tens of thousands of dollars, while the latter was free.  What is certain is that the majority of those working in higher education and in our public schools are helping to indoctrinate the younger generation in the sort of leftism incarnated by Obama.  The stimulus package also showers money on the environmentalist causes beloved of the upper-middle-class liberals who flocked to Obama, including $49.7 billion for a laundry list of mostly “green” energy projects.

The prototypical upper-middle-class liberal does quite well under Obama’s stimulus package.  The sort of clean, high-tech jobs preferred and performed by that class are all rewarded.  In his address to Congress following the passage of the stimulus package, Obama stated that “Now is the time . . . to invest in areas like energy, health care, and education that will grow the economy.”  Not only do healthcare and education employ lots of technocrats, but they are largely shielded from economic reality by government, which explains why the cost of both has been outpacing inflation for many years.  The ultimate winner under the stimulus package, though, is government itself.  Indeed, Moody’s has estimated that the economy in the D.C. metro area will grow by 2.5 percent from mid-2008 through mid-2010, while the rest of the economy shrinks.  Unless we begin to address the systemic problems the current recession has exposed, it may be that the only Americans who will enjoy prosperity in years to come will be those who work for government or who work in those sectors of the economy connected to government.