No Shock: Stimulus Is a Money Loser
Economic Recovery: The results are in, and last year's $787 billion stimulus not only failed to do what it was supposed to do, but it has also turned out to be one of the worst investments in economic history.
Remember the debate in 2008 over the bailouts then being put together by the Treasury, the Fed and the Democratic Congress? Proponents often raised the possibility that any bailout would make money for taxpayers.
Didn't work that way. As we've discovered, the American people aren't just saddled with the ongoing costs of the various and sundry stimulus programs. They're also taking huge losses in doing so.
On Tuesday, the Treasury estimated that taxpayers had lost $68.5 billion in the fiscal year ended Sept. 30, 2009, on the Troubled Asset Relief Program and that the losses could go as high as $120 billion.
That isn't imaginary cash stuffed under some government cushion. It's a tax on you that comes straight out of your pocket. It's money that won't be used to fund private-sector jobs or pay for a child's education or a new house. It's gone.
Meanwhile, the Federal Reserve says it earned $45 billion last year - the largest one-year profit in its 96-year history.
As the Washington Post points out, that will easily eclipse "the expected profits of Bank of America, Goldman Sachs and JPMorgan Chase combined."
Why the big Fed profit? Basically, it printed money, bought Treasuries and private bonds with what it printed (we called it a bailout), then watched as interest on the investments flowed in. At year-end, the Fed held $1.8 trillion in U.S. government debt and mortgage securities, up from $497 billion a year earlier.
Don't worry, though. The Fed doesn't keep the money. It goes to the Treasury - which will just spend the money on something else.
All of this only underscores how badly the so-called stimulus has turned out. After trillions of dollars in outlays by the Fed, Treasury and Congress, the U.S. has zero net new jobs to show for it. Zip.
In fact, jobs at private businesses shrank by 4 million in 2009.
Nor have banks started lending to small and midsize businesses. Commercial and industrial loans, the lifeblood of U.S. industry, fell $252 billion, or nearly 16%, from January through November.
Why aren't profitable banks lending to businesses? Good question. For one thing, like the Fed, banks have found a sure thing in round-tripping bailout funds provided at virtually zero interest into Treasuries yielding 3%. No risk, all gain.
For another, banks are being vilified for their CEO bonuses. To punish them, the White House wants new taxes on bank profits. If you want the banks to start lending again, the worst thing you can do is start taxing their profits. This is basic economics - yet no one in the White House seems to understand it.
So capital-starved businesses are pulling back, fearing higher taxes for such things as health care and greenhouse gases, and a spate of harsh new regulations that will cost huge sums of money.
Things are so bad, the U.S. Chamber of Commerce is warning of a dreaded double-dip recession.
"Congress, the administration and states must recognize that our weak economy simply could not sustain all the new taxes, regulations and mandates now under consideration," Chamber of Commerce President Tom Donohue said Tuesday. "It's a sure-fire recipe for a double-dip recession, or worse."
Given this, the White House's claim that "America is stronger" today than it was a year ago rings a bit hollow.
But don't worry. You'll get something from all this: trillions of dollars in new debt that you, your children and your grandchildren will be paying on until late into this century - and possibly beyond, if our federal officials can't control their urge to spend.