In his inauguration speech, President Obama poetically described a stimulus plan composed of infrastructure projects that would invest in America's future. He said:
For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.
But that dream has been deferred. Half of his original plan consisted of infrastructure projects which would benefit America's children once the projects were built. But only 5% of the bill that passed the House consisted of infrastructure projects.
The money to pay for the bill will be borrowed. America's children will eventually shoulder the debt. Had the infrastructure projects been built, at least they would have gotten something tangible in return for that debt.
The other big losers will be the industrial workers. The money to pay for the stimulus will largely be borrowed from abroad which will drive up the dollar in currency markets. As a result American produced goods will be less competitive. American corporations will lose market share in world markets and in United States markets. The result will be that many American manufacturing workers will permanently lose their jobs.
Byron Dorgan did his best to help minimize the damage to America's industrial workers. In his excellent American Economic Alert blog, Alan Tonelson describes Senator Byron Dorgan's attempt to put a "buy American" provision into the bill. Here's a selection from his February 7 posting:
In a sharp break with past patterns, the Senate’s Buy-American provision, introduced by North Dakota Democrat Byron Dorgan, was considerably better than the House’s.
The House Buy-American provisions were industry-specific, simply specifying such policies for any iron and steel and textile products procured in connection with stimulus programs. The Dorgan amendment extended this treatment to the rest of manufacturing – which would maximize the benefits for the entire industrial sector.
Lamentably, the Dorgan amendment sparked a hopelessly confused debate over the legality of such measures under World Trade Organization rules – a debate further muddled by a flood of misinformation spread by the outsourcers....
What happened on Wednesday night was that Dorgan agreed to restore the status quo by accepting in his amendment the proviso that it must be applied in accordance with all of America’s existing treaty obligations. So in other words, his amendment now adds absolutely nothing to Washington’s legal authority to prioritize its own producers and workers and citizens in economic policy....
Tonelson concludes with a profound statement with which I agree totally:
(T)he WTO is a system designed to serve the interests of outsourcing multinationals and predatory traders. If this system continues to determine what international economic policies Washington can and can’t carry out, the United States will be doomed to terminal decline. And because America remains the world’s market of last resort, the rest of our trade partners will end up in even worse straits....
Therefore, even in the not-so-long run, nothing would strengthen domestic manufacturing as much as a U.S. withdrawal from the World Trade Organization. This goal should be much higher on our list of priorities. This game has to be totally changed, for our sake and the world’s. If even we don’t take up this cause, who will?
Essentially, this bill will be a disaster for America's children and industrial workers. Our children will be saddled with debt, but will get almost nothing in return. The borrowing from abroad will strengthen the dollar causing American companies to lose market share and industrial workers to lose their jobs.
Moreover, according to the calculations of the Keynesian economists at the Levy Economics Institute of Bard College, this stimulus package won't fix the recession unless trade is balanced at the same time. In fact, according to Martin Feldstein's calculations, we could end the recession without need of any stimulus package whatsoever if we simply balanced trade.
