The massive new spending program that is being pushed by congressional Democrats emboldened by their newly enhanced majorities is expected to be among the first votes after Obama's inauguration.
Unfortunately, they've intending the least effective way to give the economy a boost. Those who argue for hundreds of billions of dollars for infrastructure projects and "green jobs" have it all wrong. We and others have tried those remedies before and found them wanting:
- Japan followed the same Keynesian game plan after its real estate bust of 1989.
- To the applause of many American liberals, hundreds of trillions of yen were spent on infrastructure, raising outlays on big projects from 6.5% of GDP in 1990 to 8.3 percent % in 1996 -- even more than contemplated under Obama's plan.
- It didn't work; the 1990s were a "lost decade" for Japan's economy, and the country is still stagnating.
- Its infrastructure boom did have one lasting legacy, however: Japan is now the most heavily indebted nation in the Organization for Economic Cooperation and Development.
Simply handing blank checks to Congress and the White House, and letting them pass an ill-considered stimulus plan with little transparency and no checks on spending is a very bad idea.
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