A Tardy Jobs Bill Won’t Rescue Dems

“Let’s not — and say we did.”

That piece of adolescent smart-aleckry may be the wisest reply to Democratic plans for a second stimulus — their so-called “jobs bill.”

The $15 billion bill just passed by the Senate won’t help with the recession; it will arrive far too late. House Democrats are even less charitably disposed toward the Senate than usual these days; they can hardly be expected to rubber stamp the Senate’s work. So how fast could Democrats get a bill to the president for his signature? April? May? How long after that will it take for any appreciable hiring to take place? Six months?

So now we’re into 2011. By then, according to most independent economists, the recovery already visible in today’s macro-statistics will be reaching the private-sector job market. Although the government spending will get underway too late to help with jobs, it will arrive just as we are turning our attention to rising deficits and debt. And thanks to this bill, there will be $15 billion more of it — plus interest — to discuss.

Democrats must know this. They must know, too, that economists have studied the record of “jobs bills” since World War II and found it consistently disappointing. The government moves too slowly to do counter-cyclical  stimulus very well. Most of the time the anti-recession jobs bill goes into effect just in time to aggravate post-recession inflation.

So why bother? The answer is that a terrified Democratic Party feels it must do something, anything, to prove its concern for jobs. Shove at congressional Democrats a great pile of papers with dollar signs printed on them, and they’ll pass the thing almost without regard to content. If, as a bonus, those dollars reward cherished Democratic constituencies, all the better. If the money will only reach its target way too late to do anything but inflate the deficit –  well, that’ll be a problem for the new Republican majority, won’t it?

The exception to the rule that “fiscal stimulus never works” might have been the fiscal stimulus adopted in spring, 2009. By then it was apparent that the Great Recession would be so deep and prolonged that government action might have a positive impact on jobs within a relevant period of time.

Unfortunately, the White House whiffed at its plan. Though it was advertised as creating or saving 4 million jobs, the Congressional Budget Office now estimates that the plan delivered somewhere between one-quarter and one-half the promised jobs — at most 2.1 million by the final quarter of 2009. Considering that the stimulus cost $800 billion, that’s a very expensive economic rescue.

What went wrong?

First, more than one-third of the Obama stimulus took the form of a tax rebate for less-affluent Americans: $400 per person or $800 per couple. President Obama has scoffed at Republicans who objected to his tax cuts — whoever heard of that? But from a conservative point of view, there’s a lot not to like about this type of tax cut.

It’s well known that temporary tax cuts do not spur spending: People regard them as a windfall and save them. (More precisely, they use them to reduce debt.) Increases in income only lead to increased spending when they are perceived as permanent.

Second, much of the stimulus plan’s remaining spending supported existing functions of state governments. That helped states avoid service cutbacks. But since state jobs tend to be much better paid than typical jobs, the cost of protecting them is also much greater than the cost of creating new jobs in the private sector.

Third, the Obama plan counted income maintenance such as unemployment insurance and health-care benefits as “stimulus.” This is true as far as it goes: The unemployed are enabled to sustain consumption. But it does not add anything new to the economy, in the way that, for example, infrastructure spending does. Yet there was remarkably little money for infrastructure in the stimulus — less than $100 billion.

Now, as elections approach, Democrats are clamoring to try again, in the hope of getting at least some credit for “focusing on jobs” and averting the guillotine’s clang in November.  They should have done the job right the first time. It’s too late now to help the unemployed, and the additional spending on “jobs” will only add to the country’s fiscal troubles.

So let’s not — and say we did.

Originally published in The Week.