Reading Obama 1

Obama’s speech may not have been stirring, but it contains much valuable information about what the new president aspires to do and the assumptions he brings to  his job.

Let’s go to the highlights.

"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."

Obama labels his vast new spending program as a “stimulus” plan. But of course most of the funds he is requesting will be expended months and years from now, long after the downturn has presumably come to an end. So here  he is laying down a double-jointed defense of his plan: “OK, maybe this spending isn’t stimulative. But it will promote long term growth!”

One problem:

In a crisis, when government is the only spender, nobody much cares whether that spending is efficient.

But in 2010 and 2011, every dollar the government borrows will be bid away from the private sector. In those years, government spending should be required to meet a simple test: Will they buy more growth if invested by government than they would if invested by the competitive economy?

If yes, then even conservatives should be happy to see that spending go ahead.

Usually though the answer will be No.

Which means that the Obama administration will be spending much effort trying to wriggle away from that question in the first place.