Councilman opposes use of federal stimulus dollars

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A constituent recently asked at a city council workshop why I oppose the city taking federal stimulus monies. Here are four major reasons:

1. STIMULUS FUNDING IS INEFFECTIVE: The goal of stimulus spending since 2008 was to stimulate investment, lending, and hiring. It has not done the job. A few examples will illustrate the problem:

A. Investment: After the initial stimulus spending in 2008, business capital expenditures (investment) fell by 28 percent.

B. Lending: The banks that benefitted most from the Troubled Asset Relief Program (TARP) made 23 percent fewer loans than before TARP. In February 2010, the Wall Street Journal reported that U.S. banks had experienced the steepest reduction in lending since the beginning of World War II.

C. Hiring – the key to ending the recession: Private sector hiring continues at depressed levels. National unemployment levels only recently dropped out of double digit range.

In May, the private sector generated only 41,000 jobs. This figure compared unfavorably with the 411,000 temporary, low-paying jobs created by the Obama Administration to conduct the Decennial Census – but these positions were temporary work, not permanent jobs. Even these temporary jobs will evaporate during the second half of the year when the minimal effects of the federal stimulus spending will begin to disappear.

In Clark County the unemployment rate remains around 14 percent. Hiring here remains anemic.

In June, the federal jobless rate fell to 9.5 percent, but only because over half a million job seekers gave up and left the job market. Such discouraged workers, as they are called, are not counted in federal unemployment figures. If they were, national unemployment would more closely approximate our situation here in Clark County.

Although private sector hiring increased to 83,000 new jobs in June, that figure is far short of the 200,000 new jobs needed each month to reduce unemployment. Also, it remains to be seen whether this surge in private sector hiring is a turning point or an anomaly.


The federal government, already deeply in debt, does not have the money to “prime the pump” to get money flowing through the economy at an increased rate. So it borrows it.

When the government takes money from the private sector, whether by incurring public debt or through taxation, it reduces economic demand. Demand is the money that people use to buy goods and services. That demand is what stimulates our economy.

Temporary spending of money taken out of the economy by the government does not stimulate the economy.


The current national debt incurred by the federal government over two centuries will increase dramatically to $18 trillion under the Obama Administration. Under the president’s 2010 budget, we would borrow 42 cents of every dollar we spend this fiscal year. We would need a trillion dollar budget surplus each year for 18 years to pay off just the principal on this debt.

The only time in recent memory that the federal government had a surplus was during the Clinton Administration. That situation resulted from the combination of the economic growth stimulated by the Regan tax cuts and control of Congressional spending accomplished by Speaker of the House Newt Gingrich.

Without a surplus, which current politicians show no intent to generate, it is future generations that will have to (1) pay our debts, and (2) suffer a decline in government services while government diverts taxpayers’ hard earned money to pay the principal and interest that will come due on the extravagance of this generation. The continuing decline in the number of taxpayers will aggravate this situation for the remaining taxpayers.


The current financial crisis in Europe is a harbinger of what is in store for the US. Our government expenditures at federal, state, and local levels are approaching 50 percent of national gross domestic product (GDP), and our debt levels are approaching those of troubled European economies. Their financial crisis is illustrated by the decline in the value of their currency. With the consequences so plainly before us, do we want to pursue the same policies that are bankrupting them? And Europe’s disaster is just the most recent example of the failure of the discredited Keynesian economic theory on which the recent US stimulus efforts are based. Japan in the 1990s followed similar policies with predictable results. So did the US under FDR in the 1930s, with similar results.

Canada, by contrast, recently has followed a more prudent course with better results. From the mid 1990s to 2008, Canada reduced spending as a percentage of its GDP. As a result, Canada has a lower unemployment rate, significantly lower budget deficit, much lighter debt load, and more stable banks.

Should we follow Europe and Japan and accept their results? Or should we emulate Canada’s lower spending to replicate their success, eh?

Washougal City Councilman Dave Shoemaker can be reached at or 210-4654.