Spending our way into economic prosperity?

An excerpt from a FT opinion piece by David Walker, who was the head of the Government Accountability Office from 1998 to 2008.  I especially like his point on stimulus as a down payment on the future.

In fairness, we cannot assign all the blame to Mr Bush. Congress bears some responsibility, as do the American people. After all, in our constitutional republic it is “We the People” who are ultimately account able for what happens in Washington.

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Any stimulus proposal should be timely, targeted and temporary. It should be large enough to make a difference, but not too large, and be properly structured in order to minimise waste. It should be designed to stimulate job growth and make targeted infrastructure and other investments to make America more competitive.

While some stimulus is called for, we cannot spend our way into economic prosperity, especially when all new spending is debt-financed. It was troubling to see one prominent incoming senior economic official refer to the Obama administration’s planned stimulus proposal as a “down payment” on the future. How can something be a down payment when there is no equity involved? This is an example of how words used in Washington do not always fit Webster’s definitions.

The president and Congress must put a process in place that will enable elected officials to reimpose tough statutory budget controls and reform our nation’s Social Security, Medicare, healthcare and tax systems. All these require significant reforms that Washington has delayed for too long. We also need a baseline review of all main spending and tax choices to re prioritise them to reflect 21st-century realities.