By Rich Lowry - July 20, 2010

The 19th-century academic William Graham Sumner had a famous formulation for the hidden costs of feel-good economic legislation.

Persons A and B, he wrote, usually get together to decide what C will be compelled to do to alleviate problem X. "What I want to do," Sumner wrote, "is to look up C. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who is never thought of. He works, he votes, generally he prays - but he always pays."

Amity Shlaes took "The Forgotten Man" as the title of her splendid account of the New Deal, focusing on the neglected economic victims of Franklin Roosevelt's policies. Seventy-five years later, we're forgetting all over again.

The operative theory of the Obama administration is that the $14 trillion American economy is so sensitive to government spending that even tens of billions of new deficit spending to extend jobless benefits will provide an economic jolt. "This is one of the best stimuluses to our economy," House Speaker Nancy Pelosi said. "It creates jobs faster than almost any other initiative."

A dollar of government spending is like the proverbial flap of a butterfly wing that causes a hurricane. Through the secular miracle of the Keynesian "multiplier," it creates so much follow-on wealth, it practically pays for itself.

Otherwise, the economy is a hardy ox that can be beaten about the head and shoulders without consequence. New taxes and regulations can be piled on top of it with nary a worry about how it might affect business spending and hiring, to which a wondrous multiplier is never imputed.

At the same time Obamaites were plugging for the latest unemployment extension, they hailed the advent of a crushing 2,300-page financial-reform bill.

After the bursting of the tech bubble, Congress passed Sarbanes-Oxley, an ambitious raft of regulation that did nothing to stop the latest bubble. At a slender 66 pages, it nonetheless cost business as much as $20 billion to comply in its first year of implementation, according to the nonpartisan Committee on Capital Markets Regulation.

A few things were needful in this new financial reform - a resolution authority to truly end too-big-to-fail, countercyclical capital requirements, and reform of Fannie Mae and Freddie Mac. The Dodd-Frank bill doesn't bell the cat on any of these, but slathers so many new rules on the financial system that - as the Wall Street Journal notes - even experts can't agree on the exact tally.

Surely, the compliance costs and the unintended effects will be vast. But who cares? Democrats' sympathy for the unemployed doesn't extend to the people who might hire them - or give their employers loans.

With one hand, Democrats want to put money into the economy with spending; with the other, they want to take it right back out with taxes. They hope to let the Bush tax cuts on the wealthy expire next year, even though the tottering economy supposedly needs infusions of yet more deficit spending.

Certainly, many of the intellectual architects of Barack Obama's economic policy sincerely worship at the altar of Lord Keynes, with offerings of burnt money and hymns to shovel-ready road projects. For much of the president's party, though, Keynesianism is merely a justification for what they want to do anyway: spend as much money as possible, raise taxes, increase regulation, grow entitlements, and subsidize favored industries.

This mindset is a closed circle. In an interview on This Week, Vice President Joe Biden admitted the stimulus was flawed - because it hadn't spent enough. By definition, that's the only possible economic error.

Forget the uncertainty created by massive changes in the regulatory environment. Forget the overhang of debt everyone knows will exact its eventual price in new taxes or inflation. Forget the specter of a president hectoring business. Forget the new costs to hiring. Forget all the people who may pray, but assuredly will pay.