Friday, January 30, 2009

Bailout or Stimulus: Either Way It's Bad

I opposed the Bush bailouts last year, despite the fact that alarmists were loudly warning that Armageddon would ensue if we didn’t immediately spend a lot of money that we don’t have. Likewise, I oppose the current bailout/stimulus/or whatever you want to call it. It is a pork-laden pile of spending nonsense that will do little to effectively stimulate the economy, as it is marketed to do.

I rather agree with Rep. Cynthia Lummis’ (R-WY) assessment that this boondoggle is “a bridge to bankruptcy.” This package will spend loads of money the government doesn’t have in what mostly amounts to political payoffs.

But I don’t imagine for even one second that the Republicans wouldn’t do something along the same lines if they happened to be in power at the moment. Most of the GOP members of the House of Representative that voted against the bill and most of the GOP senators that oppose the bill do not, in fact, disagree with the general idea of spending more than three times (in fake money) in one shot than the size of the entire 2007 budget deficit. Rather, they disagree with the fact that Democratic buddies will get paid off instead of Republican buddies.

Republicans also have their knickers in a twist about being left out of any substantive role in negotiations over the bill in Congress. President Obama graciously met with GOP congressional leaders last week, but the president does not control his allies in Congress, so this didn’t translate into much actual bipartisan compromise. House Democrats’ idea of bipartisanship was to throw in a few paltry items they thought might appease the GOP and then to tell their GOP colleagues that they were required to vote in favor of the bill.

Political nitpicking aside, the main point is that most congressional Republicans are completely in favor of blowing a trillion dollars that don’t actually exist. Contrast this federal debacle with LaVarr Webb’s Jan. 29 commentary about the budgeting process in the Utah Legislature.
“It is remarkable to contrast what’s happening at the federal level and state level with regard to spending, borrowing, and fiscal restraint (or lack thereof). The Congress, with its ability to sink ever deeper into debt without worrying how the debt will be paid, is spending with total abandon, actually looking for more places to spend money and (hopefully) stimulate the economy. We will, of course, be happy to spend that federal money that comes to Utah.

“At the state level, our lawmakers are scrutinizing budgets line by line, looking for places to cut, rather than spend, with a determination to balance the state budget both for fiscal 2009 and 2010. They will use creative means to stimulate the economy, including through investments in highway and building construction, but any borrowing will be based strictly on the state’s ability to pay off the bonds with identified on-going revenue. What an immense difference in budgeting approaches.”
Our federal politicians could learn a thing or two from governors and legislators in fiscally responsible states. Leaders in spendthrift states would gain much longer term benefit by emulating Utah’s budgetary policies than by lobbying Washington politicians for a piece of the stimulus pie. The former is somewhat responsible. The latter is akin to a drunk begging for booze.


rmwarnick said...

What to do when Great Depression II looms ahead?

Balance the budget and cut taxes, just like Herbert Hoover.

Scott Hinrichs said...

Hoover tried many programs and spending. But it didn't help. FDR tried more spending programs, endless tinkering. It made matters worse. Throwing a lot of money we don't have into the political favor factory has never effectively stimulated the economy and it never will.

What should government do? Quit thrashing about and get out of the way. Stop acting like it has all the answers. Let the dysfunctional business models fail and reformulate. And, for heck sakes, stop corporate welfare.

rmwarnick said...

Great, what do we all do for jobs while we're waiting for failed business models to reformulate?

Scott Hinrichs said...

I have a friend that began a business in a certain type of construction materials during the last construction bust. Everyone said he was crazy, but he knew an opportunity when he saw it. His business has done well. Right now he is hiring and expanding.

There are plenty of other entrepreneurs like my friend. They don't need government to "create jobs," whatever that means. They need government to make it possible for them to play on a level playing field. Job creation happens in small business. Help these guys by reducing superfluous regulations, not by sending cash to state and local governments.

Throwing a bunch of money to political friends does not create jobs. It may help preserve politically correct jobs while destroying other opportunities. But it will not in reality create jobs.

rmwarnick said...

Maybe some entrepreneurs can do business and thrive during a credit freeze, while the stock market is plummeting and GDP is declining. I'd bet not very many! They do say McDonald's franchises are alright these days.

The Republicans in Congress are loudly demanding tax cuts, but their economic plan would result in a tax increase for 26 million families-- because they forgot about the Alternative Minimum Tax.

Scott Hinrichs said...

Regardless, government spending will not improve the overall job situation. It will help certain privileged sectors while harming others.

I'm hardly surprised by the GOP's failure to handle the AMT. They failed to permanently fix it during the first six years of GW Bush when they controlled both houses of Congress. I note that even the Democratic plan fixes it for only a single year.

It boggles the mind that both parties are so inept that they can't permanently remedy a simple and obvious tax problem their inept predecessors created by failing to index the AMT for inflation. And these fools wonder why their approval ratings are so low.