“Stimulus” Should Unleash America’s Potential – Not Government’s Appetite for Pork
On Friday, the Bureau of Labor Statistics reported more troubling news that the American economy is falling deeper into recession. In January, nearly 600,000 Americans lost their jobs, bringing the unemployment rate to 7.6% and the total number of jobs lost since the recession began to 3.6 million. These are troubling numbers. American families are hurting, businesses are closing, and more jobs are in jeopardy. The American people are looking to Washington for leadership to get the economy moving again – and so far, Congress has let them down.
When President Obama called on Congress to produce bipartisan legislation focused on immediate job creation and fast-acting tax relief, the Democratic controlled Congress responded by passing a trillion-dollar spending bill focused on slow and wasteful spending that won’t create jobs. In the end, the only thing bipartisan about the bill the House passed was the opposition to it. All 177 Republicans and 11 of our Democratic colleagues voted against the “stimulus” package.
Republicans and Democrats have asked questions about the “stimulus” package that the Democratic leadership has been unable to answer:
How is $50 million for the National Endowment for the Arts or $650 million for digital-TV coupons going to move Americans out of the unemployment line?
How will spending $20 million for the removal of fish passage barriers, or $85 million for polar icebreakers, or millions of dollars for global warming research put struggling workers back to work?
Some estimate that nearly three-fourths (70 percent) of the spending in the House-passed bill is “non-stimulative” and won’t create jobs. The Congressional Budget Office says that most of the money in the $1 trillion bill won’t be spent until after 2010, when many economists believe the economy will already be on the road to recovery.
And of course there’s a more fundamental question: how are we going to PAY for all this new spending?
The metric that the President’s Director of the National Economic Council, Larry Summers, has used to describe what a successful economic recovery package would look like is one House Republicans agree with: it should be “timely, targeted, and temporary.” Congressional Democrats have failed on all three counts. In baseball, that would be a strikeout.
Between the “stimulus” spending package and other spending ambitions held by the Democratic Party, “it seems likely that the deficit for this year will approach $1.7 trillion,” American Enterprise Institute scholar Kevin Hassett notes. “If your family income in 2006 was between $75,000 and $100,000, the extra taxes that you will have to pay at some point in the future [as a result of the additional borrowing by Congress] add up to about $14,000,” Mr. Hassett says.
The hundreds of billions of dollars Washington is borrowing to finance this pork-barrel monstrosity will come from our children and grandchildren. This is not “stimulus” – it’s generational theft.
On the opening day of the 111th Congress, I pledged that the House Republicans wouldn’t just be the party of “opposition,” but the party of “better solutions.” The President asked for Republican input on his proposed “stimulus” initiative. In response, I asked Rep. Eric Cantor (R-VA), the House Republican Whip, to convene a “solutions group” on the economic recovery effort to craft some recommendations that could be considered by the President.
The Cantor-led solutions group came up with a “smarter, simpler” plan. Our plan would create twice the jobs at half the cost as the Democrats’ “stimulus.” It has five components: 1) Immediate Tax Relief for Working Families, 2) Help for America’s Small Businesses, 3) No Tax Increases to Pay for Spending, 4) Assistance for the Unemployed, and 5) Stabilizing Home Values.
Our solution is quite different from the plan written by Congressional Democrats. It recognizes that the engine that drives the American economy is the American people – not government spending. Freeing up Americans to invest, save, and spend more of their own money is at the core of our proposal.
As I said on the opening day of the current Congress, America’s potential is unlimited; government’s potential is not. We must not confuse the two. We can’t simply spend our way back to prosperity. Our responsibility as elected leaders in a flagging economy is to craft policies that allow our country’s potential to be unleashed. America runs on freedom. It’s the fuel of our economy and the fuel of our democracy. The more we spend and borrow, the less freedom we and our children and grandchildren will have left.
Our nation is in recession. Families are struggling. We owe the American people a responsible, bipartisan bill that will protect and create American jobs. To date, Congress has failed to get the job done.
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This is very true. I hope that Congressman Boehner continues to hold the line against the wasteful new spending measures that the Democrats are proposing. Kudos to him.
I appreciate Congressman Boehner holding the line against the Democrats wasteful spending. Kudos to him.
Yeah, but look at what Paul Krugman wrote today.
On the Edge
By PAUL KRUGMAN
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.
As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
Too bad Congressman Boehner didn't find his
fiscal conscience and outrage during the tenure
of Republican majorities. I find his credibility
now during these times very hard to acknowledge,
and it appears more like an opportunity to use the
hardships of ordinary Americans to score political
points.
Mr. Krugman,
It is clear to all of us that there is a very serious global problem in the financial sector. So, how about articulating some specific ideas about how to fix the problem rather than spouting off a lot of details about the crisis mixed with a lot of platitudes and criticisms of conservative politicians.
The fact of the matter is that the foundation of this problem has been the habitual over-spending of people and governments alike that has created runaway deficits and unmanageable borrowing. The law that a free market must go through cycles of expansion and contraction is as certain as that which determines that an object thrown up will come down. In short, this economy must shrink at some point. We have been in a period of unparalleled expansion and it only makes sense that we now need to shed some of the fat and waste that has collected during this time. This will not be pleasant, and the process could be eased through some targeted and well planned government action. However, that action must ultimately include a massive overhaul of public spending if it's to have any real and lasting effect. In other words, we need to cut hundreds of billions from unsustainable and wasteful programs like the endowment for the arts, medicare and social security while simultaneously increasing work on essential infrastructure like roads, bridges and public transit and finding ways to significantly cut taxes so that individuals have more of their money which they will eventually spend.
The biggest problem here is that the philosophy that has driven our government for the last 20 years is that it is the answer to solving all of our problems. We have forgotten that government is a necessary evil! We have forgotten that while we need government to enforce basic freedoms, history has shown us repeatedly that it is a horrible source of altruism--its interests invariably get in the way.
BTW, I'm not a cold hearted killer that thinks we should allow all of the old people on medicare and social security die of hunger and cold. My own grandparents live entirely on Social Security. I just recognize that they would be better served were I and the rest of my family supporting them rather than some huge and wasteful bureaucracy. If we were personally supporting them I have no doubt that they would find ways of trying to return some of our investment in them through helping babysit, clean and prepare food. Certainly there would come a day when even this would be too much for them, but that day will come anyway and how much more fulfilled would they be knowing that they'd done everything they could whenever they had the chance? ...and as for all of the elderly that do not have a family willing to support them, that is what we have churches and private/community shelters for.
None of this is easy, but since when do we demand that everything be easy? My contention is that (as in countless times throughout history) the easier life has become, the more we have demanded and the more we have shirked responsibility. We're kind of like spoiled children, we need a healthy dose of poverty or pain to help us get back in touch with reality.
So - AmericaSpeaksOn. I guess this is to capture the integrity of the work conducted by AmericaSpeaks, and the authentic momentum of MoveOn.
In any case ...
The fact is that Conservatives have been on a mission to destroy government, along with its regulatory restrictions, for over a hundred years. Now that they have succeeded, they seek to push the "baby" down the drain with the bath water. In this case, the Baby is the Middle Class. They HATED that FDR supported the development of the middle class, by supporting the trade unions that forced ALL industries to pay out a livable wage - not just those unionized companies. Since that time, the Conservatives have vowed to "TAKE BACK" all the wealth that they believe should be theirs. Many of them think its humorous that so many of us are struggling. At least that's the impression that I got from the Pres. of GE when he gave a breakfast talk to the other titans of Wall Street, when he chuckled that, in taking a TRAIN to D.C., to ask for support for his company, he had to have someone "show me how to buy a ticket, heh heh." They all had a nice laugh at the thought of him (and probably themselves) having to take a train. And he was in first class, even at that, don't you know.
President Obama stated that our economy is projected to SHRINK by a trillion dollars THIS YEAR, and ANOTHER TRILLION next year as well. To that, he's settling for an $800 billion boost - not enough in the estimation of thoughtful economists - and anyone who would leap at the opportunity for mere "work" (vs. a real "job," per Michael Steele, the new RNC Chairman).
I believe, and I think President Obama believes, that if the American people can keep their jobs, or find a job, we can put our collective energy together effectively enough to jumpstart our economy, and re-build the middle class.
But we have to stop listening to conservatives and the republicans who carry their water.
Anon....
Maybe the reason the middle class has disappated is because those hard working people achieved the American dream and jumped socio-economic levels the old fashion way..they earned it!
And is it possible that some of that middleclass lost the desire to better themselves or work hard to achieve what they feel America owes them. In either case do not fault Conservatives who historically have reduced the size of the government and put monies back into those same people's hands to do as they wish.
As for your support of Unions, how can American businesses compete with international labor when we are paying $18 per hour per worker (monies of which employees keep less than half) just to fill the pockets of the Unions so the unemployed can still get full pay even if they have been furlowed for over a year. Great Move GM! Oh, yeah Congress where is our check? It might have been cheaper to put them on unemployment instead, but either way our children are paying for it.
I guess the better answer would be to stop global trade and become isolationists? That will really help our economy grow! And in retort feel free to suggest that we have sent all of our jobs overseas.
America needs to wake up and realize that the future in this economy is not going to stem from what the government "hands out" in the next few years. We the people are the future of this economy and if we lay down and play dead waiting for the magic stimulus pill this recession will last much longer than anyone knows.
Somewhere today the next Microsoft is being created in someones basement. Our economy is cyclical and every cycle has winners and losers. It is not "unprecidented" to see industries disappear in these cycles. And by the way those "Microsofts" of the world create jobs!
You mock the success of our Corporate elite yet forget that they have worked to get where they are today. Last I checked CEO is not a first job out of college.
THE SHIFT THAT YOU NEED TO FOCUS ON IS EDUCATING AMERICA HOW TO ROLL UP THEIR SLEAVES AND WORK AS OPPOSED TO WAITING FOR THE NEW AGE OF ENTITLEMENT TO BE HANDED DOWN FROM THE UNITED SOCIALIST STATES OF AMERICA.
I AM DISGUSTED TO SEE WHAT GREED HAS DONE TO THIS COUNTRY: WE HAVE GONE FROM HARD WORKING AND INDUSTROUS TO INSTANT GRADIFICATION AND ENTITLEMENTS.
AS KIDS WE FALL DOWN AND AT SOME POINT IN OUR LIFE WE LEARN TO PICK OURSELVES BACK UP WITHOUT SOMEONE THERE TO DO IT FOR US.
Signed
Struggling
And working my butt off!
"The more we spend and borrow, the less freedom we and our children and grandchildren will have left."
Funny you weren't singing that same tune when you were handing out our tax dollars to Students of the District of Columbia.... so they could attend the private school of their choice. Most Americans would love to send their children to the private school of their choice as well. So why did you not choose to bestow this priviledge on the average American family?
Perhaps there was nothing in it for you.. that would be my guess.
We love your blog postings, so well add your rss or news feed for them, Thanks and please post us and leave a comment back and well link to you. Thanks Jen College Jobs.
Do anyone believe Obama? he did nothing since his presidency, just increased the allowance and as a result our economy is in it's worst position.
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