How can anyone make a financial crisis which could eat up to a trillion dollars in government funds any worse? Demanding an appetizer of $50 billion more in government spending. Democrats have assessed that as their price for supporting the biggest federal bailout in history, and Barack Obama leads the chorus:
Congressional Democrats are pushing for a new $50 billion economic-stimulus plan as a way not only to jolt the economy but also to help themselves politically in November’s elections. The plan would include new spending for infrastructure, an extension of unemployment benefits, energy assistance to lower-income families and aid to states to help pay Medicaid health-care costs for the poor. Democratic presidential nominee Barack Obama touts the plan almost daily.
“This plan can’t just be a plan for Wall Street,” he told a Charlotte, N.C., audience Sunday. “It has to be a plan for Main Street. We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs and prevent painful budget cuts and tax hikes in our states.”
Most Republicans sharply disagree. They note that negotiators from Congress and the Bush administration already are eyeing a financial-rescue package that’s estimated to cost $700 billion.
With this fiscal year’s federal budget deficit already headed over $400 billion, and next year’s likely to top that, “sooner or later there will have to be a reckoning,” said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.
What’s the best argument against the stimulus package? How about the complete lack of impact from the last stimulus package? Instead of offering a useful set of tax reforms that would create a real stimulus, Congress and the Bush administration handed everyone back $600 of their own money and treated it as some sort of gift. That was just a few months ago, and it did so little to fix the structural problems of the economy that now Democrats think we need another round.
The argument from the stump is that we’re bailing out Wall Street but ignoring Main Street, and so we should spend even more money in order to pander to the middle class. It’s this kind of logic that explains why we have hundreds of billions in deficit spending each year, and we face another financial catastrophe in a few years regarding entitlement spending. Instead of prioritizing spending and making tough decisions, our political class decides instead to spend money everywhere in order to look like Santa Claus to everyone.
Indeed, that’s what started this credit crisis in the first place. Politicians wanted to force lenders to take more risks in offering credit, so they passed mandates for lenders to sell mortgages to marginally qualified buyers, or in many cases flat-out unqualified borrowers. Instead of demanding fiscal responsibility from GSEs like Fannie Mae and Freddie Mac, they encouraged reckless behavior so that they could take credit for putting people in houses they couldn’t afford. Of course, Congress hardly serves as an example of fiscal responsibility at the best of times anyway.
Now we learn that the reckless fools who brought us the sub-prime meltdown want to keep spending money in order to make us feel “good” once again. If they really wanted to solve the problem, they would start cutting government spending in order to absorb the massive losses that taxpayers will underwrite. They could also take less of our money in the first place and perhaps end capital-gains taxes in order to encourage investors into kick-starting the economy. Congress could also take the limits off of oil exploration and extraction, creating hundreds of thousands of jobs and keeping American wealth inside America for the next few years to create more revenues to pay for the bailout.
That would be a real stimulus plan, not some one-time giveaway that does nothing to boost the economy but works to boost the populist street creds of free-spending politicians.