Washington is all atwitter about the “Stimulus,” which is currently being pushed through Congress (without being read by most members). Acton’s own Michelle Muccio has come up with a plan of her own, and did a bit of independent research to see if her proposal would find any support:
What is the root cause of the sub-prime crisis shaking the global economy? We need to know so we don’t allow it to screw up our economy even worse.
Many point to dishonesty and poor judgment on Wall Street. There was plenty of that leading up to the near-trillion dollar bailout, and even now the stock market is busily disciplining stupid, dishonest companies.
Others point to the many people who falsified loan applications to get mortgages beyond their means. That too played a role.
But dishonesty and poor judgment are as old as Adam and Eve. Something more was at work in the present crisis, a crisis of unprecedented scope. Why didn’t profit-minded loan companies run thorough credit checks? Why did they keep pumping out low interest loans to high risk borrowers, ignoring the risks?
It’s as if somebody spiked the financial system’s punch bowl with stupid juice, driving normally prudent financiers to dash, en masse, over the cliff.
It seems that way because it is that way. The brewers of the stupid juice were largely (if not exclusively) politicians in Washington who sought to redistribute wealth from the rich and middle class to poor people with bad credit. These politicians fostered various laws and institutions that directed, cajoled and legally bullied mortgage companies to extend big loans to people with little credit.
“You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance. In retrospect, of course, encouraging customers like this to buy homes seems little short of madness.
… At the time, however, that 1995 Chicago newspaper article represented something of a triumph for Barack Obama. That same year, as a director at Chicago’s Woods Fund, Obama was successfully pushing for a major expansion of assistance to ACORN, and sending still more money ACORN’s way from his post as board chair of the Chicago Annenberg Challenge. Through both funding and personal-leadership training, Obama supported ACORN. And ACORN, far more than we’ve recognized up to now, had a major role in precipitating the subprime crisis.
First Maxine Waters suggested that she might just want to nationalize the US oil industry; now Maurice Hinchey of New York is jumping on that bandwagon. And why wouldn’t they? It’s all the rage these days. Just look at Venezuela, which is rapidly emerging as a South American
hellhole paradise after Hugo Chavez started nationalizing everything. Why should we be left behind?
It turns out that there are a number of very good reasons to avoid that particular bandwagon. Dr. Jay Richards discussed them last night on KKLA in Los Angeles on the Frank Pastore Show. Listen in and decide for yourself whether the US should nationalize the oil industry.
We’re all for putting more money in the hands of the poor and moderate earners, especially via stronger economic growth that will give them better paying jobs. But the $250 or $500 one-time rebate check they may now receive has to come from somewhere. The feds will pay for it either by taxing or borrowing from someone else, and those people will have that much less to spend or invest themselves. We are thus supposed to believe it is “stimulating” to take money from one pocket and hand it to another.
To put it another way, when the government calculates gross domestic product, it expressly omits transfer payments. It does so because GDP is the total of goods and services produced in the economy, and transfer payments produce no goods and services. The poor will spend those payments on something, but the amount they thus “inject” into the economy will be offset by whatever the government has to tax or borrow to fund the transfers. No wonder stocks sold off yesterday after Mr. Bernanke endorsed this 1970s’ economic show.
A fiscal stimulus that really stimulates would change incentives, and do so permanently so workers and investors can know what to expect and take risks accordingly.
As the increasingly troubled economy emerges as the trump issue of the 2008 political season, senior congressional Republicans said Wednesday they would put aside demands to make President Bush’s tax cuts permanent if that was what it took to get quick action on a stimulus package…
…The White House has not addressed the issue in detail, but Bush, who has been traveling in the Middle East, is scheduled to hold a conference call today with congressional leaders. To avoid a veto, they hope to get his nod in advance on the outlines of a plan that would probably include a $500 rebate check for taxpayers, extended unemployment benefits for the jobless, and incentives for businesses to expand and create jobs.
Let’s think about this for a second:
- There’s at least a tacit acknowledgment here that it’s better for the nation for this money to be in the hands of consumers instead of the government, because they’ll go out and spend it in order to “stimulate” the somewhat sluggish economy.
- In order to get more money into the hands of consumers in the short term, Congress is probably going to allow tax rates to rise pretty significantly over the longer term, thus removing (presumably) a lot more money from the economy than the $150 billion that this neat little package is estimated to cost.
I know it’s difficult for Congress to think outside of the box, but let’s try for just a minute: What if… instead of handing out a $500 bribe to the voters, you actually made the US a more attractive place to do business? Perhaps by actually reducing the size, scope and cost of government, thereby leaving more of that cash in the private sector where it belongs – where wealth is created instead of just siphoned off of productive people? Heck, you might even obviate the need for those extended unemployment benefits and business incentives, because the drag on the economy from the cost of government would be significantly smaller…
But it is an election year you know. So what are you going to do with your $500?
There can be little doubt that one of the greatest political and economic problems in the US is the way that our Congress “earmarks” billions of dollars for special projects that benefit lawmakers in their bid for personal security and re-election.
The system works in a very straightforward way. Congress can pass massive spending bills and all the while representatives can add “earmarks” that benefit projects and people in their district or state. It is a form, quite often, of legal payback for favors rendered to the elected official. President Bush asked Congress, in his last State of the Union address, to give him a line-item veto. Don’t expect it to happen soon. The idea makes perfect sense really, and it has been done in several states, so why am I so pessimistic about the prospects? The simple answer is plain to see—both parties have found that it pays to spend money in this less accountable way. Incumbents use it to gain favor and to stay in power. Everyone knows that over 95% of the incumbents in the US House are re-elected every two years. Why fix a system that benefits those who are being asked to fix it? Supposedly smaller-government Republicans should favor this idea but many are just as adept at this “earmark” business as the most liberal Democrats.
All the recent talk we’ve heard about reforming the system is really not very impressive when you look at what really happens in Washington. But there have always been a few leaders who have risen above this type of spending and shown themselves to be consistent in their service of the common good of all the people. Michael Reagan recently told the story of how a wealthy businessman in California came to see his late father one day when he was running his first campaign for governor in the 1960s. The man left a paper bag with $40,000 on Reagan’s desk saying, “This is for you.” Reagan took the bag and threw it at his friend and walked out of the room. Later Reagan told this man that if he wanted to make a contribution to his campaign he should send the gift to his campaign committee. And he warned his friend to never try this stunt again, telling him that if he were elected governor the man should never expect to get a single favor from Reagan.
One could wish for more people like Ronald Reagan in public leadership. I think we call this integrity. The lack of such integrity is frankly harming all of us. Everyone knows that this growing practice of budget “earmarks” is called “pork.” Frankly, calling it pork is a disgrace to pigs, who have higher standards that many of those who spend public money to secure their spot in Congress. In a very real sense I call it “legalized bribery.” I pray for the day when the public has had enough of this and pressures Congress to clean up this mess. Changing parties in the last election cycle will not likely change the culture in Washington. We need something much bigger and stronger to do that. I would suggest that what we really need is leadership with courage and vision.
John H. Armstrong is founder and director of ACT 3, a ministry aimed at "encouraging the church, through its leadership, to pursue doctrinal and ethical reformation and to foster spiritual awakening."
Many people that I know go out and vote to elect Congress members, U.S. senators, and all sorts of local officials. But I don’t know of that many people who are able or willing to go out and see what their elected officials are actually doing.
I recently discovered a website — a project of The Washington Post — that helps you keep track of just that, although only on the Federal level. The “Votes Database” lets you follow what’s going through Congress, and how everyone is voting. It lets you see what the party vote was, and also how individual elected officials voted.
For those who don’t like visiting websites every day, you can get RSS feeds for each member of Congress and monitor their work from your favorite RSS reader. This is a great way to get a little bit more proactive about knowing what’s happening in the government.
I’ve noted before the ballooning and bipartisan feeding at the public trough conducted by this Congress, for projects of dubious value.
Brian Riedl reports on NRO today that there is at last some good news. Some of the pork from the latest spending bill has been plucked, credit due not least to a strong veto threat from the president. One might speculate that Republicans are rediscovering the benefits of spending restraint just in time to impress voters in November—but that doesn’t explain how President Bush suddenly found the gumption to do something he should have done many times before.