February 2009 Archives

Stimulate the Economy, Not Government

By Congressman Tom McClintock

     Washington’s response to the current recession illustrates one of the fundamental laws of political physics: the more that we spend on our mistakes, the less willing we are to admit them.
     The conventional wisdom is that if government can “inject” enough money into the economy, it can reverse the recession.  Unfortunately, the hard and bitter truth is that government cannot inject a single dollar into the economy that it has not first taken out of that economy.
     True, government takes a dollar from Peter and gives it to Paul, Paul has one dollar more to spend and that dollar will ripple through the economy.  The problem is that Peter now has one less dollar to spend.  On paper it nets to zero.
     In practice, it nets to much less than zero, because government is shifting massive amounts of capital away from investments that would have been based on economic calculations and toward investments based on political ones.
     How else do you explain the $800 billion spending bill that the President boasts will “save or create” up to four million new jobs?  Put a pocket calculator to work on the President’s own numbers and you will discover it works out to a cost of $200,000 for every job he promises.  Sending a $100,000 check to every one of those four million families would save $400 billion!
     Of course, the government doesn’t have that money.  Between our current deficit of $1.2 trillion and the $800 billion more about to be added, our national treasury will spend two trillion more dollars than it receives as revenue.  That figure is 150 times the size of the annual deficit that has brought California to insolvency.
     So the government must borrow that $2 trillion or about $6,500 for every man woman and child in the nation.  From where does it borrow?  It will borrow from the same pool of funds that would otherwise have been available for loans to employers seeking to add jobs, or homebuyers seeking to buy homes (to stabilize falling housing prices), or consumers seeking to buy new cars and appliances (upon which 2/3 of our economic growth depends). 
     But that money now will not be there for consumers, homebuyers, and employers to borrow to expand the economy because government will have borrowed it instead to expand government.
     Indeed, if government spending actually stimulated the economy, America should now be enjoying a period of unprecedented economic expansion.  The bailouts, stimulus spending and loan guarantees already approved over the past year total nearly ten trillion dollars.  An economist recently noted that’s much more than the modern-day, inflation-adjusted cost of the New Deal, the Louisiana Purchase, the Space Race, the Vietnam War and the Marshall Plan combined.
We’ve not seen prosperity from this policy because this policy doesn’t work.
     It didn’t work in Japan in the 1990’s.  The Japanese now refer to their folly as their “lost decade.”  It didn’t work in America in the 1930’s.  The unemployment rate in 1939, after nearly a decade of New Deal spending, was the same as it was in 1931.  And it hasn’t worked today.
     Fortunately, we know what does work.  Reducing the burdens on productivity increases productivity.  America suffers the second highest corporate tax rate in the industrialized world.  Economists estimate that reducing taxes on productivity, as proposed by House Republicans, would produce twice the jobs at half the cost of the President’s new New Deal.
It worked when John F. Kennedy did it in the early 1960’s and it worked when Ronald Reagan did it in the 1980’s. 
     How typical of government to reject policies that we know work in favor of policies we know don’t work.  Of the czarist government Leo Tolstoy wrote, “I sit on a man's back, choking him and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by all possible means -- except by getting off his back.”
     No nation in history has ever spent its way to prosperity, but many have spent their way to economic ruin and collapse.  It is the economy that needs stimulation, not government, and the best way to do so is to get off its back.

Congressman Tom McClintock represents California’s Fourth Congressional District.  His website address is www.mcclintock.house.gov

 

House Chambers, Washington D.C.
February 25, 2009

M. Speaker:

 When it was announced that Randolph Churchill had been hospitalized to remove a benign tumor, a parliamentary wag commented, “What a pity it is to remove the only part of Randolph that isn’t malignant.”

 As I look at this bill, I can only remark what a pity it is to remove the only part of the nation’s education system that actually works.

 Hidden in this mess is a provision that effectively destroys the Washington DC Opportunity Scholarship Program.  For the last five years, these vouchers have provided thousands of low-income children with the means for their parents to make the same choice that our First Family has made for its children.

The Washington Post – hardly a paragon of conservatism – summed it up this way in its editorial today:

“Many of the Democrats have never liked vouchers, and it seems they won't let fairness or the interests of low-income, minority children stand in the way of their politics. But it also seems they're too ashamed -- and with good reason -- to admit to what they're doing.”

 This bill represents the biggest expansion of discretionary spending since the Carter administration.  But it can’t even continue the one successful education program in the entire federal government. 


 

Do No Harm

House Chamber, Washington, D.C.
February 12, 2009


M. Speaker:

 I rise again to urge the majority to consider very carefully the damage they are doing to our nation’s economy by passing this unprecedented spending measure.

 There is still time to heed the warnings from economists across the nation that this bill will do long-term damage to the growth of our nation’s economy for many years to come.

 This is not mere economic theory: it is the consistent effect every time and everywhere that governments have tried to spend their way to prosperity. 

History is shouting its warning at us: never has a nation spent its way to prosperity – although many nations have spent their way to ruin and collapse.

If government bailouts and handouts and loan guarantees actually worked, we should today be enjoying a period of unprecedented economic expansion. 

After all, we began down this road more than a year ago with the failed Bush stimulus plan and have now squandered or placed at risk some $9.7 trillion – enough to buy up 90 percent of all the mortgages in America. 

We’ve been told not to "come to the table with the same tired arguments and worn ideas that helped to create this crisis," – and yet that’s exactly what this administration and this Congress are doing.  This is exactly the same worn and tired policy that the Bush administration pursued for a year to no avail – and we’re even hearing the same worn and tired rhetoric to justify it. 

Different singer.  Same tired and worn out song.

 At best they are trading a fleeting economic surge for a sustained, chronic and long term reduction in economic growth. 

There’s a simple reason for that: the $800 billion that they must borrow to finance this plan comes from the same capital pool that would otherwise have been available to loan to employers seeking to add jobs, to homebuyers seeking to buy homes and to consumers seeking to buy consumer goods.

 They are literally taking $800 billion from loans that could have been made to expand the economy and shifting it to loans that are largely merely expanding government.

 And that $800 billion – plus interest – will have to be repaid from the future earnings of American families – directly sapping the future economic growth of this nation.  On average, this single bill will reduce the disposable income of a taxpaying family by more than $7,000. 

 Instead, why don’t we increase the disposable income of that taxpaying family by reducing their tax burden NOW.

 That’s what the Republican alternative proposes – a plan economists say will produce twice the jobs as the President’s plan at only half the cost.

 And to those who doubt that, listen to the President’s own numbers.

He has repeatedly promised that the $800 billion in this bill will create or save as many as four million jobs.  That comes to $200,000 per job.  We could save half of what he has proposed spending and still be able to send $100,000 checks to each of those four million lucky families.  And that’s by the President’s own numbers.

Nobody here suggests the government should do nothing in the face of this recession.  But this plan is actually worse than doing nothing, because it robs us of our economic future.

Perhaps we need to add the Hippocratic Oath to the oaths of office for the President and Congress: “First, do no harm.”
 

 

 

February 10, 2009

 Mme. Speaker:

  Before we continue with a stimulus policy that has consistently failed to stimulate anything but government, I think the supporters of this program need to answer some very simple questions.

 For example, the President himself told us yesterday that this $800 billion of new spending will produce up to four million new jobs.  That comes to $200,000 per job.
Question: Why don’t we just send those four million lucky families a check for $100,000, and save half of what the President wants to spend – by his own numbers.

The President himself told audiences this weekend that the spending bill would produce a renaissance of highway, road and bridge construction. 

Question: If that is the objective of this bill, why are only three percent of the funds going to that purpose? 

The Congressional budget office last week noted that the current spending bill, though producing temporary relief, will incur so much long term debt as to reduce overall GDP growth over the next decade.

Question: How do we strengthen our economic future by leaving the next generation with an unprecedented debt that will take decades to pay off?

We know of many cases where massive government spending and borrowing has destroyed economies and brought down great nations – one need look no further than the old Soviet Union.

Question:  When in the recorded history of civilization has massive public spending ever “stimulated” an economy?  It didn’t work in Japan in the 1990’s.  The Japanese call that their “lost decade.”  It didn’t work in America in the 1930’s. The unemployment rate in 1939 – after nearly a decade of New Deal spending -- was the same as it was in 1931.

Mme. Speaker, history warns us that bankrupt nations don’t last very long.  I suggest that before we continue with yet another round of massive spending and borrowing, we get some answers to these inconvenient questions.


 

A Policy That Doesn't Work

House Chamber, Washington D.C.
 February 10, 2009

 M. Speaker:

 Benjamin Franklin warned us that “Passion governs, but she never governs wisely.”

 As the Congress and the President rush to enact the latest in a long line of mega-spending bills, I think we would be well advised to spend a little more time on the dispassionate math of the matter.

 The Congressional Budget Office issued a report last week that warns us, as reported by the Washington Times, that the spending bill may “help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.”

 We are already running a $1.2 TRILLION dollar national deficit this year – with a spending bill racing through Congress to add another $800 billion more on top of that. 

 Let’s put that in perspective.  A $2 trillion deficit.  That’s 150 times the size of the annual deficit that has brought California to the brink of bankruptcy.

 That’s $6,500 of new debt for every man, woman and child in the United States today – or $26,000 for an average family of four.  This is not a theoretical number.  That family will have to repay that $26,000 – plus interest – from their future taxes just as surely as if it appeared on the bottom of their credit card statement this month. 

 This is all being done in the name of stimulating the economy, but the supporters of this policy have not been able to cite a single example in all of recorded history where massive government spending has stimulated an economy.  And there are plenty of examples where it has ruined economies and brought down great nations.

 They have not been able to explain how government can inject a single dollar INTO the economy that it has not first taken OUT of the economy.

 They have not been able to explain how we strengthen our economic future by leaving the next generation with an unprecedented debt that will take decades to pay off.

 What then President told us last night is that by spending another $800 billion, he can create or save up to four million new jobs.  Sounds good until you realize that comes to a minimum of $200,000 per job.  By his own numbers. 

By his own numbers, we could literally send those four million lucky families a check for $100,000 and save half of what he proposes to spend.

 If this policy worked, we should already be enjoying a period of unprecedented economic expansion.  The bailouts, spending and loan guarantees now total $9.7 trillion.  As Bloomberg pointed out last week, that’s enough to pay off 90 percent of all the home mortgages in America.  Not 90 percent of the bad mortgages – 90 percent of the TOTAL mortgages.

 We have not seen prosperity from these polices because these policies don’t work.

 They didn’t work in Japan in the 1990’s.  They didn’t work in America in the 1930’s.  The unemployment rate in 1939 – after nearly a decade of New Deal spending – was the same as it was in 1931. 

 M. Speaker, history tells us that bankrupt nations don’t last very long.  Before we can secure the blessings of liberty to ourselves and our posterity, the nation’s finances must first be solid.

 I beg the majority to pause and consider carefully what they are doing.  I beg the President to pause and consider what kind of legacy he wants to leave.  And I beg the American people, while there’s still time, to rise up and demand a return to fiscal responsibility.
 

Debate Speech:  Debate on Referral to Conference Committee of HR 1 Stimulus Bill.  "The President himself told us yesterday that this $800 billion of new spending is going to produce four million new jobs. That's great, until you pull out a pocket calculator and realize that comes to $200,000 per job." February 10, 2009

 

The Plain Math of the Matter

House Chamber, Washington, D.C.
February 4, 2009


  M. Speaker:

 The mantra we hear from the Left is that government – rather than the productive sector – needs to create new jobs.  According to our new President, the $825 billion spending bill will create 3 million new jobs.

That sounded pretty good to me at a time when our economy is hurting so badly, until I pulled out a pocket calculator and did the math.  Three million new jobs for $825 billion.  Ladies and Gentlemen, that comes to $275,000 per job!

 That’s by the President’s own numbers.   $275,000 – that will have to be paid back – with interest – by average Americans – for every job he – himself – says will be created.

 Madam Speaker, we don’t need to stimulate government – government continues to grow just fine.  We need to stimulate the productive sector – and the best way to do that is to get off its back.


 

Do No Harm

Economic Stimulus Debate, February 12, 2009

M. Speaker:


I saw S-CHIP implemented in California, and I can tell you that it’s a prime example of the law of unintended consequences.  Since its inception, we’ve watched as S-CHIP has been slowly replacing employer health plans with government-paid health plans – with spiraling costs to taxpayers.  Employers discovered that they could avoid their own plans, knowing that their employees would be covered by S-CHIP.

S-CHIP was supposed to provide health insurance for poor and working-class families, but like all things bureaucratic, it has now morphed into one in which families earning six-figure incomes and who would otherwise have good employer-paid health insurance are being pushed into the government program.

That’s the fine point of it.  This is no longer a program for the children of poor people – it is being used to insinuate government into the medical care of every American.

Frankly, we don’t need the same people who run the TSA to be running our health insurance.

 

Where Do We Borrow It From?

M. Speaker:

 When we speak of running up a $2 trillion debt to pay for this year of unprecedented spending, where does that money come from?

 We don’t have it, and so we borrow it.

Where do we borrow it from?  We will borrow that $2 trillion from the same pool of funds that would otherwise have been available for businesses seeking to add jobs, or homebuyers seeking to buy homes or consumers seeking to buy new cars or appliances. 

 But now that money won’t be there for consumers or homebuyers or employers to borrow to expand the economy, because government has borrowed it instead to expand such government programs as the National Endowment for the Arts.

 M. Speaker, when are we going to stop hurting the economy and start helping it?
 

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