Spending To Prosperity?
by Jeffrey Folks
Issue 128 - March 25, 2009

The Titanic is approaching the iceberg, and the passengers and crew are lined up on deck, raising their glasses and calling for more ice. On top of the one and a half trillion in new stimulus and housing spending already agreed upon, Democrats in the House now propose an 8.7% increase in omnibus spending. The total federal deficit projected for 2009 is now approaching two trillion dollars, adding fifteen percent to the national debt. All this takes place while our captain proclaims “fiscal responsibility,” backed up by a one-day brainstorming session intended to “fix” the problem.

Reportedly, the president’s next “fix” will be for health care, with Social Security and Medicare to follow shortly thereafter. Each of these fixes has involved caving in to each and every special interest group, thereby increasing spending and racking up more debt. The large banks are considered too big to fail, but so are the auto makers and their unionized workforce, the “victims” of foreclosures in danger of losing “their” houses, the alternative energy industries (which now make less sense with oil and natural gas at recent lows), and the growing populations of earned-income-credit voters, SCHIP recipients, WIC beneficiaries, college aid applicants, job training candidates, and clients of every other federal bureaucracy supposedly in an attempt to spend ourselves into prosperity.

Americans should be alarmed at the dangerous escalation in government spending, but for some reason they are not. Perhaps, in a decade in which average housing prices rose by over forty percent, only to fall in some markets by more than half, the public is simply too shell-shocked to care. Perhaps in an age of trillion dollar deficits, it is impossible to believe that money has any real value at all. Once we arrive at the trillion dollar scale of things, any extra fifty or hundred billion dollars doesn’t seem like much. Not, that is, until we have to repay it.

Not only is the total amount of spending daunting, there is also the reckless manner in which money is to be spent. A $1.2 billion increase in the WIC program—defended, as so often liberal programs are, as essential for the welfare of children—translates into a twenty-one percent increase over 2008. A twenty percent increase in funding for climate change programs can only be explained on the grounds of political payback. Huge increases in spending on renewable energy seem to be aimed at the environmental lobby as well. Wouldn’t we be better off taking those tens of billions in subsidies and spending them to increase the production of natural gas and clean coal? Wouldn’t we be even better off eliminating the Department of Energy, allowing the free market to decide what fuels we use, and returning the now wasted tax dollars to the taxpayers?

The incredible amount of money being spent is bad enough, since it is $6,666 in additional long-term debt for every citizen of the United States. (Since only half of Americans pay any significant amount of federal tax, that works out to $13,332 per taxpayer. That debt falls on the shoulders of every current and future taxpayer, including your new-born grandchild.) But there is an added, and even more burdensome cost to the administration’s spending spree: the cost of new regulation and bureaucratic waste.

It would not be so bad if the president’s stimulus package simply involved a tax holiday. “Go to the line that indicates “Total Tax Due” on your 1040. Reduce that amount by half. Spend, save, invest, or donate that amount in any way you wish.” That, I suspect, would comprise a reasonable, efficient, swift, and effective stimulus. Since the administration likes to talk about fairness, a tax holiday would also be a lot more “fair” than the Byzantine schemes of income redistribution embedded in the Democratic spending packages.

Unfortunately, every facet of the new stimulus, housing, and omnibus spending involves the creation of new “rules” for how the money must be spent and new layers of bureaucracy to enforce those rules. It establishes for the first time a national “office of medical information” as a first step toward sweeping national guidelines on permissible and impermissible treatments. It puts into place the foundation for a federal bureaucracy to regulate carbon emissions, pointing to devastating future cost increases for nearly all businesses and individuals. It expands government control over the lives of millions of Americans living off of welfare subsidies. With this new spending, the heavy hand of government reaches further, much further, into the lives of ordinary citizens. The president’s spending programs are a down payment on the death of liberty.

As Democrats, joined by a few Republicans, bat around ideas for how to spend our way out of the current downturn, they have lost sight of the fact that the best way out of a crisis of too much debt is to spend less, not more. We are on the verge of colliding with a colossal iceberg of our own making, and all we can do is lift our glasses and order another round on the rocks.

Jeffrey Folks