But the bigger worry is that conservatives in Congress will sign their names to almost $1 trillion in new federal government spending in exchange for a measly $300 billion in temporary tax cuts. Rugters University professor Ross Baker told the LAT: “That’s Republican bait. It’s difficult for many Republicans to vote against a large tax cut. ” Baker is right. Generally, Republicans ought to favor large tax cuts. But not all tax cuts are created equal. Short term tax cuts (like rebates, holidays, etc.) simply do not work. Both the Bush 2001 tax rebates and the Bush 2008 tax rebates failed to stimulate the economy. Only long-term tax rate reductions trigger the important economic decisions that a real recovery depends on like more investment in new factories and new equipment.
And what is the price for conservatives if they accept $300 billion in temporary tax cuts? Hundreds of billions of dollars in new entitlement spending on benefits like unemployment insurance for part-time workers and Medicaid eligibility for laid-off workers. Hundreds of billions of dollars in bailouts for profligate states like California, New York, and New Jersey. Hundreds of billions of dollars in new spending on infrastructure projects which will do nothing to stimulate the economy.
As Sen. Everett Dirksen (D-IL) quipped during the Great Society spending boom of the 1960s, “A billion here, a billion there — pretty soon, you’re talking real money.” The Wall Street Journal adds:
How quaint. In modern Washington, trillion is the new billion. … The human mind is not well equipped to fathom a number that large. A check for $1 trillion — a million million dollars — would have 12 zeros to the left of the decimal point. Homo sapiens hadn’t evolved a trillion seconds ago: 31,546 years in the past, Neanderthals were still trying to make fire. More immediately, $1 trillion is about one-third of annual U.S. government spending and 13% of the U.S. economy. It is more than the GDP of all but 12 countries in 2007 (America, Japan, Germany, China, the U.K., France, Italy, Spain, Canada, Brazil, Russia and India, in that order).
Obama likes to say, “We are being guided by what works, not by ideology.” But if that is true, then he should listen closely to his Council of Economic Advisers chairman Christina Romer, who has published economic studies concluding that: 1) tax increases harm economic growth; 2) permanent tax cuts lead to greater economic activity; and, most importantly, 3) increased government spending has at best a small effect on stimulating economic activity.”
I firmly believe that the greatest long term danger of an Obama presidency is the expansion of programs that promote government dependency (welfare and the like). Once a dependency has been formed on a large scale it won’t be done away with; at least, that has been the case in our history. This new stimulus plan clearly increases dependency on a large scale and it will be interesting to see how Republicans handle the situation as a whole. I don’t have much faith in Republicans on Capitol Hill as a group, but you never know…maybe they’ll stick to their guns this time.
God bless and veritas supra omnis!
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