Saturday, January 10, 2009

A Conservative Viewpoint
- The Case Against Further Stimulus

Article by Bob Steinburg
- Edenton, North Carolina: Cradle of the Colony

I write this column in early January and our national debt stands at an unfathomable $10.7 trillion or $34,844.47 for each of us. That means a typical family of four would ostensibly shoulder more than $139,000 of the debt, which in most cases far exceeds their net worth.

CNN Money recently reported that a 33 year old worker- one that’s halfway toward today’s retirement age of 66 and earning an average of $25,000 over the past 10 years- has a net worth of $2,125. In fact Americans save a paltry one percent of their income; the lowest by far among our largest industrialized trading partners. We have an average of nine credit cards with balances totaling $16,000. In this decade, real wages went up four percent; credit card debt soared by 75 percent.

The difference between our individual debt and that of our government’s is that we eventually have to pay our bills on a predetermined payment schedule. The government simply sells more securities in the form of treasuries and other U. S. guaranteed notes to finance its debt. A growing amount of this paper is held by foreigners, led by government, individual and institutional investors from China, Japan and the United Kingdom.

The government only pays the minimum due to those holding the paper, which is like making the minimum payment on a credit card debt. It’s called interest. According to the U. S. Treasury Department web site, our government paid $412 billion in interest for debt service in 2008.

U. S. Treasury securities have been safe and reliable investments for many years. When the world wide economy was booming, foreigners were willing to invest in the U. S. because in many cases we were their primary market. With most of the world now reeling economically, that money is drying up. Yet our debt at home continues to climb, with our government continuing to spend money like it actually had it. Giveaways such as the recent financial institution and auto industry bail-outs may help prolong the taxpayers’ day of reckoning, but as certain as death itself, it’s coming.

President-elect Barack Obama and Democrats in Congress are painting an economic picture so dire that they are proposing adding a trillion additional dollars in economic stimulus to an already incomprehensible debt with hopes of staving off the wolves. And if things begin to turn around, albeit temporarily, we will undoubtedly continue to rely on foreign money to finance our debt, much the same way we rely on foreign oil to run our vehicles.

During the 1990’s Congress adopted a “pay- as- you- go” policy. Tax cuts had to be accompanied by a like dollar amount in spending cuts. If new spending was required the money could only come from a corresponding dollar- for- dollar increase in taxes. This resulted in annual budget surpluses. Congress allowed pay- as- you- go to expire in 2002. Unwilling to make the tough decisions necessary to maintain fiscal responsibility, including addressing the still expanding national debt, they embarked instead on a spending free for all.

Politicians as a rule are not strategic planners. They are more interested in winning popular support than dealing with the difficult and pressing issues that call for national sacrifice.

In his book “Imposter: How George W. Bush bankrupted America and betrayed the Reagan legacy,” conservative author Bruce Bartlett describes how Bush’s “Compassionate Conservatism” was nothing more than socialism, citing Medicare’s prescription drug plan as one example. While the author acknowledges that Bush is a patriot who has kept the nation safe from another terrorist attack, he sees him as betraying the very principle of conservatism: fiscal restraint.

And it’s fiscal restraint that will ultimately save us from ourselves. While there are few today who are unaware of the enormity of this economic crisis, we are still reluctant to accept what it’s going to take to fix it. Stimulus packages and bailouts are not long term solutions. Reducing the nation’s debt is.

While Obama’s stimulus package will emphasize expenditures on badly needed public works projects, it won’t have an immediate impact on the economy. These projects are time consuming, not only in the developmental stages, but to implement. And those rebate checks last spring? They went mostly to pay down existing debt. I suspect the proceeds from Obama’s refunds will be used similarly.

Last fall’s economic downturn that turned into a full-fledged panic was fed by opportunistic politicians on both sides of the aisle in the closing days of their campaigns. Some of those, including Obama, continue to make statements that have done nothing to “encourage” spending but rather promote a wait- and-see attitude, discouraging spending even among those with the resources to do so. Thus we remain in a state of economic paralysis.

The only way out of this crisis is less, not more government along with more savings and increased productivity. Congress needs to give the steep rate cuts by the Federal Reserve and the trillions of dollars in assistance they have put in place an opportunity to work. Next, they need to address the cost to the taxpayers of any additional “new” government spending and how we are going to pay for it. Congress needs to reinstitute their pay- as- you- go policy that led to the budget surpluses in the `90s.

America loves reality T-V. We now have our own dose of it in the form of economic chaos. Will we and those who lead us remain voyeurs in this drama, or will we become active participants who acknowledge the gravity of the situation, accept the plan to escape it, and then have the guts and unselfishness to actually try?

It is sad how much of a disconnect there is between people who are gung ho about the chance Obama has to prove socialism works, many of them our young who have been brain washed by pro socialist teachers, and those who see the return to the socialism crises that nearly destroyed our nation twice in the last century as a risk that may finally bring our great nation down.

The first of these two crises was FDR's virulent form of socialism, fascism, with government works programs wasting our money on useless unproductive projects that repeatedly ended incipient recovery. If you doubt FDR was fascist then you have to explain why one of the foremost practitioners of fascism, Mussolini, praised FDR repeatedly for his fascist example. FDR's misguided plans drug the depression out for several years longer than any prior recession in our history. The results were due totally to the inability of FDR’s socialist delusions to be honestly accepted as wrong headed by his admirers. Only World War II ended FDR's depression. It takes a special kind of stupidity to adore FDR when the depths of the suffering and the length of the suffering were caused by the man who is adored.

The second slow motion recession was the Lyndon Johnson – Richard Nixon – Jimmy Carter trilogy of socialists. At the end of the Carter Presidency we were in the disastrous shape that we will shortly be in if Obama's plans are successful. Their Keynesian driven damage to economic health and freedom was only reversed by Ronald Reagan's ability to inspire enough people to vote him in to office. Tough love prevailed and created a huge explosion in jobs and economic success for our nation and the world for the next twenty years. It should be remembered that the current Democrat pretense that they loved Ronnie at the time is not true. Reagan in actuality was the target of a constant barrage of lies and denunciations which equalled the lies now being spread about Sarah Palin.

The problem we have this time is the serious subversion of Republican resistance to socialism due to the “compassionate communism” [actually Bush uses a more popular expression “compassionate conservatism”] big government philosophy that has been sold to a large segment of the Republican Party. There is no party right now that is unified in its resistance to socialism due to this Republican squabbling between traditional conservatives and Bush socialists. In one party we have the enthusiastic socialism of the Marxist Barack Obama and the other is the fractured Republican Party still trying to deal with the socialism of Karl Rove and George W. Bush and its devastation on party unity.

This is seriously damaging the ability to fight against socialism at one of the most critical periods in our nation's history.

This article by Bob is an important article. I just don’t know how much acceptance he will get from that element in the conservative movement that bought the Bush-Rove lies. I will be curious to see the reaction to his article.


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