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Monday, February 2, 2009

Stop the Bailout: Salazar Promotes Special-Interest Warfare

The following article originally was published February 2, 2009, by Grand Junction's Free Press.

Salazar promotes special-interest warfare

by Linn and Ari Armstrong

Shame on Congressman John Salazar for voting to pass the special-interest monstrosity deceptively called the American Recovery and Reinvestment Act, passed by the House on January 28. Barack Obama and the Democrats are following in George W. Bush's footsteps in expanding the power of the federal government at the expense of the free economy.

If politicians actually cared about economic recovery, they would remove the political controls that have caused the recession and hampered economic growth. Through myriad controls, politicians have encouraged risky home loans, discouraged the formation of new companies, pushed up the cost of health care and energy, and buried businesses and taxpayers under mountains of paperwork. True economic recovery would consist of repealing those controls and curbing the diversion of precious resources to bureaucrats.

The whole idea that politicians can right the economy with "stimulus" spending is a fallacy. The economy is not a wind-up toy.

The recession is not the fundamental problem: it is the consequence of malinvestment promoted by the federal government. For example, through such measures as the Community Reinvestment Act and easy-money Federal Reserve policies, the federal government encouraged many to buy homes they couldn't afford and weren't prepared to maintain. Federal politicians thus encouraged too much investment to flow to properties, construction, home-improvement stores, etc., and away from other industries. A recession is a period when people recognize the nature of the malinvestment and act to correct it by adjusting investment, production, and employment.

All federal "stimulus" spending accomplishes is to replace earlier malinvestments with new ones, while robbing the free economy of the resources it needs for true, long-term recovery. After all, that "stimulus" money comes from somewhere. The Congressional Budget Office estimates the bill "would increase federal budget deficits... by $816 billion over the 2009-2019 period."

Deficit spending means the federal government is borrowing money that its earners would otherwise spend or invest in the free economy. Deficit spending must be repaid through future taxes or inflation, the most insidious form of taxation.

So where is that money headed, anyway? We don't know quite what the final bill will look like, and we do not doubt that the Senate will further load it up with pork. Part of the package consists of tax breaks, which we don't have a problem with, though we point out that tax breaks without commensurate spending cuts again leads to deficit spending. Figure that new government spending will amount to around three-quarters of a trillion dollars.

Of that money, only a portion will be spent within the next couple of years, while the rest will supposedly "stimulate" the economy into 2019, though we hope the recession has ended well before then. This indicates the basic problem with the bill. It is not fundamentally about "stimulating" the economy, it is about paying off special interests.

The most popular spending is for infrastructure. The Associated Press reports figures of "$30 billion for highway and bridge construction and repair," "$31 billion to build and repair federal buildings and other public infrastructure," "$19 billion in water projects," and we might include here "$21 billion for school modernization." That's about $100 billion, a small fraction of the package.

One thing we can count on is that even infrastructure spending will be wasteful, as funds are spent for political purposes rather than economic ones. Anyway, don't we already pay the gasoline tax for roads and property taxes for schools? Where's all that money going? The federal "stimulus" spending will help free up that money for yet more special-interest payoffs, so that Obama can help Democrats all the way down the line.

Meanwhile, federal politicians want to spend around $150 billion more on health welfare, $43 billion more to pay people not to work, and $20 billion more on food stamps. In other words, the "stimulus" spending devotes more than twice as much resources to expanding the welfare state than for building infrastructure. But rewarding people for not working and for remaining poor does not stimulate the economy. You get more of what you subsidize, and that goes for unemployment and poverty as well.

Do you see how the game works? First, federal politicians eat up a huge portion of people's paychecks in payroll and income taxes, so that many struggle to pay off debt and save for hard times. Then, having largely destroyed people's ability and incentive to save, the same federal politicians kindly step in to help their victims through the recession that federal policies caused. And this is what is known today as "stimulating" the economy.

The American people have trusted the likes of John Salazar for far too long. Some become blinded by the misleading rhetoric of "stimulus." Others just want a handout.

But for Americans who care about economic liberty and individual rights and who want to preserve a free country, now is the time to say enough is enough. Give us liberty.

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