Democrats in Washington still think spending is the answer

By J.R. Hoeft

Two houses. Both controlled by Democrats. Two separate budgets. Both have massive spending increases. Both fail to do anything on Congressional earmarks. But one saving grace is one budget will keep the Bush tax cuts in for a remaining three years (the Senate version), but the other (the House) will eliminate them immediately.

U.S. Rep. J. Randy Forbes (R-VA04) and chairman of the House China Caucus had the following statement on Friday:

“The last thing we should do is raise taxes on our working families. Unfortunately, that is exactly what the majority’s budget resolution does by imposing the largest tax increase in history on American taxpayers. In fact, the Majority’s budget would place the burden of paying $2,915 more each year in federal taxes on the average taxpayer in the Fourth District, more than double the so-called household ‘economic stimulus’ package that just recently passed.

“In addition, the Majority’s budget does nothing to reduce the deficit, balance the budget, or address entitlement spending. Instead, it raises the national debt this year by $646 billion, much of which would likely be financed by China.”

As expected, U.S. Sen. Jim Webb (D-VA) was a bit more pleased with the outcome.

“The budget passed today [Friday] is fiscally disciplined. It restores a balanced budget by 2012.

“This budget invests in our people, with $340 billion in tax cuts for America’s working families. Instead of providing and extending tax breaks to the wealthiest in our country, this budget sends extra dollars back to those who need them the most. These tax cuts will provide relief to married couples, parents, the members of our armed services, and more than 72 million homeowners through a new property tax deduction.

“The Senate also acknowledged today that investment in our nation’s highways, bridges, and water systems is one of the strongest tonics for a stagnant economy. This budget allocates billions of dollars for infrastructure projects which will create hundreds of thousands of high-paying, stable jobs that can’t be sent overseas.

“The budget also includes an amendment I offered, reserving federal funds for veterans’ programs that focus on education and training. This reserve fund is an important first step toward funding a comprehensive ‘21st Century’ GI Bill for the newest generation of veterans. With a bipartisan majority of 51 cosponsors on my Post-9/11 GI Bill, I am hopeful we will see the bill enacted this year.”

Notice how the Democratic answer to perceived economic problems is to spend?

Certainly government spending does provide some stimulus to GDP, but how much? Which would have the greater impact? $1 in spending or $1 in tax cuts?

Both put “dollars” back into the economy, but a government dollar in spending has to:

1) Be collected from the people ($1.00)
2) Pay the tax collection system ($1.00 - whatever % to fund the IRS, et al.)
3) Fund the government organization to oversee the project ($1 - IRS cut - whatever % to fund bureaucracy)
4) Pay the contractor

All this takes time…and we all know that every day that goes by, the “real” value of the dollar declines ever so slightly due to inflation.

So, that original dollar taken out of the economy is nowhere near a $1 put back into the economy. A good chunk of it went to just fund the government and its operations.

Compare this to a government dollar in tax cuts:

1) The dollar stays in your pocket to be spent or saved for whatever you need. If it is saved, it can gain interest and grow, possibly out-pacing inflation.
2) When you spend it, it will be spent on something of your choice, not on something the government tells you that you need, like a bridge to nowhere.

When I started typing on this, I didn’t mean to go into economics 101, but it really annoys me that Democrats always think government spending is the answer.

Certainly there are things we must spend money on — but to argue economic stimulus? It’s only half-true. Half-a-dollar, that is.