America Gets Change in the Form of An Iceberg
Rory Cooper /
Americans have been trying to tell Washington for the past week that the “stimulus bill” is not the change they were asking for last November. Unfortunately, the President and Congress are not listening. The Senate is poised to pass a “stimulus” bill tomorrow that 62% of Americans flatly reject as “too much spending and too little tax cuts”. While the details of this plan have been debated to the point of exhaustion, including here in the Foundry, not enough people are debating the fundamental changes to the American way of life that will occur if this bill is passed. Even if the economy gets better overnight, we are still welcoming a new era of Government control over our lives.
Hello Welfare: The “stimulus” bill effectively ends welfare reform as we know it. In fact, the House version contains $264 billion (32%) in new means-tested welfare spending. This represents about $6,700 in new welfare spending for every poor person in the U.S. But this welfare spending is only the tip of the iceberg. The bill sets in motion another $523 billion in new welfare spending that is hidden by budgetary gimmicks. If the bill is enacted, the total 10-year extra welfare cost is likely to be $787 billion.
Goodbye Federalism: One thing that is certain, if this bill passes; it will fundamentally change the balance of power between the federal government and state governments. If a Governor has spent years balancing his state budget only to have the federal government now double certain state funds in time of “emergency”, they will never be able to restrain state spending again. Plus, it rewards fiscally irresponsible states with the tax dollars of Americans in states that have sound budgets; i.e. robbing Indiana to pay Illinois.
Spending does not suddenly become stimulating if it is funded by Washington instead of state governments. Either way, all spending “injected” into the economy must first be taxed or borrowed out of the economy. It is a zero-sum transfer that does not create any new demand, regardless of which level of government is doing the taxing, borrowing, or spending. In this case, the economic positive of states adding $200 billion to the economy will be negated by Washington first having to borrow $200 billion out of the economy. (more…)