Bailouts and Stimulus

Bailout and stimulus programs are not fair and, moreover, do not work. Under these programs, government spends money that it confiscates – now or later – from the private sector. Private economic activity therefore shrinks by an amount equal to increased government funded activity plus the costs of government.

Bailout and "stimulus” activities are like taking water out of a swimming pool at one end, spilling some, and then pouring the rest in the other end. The level of the water does not rise. The level – economic activity – actually falls by the amount lost to government waste and inefficiency.

Stimulus, bailout, pork barrel, and earmark appropriations are used to award taxpayer money to special interests in return for political favors. The current Congressman from Oregon District 4, Peter DeFazio, receives large amounts of campaign cash from business and other special interests for whom he does political favors in Washington – interests that often have little or no connection with Oregon.

Having helped to bankrupt our country by voting for profligate over-spending during the past 25 years, DeFazio now advocates even more spending on “transportation infrastructure” stimulus projects, which would further enrich those who fund his political campaigns.

How does he expect these projects to be financed? They would be financed by borrowing (from China and other foreign interests), by money printing (which causes prices to rise), and by higher taxes.

Higher taxes are promoted by claiming that they will fall only on the “rich.” In fact, higher taxes fall most heavily on the poor and middle class.

In order to pay these higher taxes, assets must be sold and productive capital withdrawn from the private sector. The “rich” do not keep their money as piles of cash under their beds. Their wealth is invested in stocks, bonds, and other productive assets where it provides the capital necessary to build, maintain, and operate the businesses and industries that fund jobs for the American people.

In order to pay higher taxes, the “rich” must withdraw assets from productive enterprises and send them instead to Washington politicians. Since politicians are generally unsuited to the wise use of money, a substantial part of these resources is wasted, so there is a net loss of jobs – especially jobs for poor and middle class workers.

Moreover, higher taxes, borrowing costs, and money printing all cause prices to rise. Price rises are far more harmful to the poor and middle class because their fewer dollars are more precious to them. The net result is fewer jobs and higher prices, which further impoverish poor and middle class Americans.

Over-spending in Washington has put the national budget in the red by about $1.5 trillion dollars per year. Consequently, American voters strongly favor a balanced budget.

So, does DeFazio vote to reduce expenditures and balance the budget? No. Instead, at taxpayer expense, he sends fliers to voters saying that he supports a Balanced Budget Amendment to the Constitution. DeFazio knows that, even if such an

Amendment is passed, the amendment process will require many years until long after he has retired. He also knows that Congress already ignores the Constitution in many ways. While a Balanced Budget Amendment, if carefully written, would be useful, it will surely not be passed in time to affect budgeting during the 2012-2014 Congressional session.

The federal budget must be balanced, but it should not be balanced by imposing additional burdens on the backs of American workers. And, it should not be further unbalanced by vast political slush funds represented as “stimulus” and “bailout” programs. Neither should the budget be balanced by lowering payments to those who depend upon Social Security and other critical programs.

The federal budget can be balanced by:

1. Reducing over-regulation and over-taxation of American businesses and industries, so that increased economic activity provides more money for everyone, including government.
2. By ending the capital gains tax, which causes extensive misallocation of American capital.
3. By large reductions in the millions of unneeded bureaucrats the government employs, who not only cost money, but also constantly get in the way of productive people.
4. By avoiding budget-busting new programs, including socialized medicine, unnecessary military activity, stimulus programs, and other grand government-expanding schemes.