By Robert Romano
Punxsutawney Phil saw his shadow this morning, which legend has it will mean six more weeks of winter. And should Senate Republicans vote in favor of the wasteful $819 billion debt stimulus that has just made its way to the world's most deliberative body, they just may be looking at six more years of minority status. At least.
Or perhaps, as in Bill Murray's classic role, they will relive the same day over and again, destined to repeat the mistakes of days past until they, one day, finally get it right.
Certainly, a vote for the bill would confirm what several conservatives already suspected: that the Republican Party buys into Keynesian economics. And that it cares not a wit for the burden the spiraling debt has on the American taxpayer.
Although, to be fair, this is much, much worse than anything Keynes would have ever proposed. He coupled monetary easing with infrastructure investment. But this “stimulus” only contains some $42.7 billion in infrastructure spending, a little more than 5 percent of the $819 billion tab. The rest—bailouts for state governments budget deficits, expansion of Medicaid, more for education spending, more for food stamps and unemployment benefits, federal buildings, more for public housing, climate change supercomputers, erecting trade barriers overseas, refundable tax credits, and other special interest payouts—really stretches Keynes' stated advocacies.
A vote in favor of the bill—whose cost will rise to $1.2 trillion according to Congressional budget office once interest is calculated—will give those who favor ever-expansive government carte blanche to shackle the American taxpayer to a mountain of debt. Permanently.
That's because it will tell global markets that the U.S. never really has any intention of paying off its astronomical $10.7 trillion debt. And it will tell the American people that they have no advocate to protect them from the higher taxes, elevated interest rates, and increased inflation that will be the end result of this spending spree.
More harmful than good, the “stimulus” may in the short term—the next two to three years—provide some sort of bubble, and some may be able to capitalize on it. Already, Treasuries are experiencing a bubble, ostensibly from Fed, Treasury, and Congressional market interventions to date. How badly it eventually pops could prove hazardous—if not fatal—to the health of the dollar and the economy.
Instead, Senate Republicans must propose a plan that ultimately seeks to retire the national debt, takes America off of its dependence on foreign creditors (and credit in general), and makes the nation self-sufficient to finance its own obligations. The nation is teetering on the brink of bankruptcy. The CBO projects a budget deficit of $1.2 trillion, but it could be as much as $2 trillion, even before the “stimulus.”
Senate Republicans—and their colleagues in the House of Representatives—got burnt in 2006 because they failed to rein in spending adequately. They must learn from their mistakes. They became a Congressional majority largely on the promise to balance budgets and pay down the national debt.
As they strayed from that path, they lost elections, and now they now risk political extinction should they go along with the Obama Administration's trillion dollar spending program. Their political base—and anyone with good sense—does not support bankrupting the nation.
Importantly, they must not be suckered in with lollipops. Anything that results in expanding the debt must be a non-starter because debt, excessive spending, and excessive lending being accommodated by the nation's central bank is how this economic crisis began. And it will not now be solved by excessive borrowing. This is not an ordinary recession through which “stimulus” will do a thing. It is a sovereign debt crisis, and until government understands that and treats its causes, the people will continue to endure the repeated boom-to-bust economic cycles.
The nation must not suffer the same fate over and again, as Phil did in Groundhog Day. Senate Republicans can interdict the Punxsutawney tautology, but to do so they must stop the “stimulus,” and be the American people's legitimate voice of opposition.
Robert Romano is the Editor of ALG News.