111th United States Congress

The American Recovery and Reinvestment Plan was unveiled today.  Well, a little short on details, but if there is anything true about Washington, it’s that the first thing you have to do is come up with a catchy name.  Once you craft a name that is as American as Motherhood and apple pie, the details are only a distraction.  You have to start with a name that members of Congress would be afraid to vote against.  “You mean, Congressman, that you are opposed to recovery?  And you’re against reinvestment?”  You can hear Katie Couric incredulously asking that question as the Congressman, undoubtedly Republican, struggles for an answer.

Mr. Obama said in his speech:

“It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe,” Mr. Obama said. “Only government can break the vicious cycles that are crippling our economy — where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit.”

Only government can break the vicious cycles that are crippling our economy?  Okay, so the government is going to borrow and spend $1 trillion dollars, give or take a few billion, and that is going to solve the problem.  Borrow and Spend?  Isn’t that how we got here?

Between Fannie Mae and Freddie Mac, The Community Reinvestment Act, Janet Reno in the Clinton Administration threatening banks if they didn’t make enough subprime loans, we had the housing bubble.  Millions of people borrowing money they couldn’t pay back for the sub prime people, and millions of people borrowing against the equity in their homes so they could spend on the good life.  The bubble burst, housing prices collapsed, mortgages went under water, and a deep recession followed.

So Barack Obama proposes borrowing $1 trillion and, unless he has a very large piggy bank from where he’s getting it, spending it to get the economy moving again.  If a significant number of Americans can’t manage their debts now, how are they going to shoulder another $1 trillion?  Let’s not forget, it’s We The People, the government is us.  There is no rich Uncle Sam who made a killing in pork bellies, who is going to foot the bill.  It is us, our children, and our grandchildren.  What we have to do is live within our means.

• Make the Bush tax cuts permanent.  That will remove the uncertainty that has been hanging over the economy ever since the presidential campaign, blaming Bush for tax cuts for the rich.  Face it, folks, tax cuts work best when they are given to people who actually pay taxes.
• Take the tax code and shred it and recycle it.  Let’s go to a flat tax that you can file your return on a post card.  It may put a lot of accountants out of work, but it costs Americans about $200 billion a year to prepare.  After five years that’s $1 trillion back in the economy.
• Cut the federal government down to size.  Start with the Department of Education.  Since 1980 Congress has appropriated $1.06 trillion to the Department of Education.  How’s that working out?  My father dropped out of high school in 1934, and I would put him up against many of today’s high school “graduates” in being able to put a sentence together properly.  So what has all this education spending gotten us?  I’ll wait………….  Still scratching your head, I’m not surprised.  I know it’s gotten us a lot of teachers.  When your goal is smaller classroom sizes, rather than results, the only result you get is bigger payrolls.  So not only has the Department of Education squandered $1 trillion, many school districts have seen their property taxes skyrocket.  Why?  Well, once you hire all those teachers you have to pay them and in many, if not most areas, that funding comes from property taxes.  So the Department of Education hits your left pocket for $1 trillion and your tax assessor hits your right pocket, and what do we have to show for it?  Many colleges now have to teach remedial classes to their incoming freshman to get them up to a level where they can handle freshman courses.
• Social Security and Medicare — These have to be tackled NOW.  This is the next ticking time bomb.  Social Security is a ponzi scheme that makes Bernie Madoff look like a piker.  Social Security’s inflation adjusted rate of return is about 1.23%.  Any effort by Bush to allow future retiree’s to divert a portion of their contributions into a fund that gets a better return, was shouted down by the Democrats and demonized as trying to starve granny.  Well, keep yukking it up, and call for another round of drinks, but the bill is coming due and when it does there will be no where to hide, and we better not be trying to digest Obama’s trillion dollar deficits at the same time.
• Couple saving Social Security with term limits.  If you are not a politician for life, you might have the guts to do some heavy lifting, but if you are always running for office and your goal is to offend as few people as possible and give out government goodies to as many people as possible, you are naturally disposed to make the government bigger and delay any tough decisions until after you’re.  So don’t fix Social Security, just make it solvent long enough for you to pick up your spoils and go home.
• Campaign Finance Reform — this folly gets rolled out around each election.  Here’s my modest solution.  If you hack back the size of government, there will be a lot less for lobbyists to lobby about.  If they have nothing to lobby about, they will have to go find something else to do. For those that are left, it will be a lot easier to see what they’re up to, since there won’t be that many of them.
• Go back to every government agency and look at the legislation that created them.  Has that original mission been accomplished?  If so, shut them down.  When I worked in telecommunications, one of the Federal Regulatory bodies was the Rural Electrification Administration.  This agency was created during the Great Depression to bring electricity to farms.  I wondered what that had to do with telephones.  Well, the problem of bringing electricity to farms was pretty much solved, so they needed to do something else, so why not telephones.  I am sure that cell phones will be next if they are not already working on that.  But what we should really do, what we should have done years ago, is throw a nice party, thank all the employers and managers for a job well done, send them on their way and put the buildings up for sale.  But that doesn’t happen in Washington, agencies created for one purpose just morph into something else.
• Following on the previous point is the Department of Agriculture.  It was raised to cabinet level in 1889.  In 1870, 70%-80% of the population worked on farms.  Today that percentage is 2%-3%.  So why do we still need a Department of Agriculture? Today it has an annual budget of $95 billion, so in the next ten years about $1 trillion will be spent in the Department of Agriculture.  The Federal beast grows without bounds.

There you have it, $3 trillion between tax filing, the Department of Education, and the Department of Agriculture.

The federal government must tighten its belt like everyone else and stop soaking up an increasing share of the economy.  Barack Obama and the federal government aren’t going to create jobs unless it is by making the beast bigger.  The majority of jobs are created in this country by small businesses.  What this economy needs is a degree of certainty.

If Obama really believes in fiscal discipline he should say the bailout window is closed.  It was opened to keep money flowing during a crisis, now all companies should get off the line, and go back to running their businesses.  As long as the window stays open there is uncertainty.  Can I get a bailout?  That company got a bailout, why not me?

What roils the markets is uncertainty.  If the market doesn’t know if the government is going to act or not act;  if the Bush tax cuts are going to continue or be rolled back;  if the auto companies are going to get bailed out or not;  is the government going to spend a trillion or not.  The U.S. economy and the American people can work this out.  The more government stays involved, the longer the uncertainty will remain, and the longer and deeper the recession will be.

As General Patton said, “Lead, follow, or get the hell out of the way.”