The Indianapolis City-County Council just passed the 1% increase in the hotel tax by a 15-14 vote. The vote was party line (Ed Coleman, the Republican-turned-Libertarian voted No) except for Jackie Nytes (D-9th) who voted yes and Christine Scales (R-4th) who voted no.
Thanks to the efforts of Rep. Tom Price (R-GA), the Republican Study Committee Chairman, Americans can see how easy it is to change spending items in a massive spending bill. Handwritten notes on bills changing the amount of money to be spent, or the purposes for which it may be spent, is not change that brings about better government and a growing economy:
Last week, President Obama proposed new rules that would limit the pay of some companies that get a bailout from the taxpayers, capping salaries at $500,000 for executives of those firms.
While I generally resist government intervention in private business, I do not have a problem with this. If you are going to take money from the taxpayers, then you should be willing to abide by the rules and regulations that come with that money. The primary lesson here is that with government money comes government strings. If corporations do not want to be bound by the strings, they are free to refuse the government assistance that those strings are attached to.
As I said on AM 1370 on Friday, I hope this serves as a lesson to conservatives who support vouchers for private schools or government aid to “faith based” charities. I warned repeatedly over the last eight years that Christian charities and Christian schools that take government money are in danger of being forced to choose between government funds and their Scriptural standards. In fact, Yahoo News reports that there were questions about whether President Bush’s plan was constitutional “if groups receiving tax dollars sought to hire on the basis of religion.”
(Read more after the leap)
A British economic analyst and writer has made dire predictions for the global economy if the “Buy American” provision that was heavily backed by Rep. Pete Visclosky (D-IN 1) stays in the stimulus bill and is signed into law by President Obama. Comparing the provision to the “protectionism” of the 1930s (more specifically the Smoot-Hawley Tariff of the 1930s, which raised tariffs on over 20,000 different products) Financial Times writer Willem Buiter declared “if the Buy American provisions of the Economic Stimulus Package were to become law, this would amount to an economic declaration of war on the rest of the world.”
What one of Indiana’s own Congressmen has failed to learn from history and economics is nevertheless being picked up on by economists both here at home and abroad. Engaging in populist economic protectionism is risky when times are good and catastrophic when times are bad, as they are now. Even though in percentage terms the American economy, and thus most if not all of the global economy, is still stronger than it was during the Great Depression or even some of the bleak economic times of the 1970s and the start of the 1980s, it certainly will not be able to survive the shock of a massive limitation on trade policy.
There were many factors that contributed to the implosion of the housing market and the financial markets that relied so heavily on the easy lending and loose monetary policies that made the housing market expand like a California wildfire. But the single impact of suddenly clamping down on the global market and attempting to halt trade by limiting government purchasing contracts to only those products made here at home will be perhaps the single most important factor in taking us into a full blown depression.
It is true that the “Buy American” provision does not raise tariffs on any imports and that it is confined to only government spending as part of contracts provided for in the $825 billion stimulus bill-spending that I believe is not the best way to stimulate the economy-but when that government spending accounts for a significant portion of a nation’s GDP (the newly added debt would push the total amount of government debt obligations to 95% of GDP by 2010), it has reverberations throughout the non-government sectors of the trade markets.
As Mr. Buiter said in concluding his article “Yes we can. I hope we don’t.” America does not need to travel the road to serfdom to reach economic prosperity. Good intentions will not change the fact that the current path our government is on will have deeply unfortunate, and frustratingly avoidable, consequences.
Congressman Pete Visclosky (D) is not letting a good opportunity go to waste. According to ConservativeHQ, Visclosky was responsible for slipping a clause into the recently passed $825 billion stimulus bill requiring federal building projects to use American made steel. This sounds good until you realize it is a protectionist policy that could generate retaliation from other steel-manufacturing countries. Yes, we all want the government to “buy American” as much as is possible (the underlying arguments behind the stimulus bill set aside), but mandating this risks sparking a minor trade war with serious implications for an economy already struggling to get back on its feet.
According to ConservativeHQ:
The Buy American provision may have a dire impact on U.S. exports, as well as strain U.S. relations with foreign nations. Additionally, using only American steel to supply materials for stimulus-created public works projects will cause constructions costs to soar, limiting the amount of projects the stimulus may fund, and further reducing the cost/benefit ratio for these projects funded by taxpayer money.
The article also points out that Visclosky has received more than $40,000 from steel and iron related PACs during his most recent re-election campaign.
Related reading today includes Rush Limbaugh’s WSJ op-ed on a different kind of stimulus proposal and Sen. Jim DeMint’s op-ed on job creation.
An unrelated aside is Karl Rove’s excellent article on the new shape of the West Wing’s operating procedures and staffing make-up. Good reading for wonkish types.
By: Brian Sikma
President Obama made it a point to reach out to House Republicans and include them in his negotiations on the stimulus package. Somewhere, though, the message didn’t carry through to the Democratic House leadership and the majority party proceeded to develop and pass a stimulus bill that had zero bipartisan support. President Obama’s wish for bipartisanship did come true last night as the House passed the massive $825 billion bailout, however, because even though the bill sustained only partisan support it drew bipartisan opposition.
Not one Republican voted for this massive restructering of spending priorities couched as stimulus. Eleven Democrats did join Republicans-and I believe the American people-in opposing a bill increases federal spending dramtically but does not contain any policies that allow economists to estimate with any certainty how many jobs will be created.
For Indiana’s Congressional delegation the breakdown in voting showed only one Democrat, Rep. Brad Ellsworth, voting against the bailout. Rep. Donnelly and Rep. Hill (both self-professed Blue Dog fiscal conservatives) voted for the bailout. Incidentally the measure was passed under the suspension of PAYGO rules so apparently having spending constraint does not apply to extremely large spending proposals.
Appearing after the vote last night Congressman Mike Pence had this interesting exchange with CNN’s Lou Dobbs:
When word first surfaced that the $87 billion for Medicaid assistance to the states in the latest bailout proposal would apply to family planning initiatives, with Speaker Pelosi defending the measure as being one that will “reduce costs”, I mentioned to someone that I thought that sounded very Malthusian. Focusing on attempts to hold down the population during an economic downturn is a very shortsighted thing to do.
Before I had the chance to fully opine about this, the Wall Street Journal unveiled an excellent op-ed on the matter entitled “Speaker Nancy Malthus“. Here is an excerpt:
Ms. Pelosi’s remarks ignore the importance of human capital, which is the ultimate resource. Fewer babies would move the U.S. in the demographic direction of Europe and Asia. On the Continent, birth rates already are effectively zero, and economists are predicting labor shortages in the years ahead. In Japan, where the population is aging very fast, workers are now encouraged to go home early to procreate. Japan is projected to lose 21% of its population by 2050.
In addition to the overall problem posed by shrinking populations, we should remember that the Social Security system is on an unsustainable path partly because of mismanagment and partly because of a decreasing number of workers still working for every one retiree collecting Social Security benefits. Since the inception of Social Security we have seen a trend towards a smaller ratio of workers to beneficiaries and unless we act now to reform the system, this shrinking gap will combine with the hard fiscal demands of the system and one day cause Social Security to collapse.
Congressman Mike Pence delivers a special order speech from the floor of the U.S. House of Representatives about the right to life yesterday.
Congressman Dan Burton was on the Fox Business Network on 1/20 to discuss the Bailout.
Congressman Mike Pence comments for the record about the use of the additional TARP funds from the House Floor:
By: Brian Sikma
When the economy started to slide towards recession, the reaction of the federal government was bold, decisive, and misguided. When investment banks began teetering on the brink of viability the federal government stepped in, first serving as a sort of “organizer” for bank mergers, then dictating the terms of the buyouts, and then simply becoming part owners in some of the nation’s largest financial institutions. As markets fell through a sort of yo-yo motion of two steps back, one step forward, it was only a matter of time before other industries felt the squeeze of a contracting economy.
The next benefactors of informal nationalization were General Motors and Chrysler Corporation, two of the nation’s Big Three automakers that found themselves in dire financial straights. Since Congress, perhaps in a rare bout of sanity, declined to give the executive branch the tools it needed to bolster automakers who were finally paying the price of extravagant union compensation contracts (among other things), the President and Treasury Secretary simply took some of the money they already had and handed it to the two auto manufacturers. Merry Christmas.
With the precedent for receiving federal money now strongly biased in favor of those who can successfully claim they are “too big to fail”, we will probably continue to see more industries make their way to Washington to plead for a government dole. Already it appears that the commercial real estate industry will be in line soon pleading for government support as more and more retailers close down and banks become wary of putting their money in commercial real estate investments.
Although the examples of private industry surrendering to quasi-government ownership, or at least to increased government interference, are disturbing, the recent news that states are now looking to the federal government for help in overcoming budget deficits is downright alarming. The free market has been an important institution in American self-government and its centrality should not be underestimated, but when states seek to obtain handouts from the federal government another important feature of our self-government is assaulted: the concept of federalism. Federal encroachment on either the free market or federalism would be bad enough, but when one follows right after the other in such quick succession a cry of alarm should be raised.
(Read more below the fold)
I’m sure it all makes sense to him in his own mind, really.
Baron Hill opposed bailing out the financial industry. He voted for bailing out the automobile industry. His reasoning? His statement reads: “Our economy simply could not withstand the collapse of the American auto industry. One in 10 American jobs is linked to the domestic auto industry.”
The cynic in me wonders whether our economy could withstand the collapse of the American financial industry (or whether it will withstand it, since it all but has). How many American jobs are linked to the financial industry? Probably more than one in ten when you figure in businesses that are dependent on short-term credit, or consumers at stores, or homeowners, or pretty much any other area of the economy.
Anyway, Mitchell Blatt, over at the Indiana Daily Student, didn’t take long to dig down to the heart of the matter:
(Read more after the leap)
*Update* – I was looking at the wrong Govtrack vote totals. Congressman Steve Buyer and Congressman Baron Hill voted in favor of the bailout. Totals have been updated below. Here are the votes from the Roll Call votes from the House Clerk.
The House passed the Auto Bailout bill 237-170. So how did Indiana’s Congressmen vote? 7-2 in favor of the bailout.
Indiana
Aye IN-1 Visclosky, Peter [D]
Aye IN-2 Donnelly, Joe [D]
Aye IN-3 Souder, Mark [R
Aye IN-4 Buyer, Stephen [R]
Nay IN-5 Burton, Dan [R]
Nay IN-6 Pence, Mike [R]
Aye IN-7 Carson, André [D]
Aye IN-8 Ellsworth, Brad [D]
Aye IN-9 Hill, Baron [D]
Congressman Souder and Congressman Buyer joined Democrats in support of the bailout.
Not that I’ve been a fan of any of these bailouts, but Steve Dalton of Porter County Politics raised a good exit question on Twitter: “Is anyone else wondering why it’s OK to bailout auto makers but we clapped triumphantly when home builders went bust last year?”
