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Albert Einstein once said that insanity was “doing the same thing over and over again and expecting different results". Under this definition, most members of Congress could be classified as insane, especially when it comes to solving the financial crisis.
Recently, as I was rummaging through the contents of my backpack, searching desperately for any piece of literature that could cure the boredom of riding the Metro, I came across the July 19 issue of Politico. Flipping through news straight to the opinion section, I came across a piece written by fellow New Yorker Rep. Carolyn Maloney, who is the chairwoman of the Joint Economic Committee. Apparently, she is also a big spending aficionado and fits the bill when it comes to being insane.
In her article, Rep. Maloney calls for a long term plan to tackle the debt and a forward reaching plan to combat unemployment. She also includes a three point to- do list. Her first job is to extend unemployment benefits, which, she claims, is one of the most “cost effective” ways to combat high unemployment. The second task is to provide “temporary aid” to civil servants in the state and local governments in order to reduce layoffs and service cuts. The third and final order of business is to extend credit to small businesses.
First off, I would like to congratulate Rep. Maloney on being able to find three brilliant synonyms for “increasing spending” and “raising the debt.” Increasing unemployment benefits helps prolong unemployment. According to a study done by the Industrial and Labor Relations Review, roughly 33% of all unemployed individuals find employment immediately after their benefits run out and most find jobs within a couple of weeks. Paul Krugman notes that Europe, whose countries have generous unemployment benefits, also suffers from chronic high unemployment, a condition coined as ‘Eurosclerosis.’ The argument that the money given to unemployed workers goes straight back into the economy is a poor one. According to a study done by the Heritage Foundation, only a few cents go into the economy for every dollar put into the hands of the unemployed. Unemployment benefits will not solve the problem and will either increase debt by $47 billion or unnecessarily tax the middle class.
Providing temporary aid to local and state governments to avoid layoffs is like feeding cupcakes to a child to solve his cake addiction. Many state and local governments have bloated to irresponsible levels during the good times and are just unsustainable. Rewarding careless behavior by dumping more money into the system will only prolong the crisis, not solve it.
Extending credit to small business seems like a good idea, but on further inspection, it’s just more of the same. “Credit” translates simply into more debt, because the government makes loans to people or entities that can’t get them from banks. Basically, good small businesses and tax payers will be forced to provide capital to be made available to bad businesses considered to be too risky by banks. The overall wealth will be reduced because money was placed into the hands of less competent people.
It is astounding that Rep. Maloney would suggest that more spending is the key to economic recovery. Didn’t we just spend $789 billion, and according to the data that the Obama administration used, still have higher unemployment than what was projected without it? I’m not an economist, and far be it for me to do the work that Rep. Maloney is supposed to do, but let me offer some sensible solutions, a to- do list of sorts. Let’ start with cutting taxes for small business owners and slashing payroll taxes. Instead of pumping money into already bloated state and local governments, how about providing incentives to restructure? And how about those Bush tax cuts? I know that Bush is single- handedly responsible for all the evil in this world, but his tax cuts helped out a lot of middle class Americans, such as my own parents.
The cure to spending too much is not more spending, but less. It is my sincere hope that Rep. Maloney reads something from Henry Hazlitt instead of reading from Obama’s tele- prompter. If not, the insanity that is the Democratic Congress will continue.
Rep. Maloney's opinion piece
Article about the harm of job benefits
Data about the projected unemployment levels "with and without Recovery Act"