What began early last year as a "credit crunch" and an "economic downturn" is now being characterized as a "long, severe recession." Once upon a time, such a crisis was known as a "depression" before Americans became squeamish about such stark language.
Should the stimulus bill be amended to place more emphasis on spending, or should it instead be amended to place more emphasis on tax cuts? That question defines much of the debate on the bill that passed the House without any yea votes from Republicans and is now before the Senate.
Common sense tells us that government cannot resuscitate the American economy and restore it to good health by spending more money and going further into debt. The government cannot spend money for its "bailout" and "stimulus" programs, after all, without siphoning the money out of the economy in the first place.
The House of Representatives yesterday passed the $819 billion American Recovery and Reinvestment Act, delivering President Obama his first major political victory and yet another setback to American taxpayers present and future. House Republicans, in a surprising display of partisan unity and commitment to principle, voted unanimously against the bill. Congressman John Boehner (R-Ohio) warned that such spending policies would bury the next generation under a "mountain of debt," while Congressman Dan Burton (R-Ind.) correctly pointed out that "free enterprise, less government and lower taxes is the way to solve this problem."
Congress is considering granting the Federal Reserve Bank dramatic new powers by this spring, according to the Washington Post for January 26. According to the Post, under draft legislation written by Financial Services Committee Chairman Barney Frank (D-Mass.), the Fed would “likely be given the power to gather information about the inner workings of banks, investment firms, insurance companies, hedge funds and any other entity big enough or so intertwined with other companies that it creates the risk of a systemic collapse."
A recent analysis by Goldman Sachs, one of the Wall Street investment banks which benefitted from the recent federal government bailout, concludes that the Federal Funds rate (the interest rate charged by banks on loans made to other banks) is too high, despite the fact that the rate was reduced to a record low target range of zero to 0.25 percent by the Federal Reserve on December 16 of last year.
Congress is now considering the American Recovery and Reinvestment Act of 2009, the latest barrel of pork to be tossed into the recessionary pit. This time around, the misnamed stimulus will, in the self-congratulatory language of the House's summative press release, "create and save 3 to 4 million jobs, jumpstart our economy, and begin the process of transforming it for the 21st century with $275 billion in economic recovery tax cuts and $550 billion in thoughtful and carefully targeted priority investments with unprecedented accountability measures built in." [Emphasis in original.]
Round two of the economic crime of the century has begun. On January 12, Lawrence Summers, President Obama's designee to become director of his National Economic Council, sent a letter to congressional majority and minority leaders seeking the second half of the $750 billion approved by Congress last October.
ITEM: Reuters reported on December 30: "The Bush administration on Monday expanded its bailout of the U.S. auto industry, saying it was buying $5 billion in equity in auto and mortgage finance company GMAC and increasing a loan to General Motors by $1 billion. The action was the latest in a lengthy series of emergency government moves aimed at easing the worst credit crisis since the 1930s and limiting the severity of a year-long recession."
In an unwonted episode of lucidity, the New York Times proclaimed in a recent headlilne that the "Rescue of Banks Hints at Nationalization." Of course, the Times got most of it wrong — nothing in the recent spate of bailouts bears the remotest resemblance to President Andrew Jackson's shutting down of the Second Bank of the United States, as banking analyst, Gerard Cassidy, quoted in the Times piece, claims.