national debt

Feb 17, 2009

The Error In ARRA

I emailed my U.S. Representative, Kurt Schrader, regarding the American Recovery and Reinvestment Act (ARRA) to indicate my lack of confidence in the claims being made.

Rep. Schrader claimed in his email he suported this act "because the cost of inaction is far too great." He provides no proof of that. It seems that the serious of the economic crisis is justification, even if it causes inflation and more unemployment.

The reports are that this bill would bring 44,000 jobs to Oregon and in his email he states, "In Oregon alone, the unemployment rates are a staggering 9%." The challenge for him, which was in my email, is if that 9% unemployment is not reduced by 44,000 jobs that he either resign his office or remit his salary to the people of the U.S.

He claims the bill includes "targeted funding support for: education for the 21st century; clean, efficient, American energy; modernizing roads, bridges, transit and waterways, lowering healthcare costs; saving public sector jobs, creating new public sector jobs, and protecting vital services; transforming our economy with science and technology."

The percentages of the total money for those in the bill are small indeed. They certainly do not cover the losses to state revenues due to the economic downturn. The bill includes less than 10% for state fiscal relief to key services. Regarding modernizing roads, bridges, and other transit construction, less than 11% of the bill is infrastructure building.

The "clean efficient American energy" is mostly for the "Smart Grid," and weatherization. The rest comes in the form of tax cuts for renewable energy. All of this portion is less than 8% of the bill. There are real investments in energy production that reduces our dependence on foreign oil as President Obama promised. We increased energy production even more than roads or bridges.

In fact, the cost of government spending while decreasing taxes results in wild increases in inflation. By the end of the year, inflation will be in the double digit figures to go with double digit figures in unemployment.

He claims, "Indeed, economists testifying before my budget committee stated that our long term ability to deal with our debt burden would be much worse if we allow the nations economy to sink without any support."

Obviously, it depends on which Nobel prize winning economist you listen to.

Before this, in the campaign speeches of Candidate Obama, he claimed he would get that cost of the Federal government back down to 18.5% of the Gross Domestic Product (GDP) that was under Reagan. I would debate that figure and his pick of a model.

The better model would be under Speaker of the House, Newt Gingrich. The budget surpluses at the end of the 1990s were due to slowing the increases in spending to keep the pace more in keeping with the growth of the economy. Even 18.5% is too high, but it was 21% before the 111th Congress passed ARRA.

The $787 billion ARRA will cost us, our children and their children about $1.14 trillion. That is about $30,000 in new debt for each American household. Rep. Paul Ryan (R-WI) asked the Congressional Budget Office to estimate the cost of permanently extending the twenty most popular provisions in the bill. The cost? $3.27 trillion.

However, if they had to directly appeal to the voters for this, every bill would be subject to higher scrutiny. This ARRA would be no exception. The economy can only pay for so much government.

The Democratic Party has made this bill unacceptable and then claims the Republicans are being partisan. If you yet again mortgage our grandchildren's future on this roulette wheel with the excuse of stimulating the economy and fail, there should be a penalty.

Unfortunately, that will only come in the form of not being elected again, at best. This debt will stay with us. The inflation it causes will stay with us for some time as well. It will not come in the form of those who voted for this losing their jobs and homes.

Again, the people have turned to a two party system that is neither responsive nor representative. They develope policy based on partisan politics rather than having to respond with a referendum of issues to the voters. Make no mistake, the Republican Party is correct in not voting for this.

If you want to comment on ARRA, Write the Whitehouse Here.

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