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The Student News Site of Stony Brook University

The Statesman

The Student News Site of Stony Brook University

The Statesman


    The $700 Billion Bill

    The recent economic unsteadiness has sparked a public outcry for government intervention. Main Street’s desire for someone “in charge” to fix the economy has forced the government to try and fill a large order. Congress and the Federal Reserve have been charged with saving the failing banking and insurance institutions, while preserving the housing market, keeping sub-prime mortgage holders in their homes all while insuring unemployment and inflation remains low.

    I’ve written before about how politicians who don’t understand how monetary policy inevitably create policy that contributes to the dreaded business cycle, where markets boom and bust, leaving uncertain volatility on Wall Street. We’ve demanded renewed government oversight over the housing market to keep lenders and borrows in line, but have forgotten how the government and the Federal Reserve’s — technically a private entity — policy of keeping interests rates low and credit freely available caused the boom in the first place, and hence the inevitable bust.

    Congress, the senate and the president, who are largely ignorant of these important details, are floundering in their response. Several days ago, the House passed a $700 billion “bailout bill” by a margin of 263-171.

    Congress is confused because they can only imagine a scenario in which government inaction will result in economic catastrophe and so revert to the only job that they know how to do: spend lots of taxpayer dollars. To congress, government action means government spending. Congressmen and women know that if they tell voters to tighten their belts and adopt more intelligent monetary policy that frees up the money system to avoid the business cycle, they might not get re-elected.

    Instead, the government will borrow and print money to buy up shares in these insolvent businesses. This only serves to increase the already staggering national debt and devalue the dollar by causing inflation. Simply put, American taxpayers will not be able to handle the $700 billion check that Congress is asking us to pick up.

    Not to mention, some of the items on that bill, I don’t even remember Congress ordering.

    The behemoth, 451-page bailout bill is stuffed full of unrelated pork. Its obvious that a lot of our legislators decided to take advantage of the bill that was going to be hurried through the voting process, hoping that it would be passed before taxpayers realized what they were being asked to pay for. Here is a tiny sampling of the earmarks in the bill:

    * Exemption from excise tax for certain wooden arrows designed for use by children * Seven-year cost recovery period for motorsports racing track facility * Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands * Income averaging for amounts received in connection with the Exxon Valdez litigation * Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property * Transportation fringe benefits to bicycle commuters

    Besides for the millions of dollars this pork will cost outright, it will take a financial toll on businesses in the years to come in the amount of billions per year. In addition, the resulting federal intrusions from everything to health care to biofuel will have far flung economic impacts.

    So, in acting with the sole purpose of being able to pat themselves on the back for doing something, Congress and the president, who signed the bill, has sentenced the taxpayers for many hard years to come.

    The tragedy is, of course, that we all wish the government could do something about the economic crisis. We wish the government could just snap its fingers and remove the mess that we have been slowly sinking into over the last decade. However, this is a mess that government created for us in the first place and it’s a mess that politicians don’t understand and couldn’t possibly get us out of using their old tricks. You can’t tell a politician that we can’t spend our way out of this one, and a politician won’t tell a voter that only slow acting policy changes will fix the underlying problems.

    Its easy to charge Congress with the task of “doing something to save the economy, corporations and homeowners.” It’s quite another thing for them to accomplish that task, especially when they don’t have the right moves in their playbook.

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