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Thursday, February 19, 2009

Rendell should reject the federal “stimulus” money

I know it will never happen -- just like asking him to pass on a greasy cheese steak sub -- but Gov. Rendell should reject the federal "spendulus" money. He should view it as the stolen cash it is -- stolen from our children and our children’s children. But, alas, he won’t pass up the "free" money. He’ll spend it all, and then some.

Of course, there’s no such thing as free money. But too few people are asking who is going to pay for it. "David Cameron" did. That’s his nom de plume because he works a little too close to the political mischief in Washington and his employer would have his head -- and his job -- if he publicly spoke out against the president’s spendulus plan. Nevertheless, the questions have been asked, and the Obama/Pelosi/Reid team isn’t answering.

Governors in states like South Carolina, Texas, Louisiana and Alaska are giving their own answers. They know that even if they get this influx of cash, the strings attached from Washington will be a "mile long."

S.C. Gov. Mark Sanford is thinking about the long-term consequences of building his state budget on one-time infusions of federal money. He said, "You get this huge slug of money. It funds programs for a couple of years, and then what? You get it started, you get a constituency established, and then we’re supposed to yank the rug out from under people when the federal money runs out?"

But that, I believe, is the intended purpose of this spendulus plan. Cameron agrees that this part of the unspoken plan will increase government spending for decades to come.

Here’s how it will work in Pennsylvania:

First, the state is projecting a deficit of $2.3 billion, bringing projected state revenues down to $25.9 billion for FY 2008-09. But with the infusion of $3.5 billion of "free" federal money, Rendell plans to both fill the current budget-deficit gap and spend even more money next year -- to the tune of nearly $29 billion, an increase of nearly 12 percent during an economic downturn.

But what happens when that one-time infusion of $3.5 billion is spent? You got it, Rendell declares another revenue crisis and tells all you working stiffs out there that we need to raise your taxes, otherwise we’ll be destroying all those jobs government just "created."

This is how you turn temporary "stimulus" spending into permanent and massive government spending. The result, unfortunately, will be significantly higher taxes, significantly deeper deficits, and much slower economic growth. But at least we might be able to move to South Carolina.

Was that the kind of stimulus you were expecting?

Matthew J. Brouillette is president and chief executive officer of the Commonwealth Foundation. This blog originally appeared on the Capital Domes at the Central Pennsylvania Business Journal.


Mike said...

Stimulus equals more spending

Anonymous said...

Yes it is more spending, yes the nation is already in deep debt, yes there are political strings.

Is it not prudent, to some extent to slow a crash or at least lend a crutch temporarily until the economy can get itself going again? Your scare tactic of future predictions is very Bushesque and doesn't seem to have any historical context when looking back at the 1930's. If the economy is buoyed enough until the economy takes over, spending will definitely come down due to budgetary constraints - however this time, right now, is extraordinary and requires action of some sort. (You mention Obama, but fail to mention that Bush had much the same plan, why?) The States would crush under current unemployment conditions - and the long term effects of those unemployed. A slow, supported, transition for Americans displaced in this economic shift seems correct.

I admire your yearning for less government spending, but I don't think now is the time, perhaps 5, 6, 7 or 8 years ago, but now? Really? Have you been unemployed during an economic downturn and tried to find employment - or even equivalent pay employment?

How do you propose the States pay for the bills of the unemployed and the uninsured and the reduction of taxes at their current levels due to less income tax?

The proper time to reduce government spending and reduce taxes will be when we are definitively out of a recession. Recessions are expensive, whether they are treated at the source (businesses and employment) or the symptoms (unemployed, homeless).

On a corporate level, taxes should be lowered for economic reinvestment, but the situation current situation requires fast fiscal injection, followed by a plan for tightening. We wouldn't be so hamstrung or concerned about this fiscal injection if the US wasn't already up to its ears in debt.