The Senate passed its $1.1 trillion spending package Sunday, re-igniting fears inside and outside of Washington about the federal government's massive spending. Number-crunching critics warn that a health care overhaul, the escalation of troops to Afghanistan, the extension of the Troubled Assets Relief Program (TARP) and other costly spending measures are adding up astronomically. How worried should we be about government spending?
- Mired In Expensive Projects Nicole Gelinas, excerpting from her book in National Affairs magazine, cautions that over-spending puts the entire economy at stake in specific projects. "With trillions of taxpayer dollars tied up in bad financial institutions and spent on economic stimulus, the federal government will inevitably shortchange needed improvements to America's physical infrastructure, making it harder for private companies to grow. We also risk inflation and the desertion of the dollar just as Social Security and Medicare are laying painful claims on growth."
- Tax Cuts, Not Spending The New York Times's Greg Mankiw surveys a wide range of economic studies. "The results are striking. Successful stimulus relies almost entirely on cuts in business and income taxes. Failed stimulus relies mostly on increases in government spending," he writes. "These studies point toward tax policy as the best fiscal tool to combat recession, particularly tax changes that influence incentives to invest, like an investment tax credit. Sending out lump-sum rebates, as was done in spring 2008, makes less sense, as it provides little impetus for spending or production."
- Spending Must Be Decreased The Washington Times's J.T. Young sounds the alarm. "As is the case with all debts, this one came (and came and came) as a result of living beyond one's means. However, only a government in a recession - or a sailor on shore leave - could do so in such spectacular fashion and so short a time," Young writes. "Eventually the recession will end, the economy will recover, and the revenues will return. The question is whether federal spending will be equally accommodating. There are real reasons - both within the current budget numbers, and in upcoming events, to believe it will not."
- Can American Remain Competitive? The Dallas Morning News worries that debt will over-burden America in the global economy. "It's important to remember that a heavily indebted United States simply can't compete in a global economy by borrowing and spending its way out of this recession. Most of the emergency actions taken by the Bush and Obama administrations slowed the bleeding and bought time for the economy's vital signs to stabilize. Now the administration should put its muscle behind efforts to create a bipartisan commission forcing lawmakers to make difficult reductions in federal entitlement programs."
- Focus On Over-Regulation The Washington Post's Charles Lane finds three regulations that he insists cause more harm than good. He cites the heavily-regimented sugar and construction industries as well as the federal minimum wage, which he says should be reduced. "[S]tudy after study has shown that this supposed benefit to the poor prices low-skilled workers out of entry-level jobs. It was unwise to keep raising the cost of hiring them in a recession," he writes. "None of these measures alone, or even all three together, would eliminate unemployment. But they might significantly decrease it at a time when every job counts."