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Archive for October 8th, 2009

The Senate Finance Committee has proposed $829 billion of new spending over the next ten years, yet this giant expansion in the burden of government somehow is supposed to be good news since the politicians are matching that huge pile of new spending with big tax increases and promised savings from Medicare. In other words, the crowd in Washington wants us to believe they are being frugal because the cumulative tax hikes and Medicare savings, at least on paper, are $81 billion more than the $829 billion of handouts and subsidies in the proposal.

But why are we supposed to think that it is responsible to have more spending and more taxes? Frugality and fiscal responsibility should be defined by limiting the size of government, not by whether the amount of money the politicians take out of our pockets is larger than the amount of money they distribute to their political supporters and campaign contributors. I address the fiscal aspects of the health care debate in this appearance on Fox Business News.

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Writing in the Wall Street Journal, David Malpass explains why the Fed’s weak-dollar policy (supported by both Bush and Obama) is a recipe for economic decline:

Some weak-dollar advocates believe that American workers will eventually get cheap enough in foreign-currency terms to win manufacturing jobs back. In practice, however, capital outflows overwhelm the trade flows, causing more job losses than cheap real wages create. This was the lesson of the British malaise, the Carter malaise, the Mexican malaise of the 1990s, Yeltsin’s Russian malaise through 1999 and the rest. No countries have devalued their way into prosperity, while many—Hong Kong, China, Australia today—have used stable money to invite capital and jobs. …If stocks double but the dollar loses half its value, who beyond Wall Street are the winners and losers? There’s been a clear demonstration this decade. The S&P nearly doubled from 2003 through 2007. Those who borrowed to buy won big-time. Rich people got richer, seeing their equity bottom line double. At the same time, the dollar’s value was cut nearly in half versus the euro and other stable measures. Capital fled, undercutting job growth. Rent, gasoline and food prices rose more than wages. …The solution is a strong U.S. jobs and wealth program. It has to include stable money, a flatter, more competitive tax structure, spending restraint, and common-sense bank regulation so small business lending can restart. …Instead, Washington’s current economic program pushes capital away by weakening the dollar, threatening higher tax rates, borrowing short (the Fed’s near trillion-dollar overnight debt, Treasury’s mounds of bill and note issuance) to lend long (mortgages, student loans, entitlements), doubling down on government subsidies, and rechanneling bank loans to governments and big businesses instead of the small business job-growth engine.

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