Here Lies America
The Republican party’s condemnation of Obama’s recent Congress-endorsed $800bn stimulus plan reeks of cowardice and partisanship after a decade of mismanagement, conceit and hypocrisy.
(Update: Now US$1 trillion.)
BOBBY JINDAL, the new Republican kid-on-the-block, has blatantly rejected Obama’s plan in his statement on behalf of the Republican party. A fresh face in America’s dynamic political scene, the 37-year-old Louisiana Governor is the first non-white Louisiana governer, and is the son of Indian immigrants. He is widely tipped to be one of the next Republican presidential candidates for 2012, and his high-profile stint as the Condemner of the Obama stimulus plan is a political manoeuvre to boost his profile – and it can hardly get more blatant.
It all boils down to the crucial distinction between the Democrats and Republicans: big government, or small government? Jindal, a strong conservative on numerous issues ranging from abortion to energy, declared that “the strength of America is not found in our government. It is found in the compassionate hearts and enterprising spirit of our citizens.” He believes that the American people is relying too much on govt spending and taxes. He leads by action, too, being the very first governor to announce his rejection of $90 million worth of Louisiana’s unemployment benefits, on the reasoning taht this would lead to a business tax increase. He has refused expanding state unemployment insurance coverage, and has made history doing so: Jindal is now the first state executive to officially refuse any part of the federal government’s payout to states.
He condemns the general spirit of the stimulus package as “irresponsible” – to dump such a massive sum of taxpayer’s dollars to revive the dwindling economy and ease the sharp credit contractions is unacceptable. The allegation? Not sustainable. Too much. The official Republican stance is that the stimulus package is “no way to strengthen our economy, create jobs, or build a prosperous future for our children”. He believes that “the way to strengthen our country is to restrain spending in Washington, to empower individuals and small businesses to grow our economy and create jobs”. As for his own state’s federal funding, he believes that “the federal money in this bill will run out in less than three years for this benefit and our businesses would then be stuck paying the bill.”
Republican trash: polemics and posturing
Perhaps, then, in the midst of populist anti-stimulus fanfare, it calls for a more thorough examination of the illustrious history of Republican politics. The most revolting part of the story is that Republican governors condemn the stimulus, but take the money anyway. It was wise to select Jindal to deliver the official party stance, but the simple truth is that few Republicans are as convicted as he is in depriving their voters of state support. This is good as it is bad – it means that for the handful of Republican governors who prefer cutting back on social spending and minimising state interference, the citizens in those states bestowed upon themselves the rare privilege of suffering in silence. But it also means that for the majority of Republicans governors and senators who accept federal handouts for the individual state’s social spending, a greater deal of citizens benefit from this money derived from a draconian, socialist agenda aimed at subverting the citizens and forcing them to ingest socialist medicine.
In his speech, Jindal said that Republicans have put forward plans to create jobs by (firstly) lowering income-tax rates, cutting taxes for small businesses, strengthening incentives for businesses to invest in new equipment and hire new workers, and (secondly) stabilizing home values by creating a new tax credit for home-buyers. And here’s what the governor confidently added: “these plans would cost less and create more jobs” than Obama’s proposals.
Much more than a symbol of desperation, it is the lack of two ideas central to today’s disaster: how the current crisis was caused, and possible solutions – there is little wonder why a lack of the former will make the Republicans a million miles from the latter. The argument that lowering personal income tax rates would boost aggregate demand is an idea found in conventional economics; since this provides more real income to American workers, there is incentive to increase productivity and boost efficiency in firms. This simplistic notion is fallacious at every single level – there is no proof or even co-relation present – recession or otherwise – how a tax cut would either boost productivity or increase spending in the economy. This microscopic increase in income would immediately be channelled to savings, a notion which all rational consumers will be inclined to take. The multiplier effect does not work here. For households with employed workers, there is far more incentive to save than spend, given the instability in asset prices.
The Big Lie
There is a far darker side to this saga, however, which few Republicans will ever want to admit, because it seems like an outrage. In a bid – unsurprising as it may be – to cut social spending (and therefore reduce government interference in affairs of the state), the Bush administration launched a two-part episode of tax cuts – one in 2001, and the other, in 2003. Now here’s the thing: the Bush tax cuts cost the Federal budget 1.6 trillion dollars. Now “tax cuts” are not not nearly as powerful as saying “Economic Growth and Tax Relief Reconciliation Act of 2001“. The US Internal Revenue Code was radically altered, streamlining and drastically reducing income tax rates, estate and gift tax exclusions, and qualified and retirement plan rules. (If you forgot.)
Now that was all fine and dandy – till America’s magic-wealth mechanism lasted till 2007. Then the period of irresponsible lending and borrowing came quite abruptly to an end. Now, Republicans complain of a $1 trillion stimulus plan. They say that buying toxic assets isn’t the way out of the solution. They say it isn’t the right way to lead them out of America’s problem. The only thing: they were the problem.
A tattered legacy
The twin strategies of cutting corporate taxes and providing more incentives for business to invest in factors of production are practically lifted from Obama’s multi-faceted plan. The Republican agenda is nothing but a useless mix of ambiguous and ill-defined policies, unable to mask the partisan thrust. Jindal has had to resort to statements like: “Washington must lead. But the way to lead is not to raise taxes and not to put more money and power in the hands of Washington politicians. The way to lead is by empowering you — the American people.”
In more ways than one, then, Jindal is a shining beacon of Republican idiocy, folly and hard-headenesses. Far from offering “better ideas for a path forward”, the Bush administration skilfully turned an unprecedented budget surplus when he took office to a hole in the national coffers so immense, it is unrivalled in magnitude. So much for Republican-style “fiscal discipline”. The GOP’s insistence to stick to their agenda in exceptional times like these more clearly demonstrate the failed cause of “limited government”.
The current crisis was caused because of a culture of shameless risk dominating America’s investment banks. Banks lent and investors borrowed relentlessly. Not just in America – in every single major economy in the world, banks, insurers and investors alike, people bought debt – beautifully wrapped and repackaged with new labels.Policies were changed – the importance of good credit history and carefully-monitored financial tools were dismissed.
But the Republicans have not issued any statement or piloted any policy even remotely related to better financial responsibility and exposure, nor do they plan to do so anytime in the near future. That much Jindal can attest to “personal responsibility”. For now, I suggest he sticks to his Economics textbook.
