A glimpse into the mind of the fiscal stimulator


“Senator Jim Bunning’s name is mud these days in Washington,” reports The Irish Times. “Twelve times [last week]... the Senate... attempted to pass a $10 billion emergency, one-month extension of unemployment benefits, healthcare insurance for the unemployed, Medicare funding for the elderly, satellite television for rural America and highway projects. Twelve times, the senator from Kentucky has invoked a unanimity requirement for emergency Bills to block passage.”

While the Washington Post suggests that Senator Bunning is insane, Democrats accuse Bunning of being a typical, obstructive Republican and others speculate that it is all driven by personal animus, the senator himself argues that he is, in his small way, trying to limit America’s ballooning budget deficit. “We cannot keep adding to the debt,” he said. “It’s over $14 trillion and going up fast.” What is more, CNN reports that Bunning “had offered to release his hold on the bill if the Democrat-controlled Senate agreed to pay for the extension using, for example, unspent money from the $787 billion economic stimulus law or closing a tax hoophole (sic.).” Hardly unreasonable, one might think.

The story becomes even more interesting if one looks into the details of the $10 billion bill. It is not all about Medicare and unemployment benefit. Even the Irish Times includes among the list of moral issues “satellite television for rural America” – hardly a life-and-death matter and one that might better be funded by providers and views. BBC Online provides a some more examples of the goodies that were to be paid for by an additional $10 billion of public borrowing: a major bridge connecting Washington DC to the state where many of the senators live; a roundabout in the Virgin Islands; and a new entrance for a national park in California. Does anybody smell riders, here?

What this bill highlights is the mentality of politicians who see it as their job to spend other people’s money. Blind to Bastiat’s dictum that in economics what matters is that which is not seen as much as that which is seen, the senators believe that by building roundabouts in the colonies and bridges linking their homes to their places of work, and by taking the opportunity of the worst recession in a lifetime to spruce up the entrance to Sequoia National Park, they will revitalise the US economy. This is unlikely. Government spending is demonstrably less efficient than private spending (indeed, some argue that it destroys more wealth than it creates). What is more, the very last thing that America needs is a big pile more pork to shove in senatorial barrels.

Eventually the senator capitulated, of course. But even the means of his capitulation highlighted the absurdity of interventionist politics. By proposing an amendment to the bill, he guaranteed that the bill itself would go to a vote, ending his one-man filibuster. And what was that amendment? That the $10 billion package of temporary extensions be offset with the end of a lucrative tax credit for paper companies on a wood by-product. His amendment fell, receiving just 43 votes. So let us be clear: what Senator Bunning’s defeat achieved was not medical aid for the elderly, or unemployment for the needy. His defeat enabled the Government to borrow $10 billion dollars to pay paper manufacturers for producing something they can’t help but make anyway.