Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, is so confident of a Barack Obama victory on Nov. 4 that he already is setting the legislative table for drastic cuts in defense spending, higher taxes, and bigger government, according to a new report from the Heritage Foundation.
Frank has declared that he wants a 25 percent cut in military spending, a tax hike on the wealthy, help for state healthcare expenses, food stamps, and extended unemployment benefits, according to the prestigious Washington-based think tank.
The report comes on the heels of House Speaker Nancy Pelosi’s recent declaration that Democratic leaders “have been working closely with the Obama campaign” on a new economic plan.
Meanwhile, confident Obama surrogates are discussing the credit crisis with Senate Banking Committee staff, reports the Wall Street Journal.
Special Session of Congress
The shadow Obama administration is helping to engineer a special session, slated for right after the election, to push an economic package featuring an expansion of food stamps, an unemployment-benefit extension, aid to states for healthcare costs, and funding for roads and bridges.
Also on the post-election shopping list: injecting federal dollars into the student-loan and auto-loan markets, and allowing federal purchases of short-term debt from state and local governments facing difficulty meeting payroll.
Senate Majority Leader Harry, Pelosi and Frank already have banked not only on an Obama victory but also a quick consolidation of their congressional majorities, which they hope to feature a filibuster-proof Senate.
As a recent Wall Street Journal report advised that, under such a scenario, “Liberals would dominate the entire government in a way they haven’t since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s.”
But despite the joy and rapt anticipation in the Democratic camp, the Heritage Foundation analysis laments that a plan such as Frank’s “hardly represents economic stimulus.”
“This misguided proposal is based on two incorrect assumptions,” warn the authors of the report. “First, that military funding is excessive, and second, that tax and spending hikes will stimulate the economy.”
Included in the Heritage Foundation’s conclusions: In order to conclude that the military deserves an enormous cut in funding, one must assume the military is over-funded. This is not the case. In fact, current spending levels are below historical averages despite the wars in Iraq and Afghanistan. Even after the Sept. 11 attacks, national defense spending has risen only 1 percentage point, from 3 percent to 4 percent of GDP. When compared with spending during the Cold War in the 1980s of 6.2 percent and the Vietnam War of 9.5 percent, the levels now are hardly excessive. Frank’s plans include extending unemployment insurance and increasing funding for infrastructure projects, among others. Although such spending may be well-intentioned, infrastructure spending shifts resources from one part of the economy to another, creating little new employment. Other spending, such as increases in unemployment insurance, could exacerbate the situation by allowing unemployed workers to stay out of work longer to collect benefits and encouraging employers to wait longer to rehire laid-off workers.
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