Rather than rescuing the economy, the stimulus bill will worsen it, says Rep. Paul Ryan of Wisconsin, a rising star in the GOP.
Calling the bill a “bloated porkfest,” Ryan tells Newsmax that it will “raise the deficit, it will raise borrowing costs, it will lead to raising interest rates, which are economically self-defeating.”
The ranking Republican member of the Budget Committee, Ryan turned down colleagues’ requests that he run for House minority leader. Before being elected to the House in 1998, he was an economic analyst and consultant.
Ryan points out that spending stimuluses were tried in Japan in the 1990s and in America in the 1930s, but they never have worked.
“All they ended up doing was cranking up the national debt, raising the borrowing costs, and continuing to stagnate the economy, and they perpetuated high unemployment,” Ryan says.
Even if such plans worked, they would have to spend money immediately to be successful, he says.
“A committed Keynesian would say spend the money right now, in the moment of recession,” Ryan says, referring to the ideas of British economist John Maynard Keynes. “But 7 percent of the money gets spent this year and 31 percent next year. The majority of the money doesn’t even get spent for two or three years. So the plan doesn’t even meet the Good Keynesian economics test.”
In contrast, lowering taxes has an immediate effect on the economy and gives people the correct incentives. He pointed to successful efforts to stimulate the economy by lowering taxes under John F. Kennedy and Ronald Reagan. Yet the stimulus bill — costing $838 billion in the Senate version — will require raising taxes in two years or less, Ryan says.
“If an investor, an entrepreneur, or a small business person is looking at higher taxes, they’re not going to have much of an incentive to invest and create jobs,” Ryan says. “If they have lower taxes on risk-taking, they’re going to take more risks. If they have lower taxes on expanding their businesses, then they’re going to expand their businesses. If they have lower taxes on putting money into their business and hiring more people, they’re going to do that. If they have higher taxes, which this bill will create, then they won’t.”
Because the government will have to borrow to spend, “You are taking money out of the private sector, which in and of itself is bad for growth,” Ryan observes. “You are sending it to Washington, swishing it around the bureaucracy, and then spending it slowly in ways that are much less productive than the ways the free market would allocate it.”
Even if one considers spending on infrastructure as good for the economy, the money will be doled out over a number of years and amounts to only 5 percent of the cost of the bill, Ryan says.
“Most of it will occur after the recession is past,” Ryan says.
Having met with President Obama with other members of Congress, Ryan believes that the Democrats are mostly “focused on ideology, doctrine, and rewarding spending constituencies by satisfying all this pent-up spending demand that they’ve had for many years. This bill is more about the spending on pet projects that they’ve wanted to spend on for some time than on actually growing the economy.”
Ryan thinks the Democrats are aware of that, and that is why they want Republicans to back the bill, so Republicans can “share in the blame if it’s not working. But we’re not going to fall for that.”
In the end, Ryan says, “I think the bill will make matters worse. What’s shameful about this situation is our economy is in real trouble. And I do believe a fiscal response is necessary. But we should do a fiscal response that works, not one that has proven to fail every time it’s been tried.”
Will the stimulus boomerang on Democrats? Not necessarily. The economy could recover in spite of the stimulus, in part because of efforts by the Federal Reserve to apply monetary stimulus like lowering interest rates, Ryan notes. In that case, the Democrats will claim credit, he says.
Meanwhile, the issue has energized Republicans.
“We all stuck together unanimously in rejecting this wish list of special interest groups,” Ryan says.
Ronald Kessler is chief Washington correspondent of Newsmax.com. View his previous reports and get his dispatches sent to you free via
e-mail. Go here now.
© 2016 Newsmax. All rights reserved.