Saturday, October 09, 2010

Chapter 4 of Toomey's Road to Prosperity

Partial review of The Road to Prosperity: How to Grow Our Economy and Revive the American Dream, by Patrick J. Toomey and Nachama Soloveichik. NY: Wiley, 2009.

A few years ago I wrote a lengthy multi-part review of Rick Santorum’s book. I’d like to do something similar for Toomey’s Road to Prosperity. Each post will discuss one or more chapters of the book with a post at the end with a linked list of all the entries and some final thoughts.

The fourth chapter (77-97)is "Government Spending: The Stimulus That Will Not Stimulate."

The chapter starts off with a smack at Pres. Obama and the stimulus plan; Toomey says he understands Obama’s concern about the recession but thinks the stimulus was a mistake. This is followed by an explanation of Keynesian economics and how it related to the president’s economic actions. Toomey favors other economists, quoting Milton Friedman and invoking Claude Frederic Bastiat and Henry Hazlitt, both associated with libertarianism.

One statement in the chapter that particularly surprised is me “When consumers spend their own money, they only purchase what they want” (79). As a consumer spending my own money, they are a number of things I spend money on that I don’t necessarily want but am required for one reason or another to buy. Also, I think anyone who is or has been married knows that household money is often spending on something that one or the other partner does not necessarily want. As for government spending, Toomey says it is “driving my political whim” (79). He picks out a few specific items in the stimulus bill, such as high-speed rail investments and money for Filipino World War II veterans. He also notes (80):

Other programs, like increasing welfare and Medicaid funds and expanded unemployment insurance, reflect long-cherished Democratic dreams od dramatically expanding the welfare state.

On the next page Toomey takes aim at spending on alternative energy:
The reason we produce electricity from coal and natural gas and drive cars powered by gasoline is simple – these are the cheapest sources of energy and transportation available today. When we use the cheapest sources of energy and transportation available, we maximize the resources left over for the production and consumption of all other resources. If the Obama administration forces us to use the more expensive, non-carbon based energy and produce the less efficient cards he favors, we will have fewer resource left over for everything else.

If Obama wants to push the country into using alternative energy, Toomey thinks he should just say so and not pretend doing so will create jobs. In a “live in the moment” world view this makes sense, but eventually the coal and gas will run out and the effects of carbon based energy on the environment is fairly clear. Personally, I think the president has been clear in his belief that using alternative energy sources is a general good. I also think carbon based energy companies receive some government money themselves and without those coal, natural gas, and gasoline would not be as inexpensive.

The next section of the chapter traces the history of government spending. His main point is that government spending has increased, and that more of it has gone to mandatory spending (medicare, Medicaid and social security. A sentence that jumped out at me in this section is “Finally, the government’s excessive intrusion into health care has caused health care prices to rise at a pace far greater than prices generally throughout the economy” (86). A number of factors have gone into the increase health care prices. I don’t think it can all be laid at the feet of the federal government.

The next section discusses earmarks in government spending. Toomey gives a short list of earmarks that he finds egregious. Interestingly, one is National Mule and Packers Museum, listed at $49,000.(89). Nine pages earlier (p. 80), this same museum was referenced and tagged as costing $50,000. That may seem a small difference but in a book on economics and spending you would think that discrepancy would have been caught. It jumped out at me.

One theme of this section is the way earmarks corrupts politics and politicians. Former congressman “Duke” Cunningham, convicted and jailed, is cited as an example. Toomey tells us of an unwritten rule of congress – “If a legislator asks for an earmark in a particular bill and gets it, then he must vote for the bill – regardless of what else is in it. Failure to comply with this rule risks the denial of all future earmark requests” (91).

Toomey is bipartisan in his blame for earmark abuse, citing the spending during the Bush administration and also when Democrats control the House. He does commend a few congressman and senators (all Republican) for working for earmark reform. Senators Tom Coburn and Jim DeMint are singled out for holding up “wasteful spending bills” (92).

In lieu of earmarks, which Toomey feels the voters are against, he favors allowing “bureaucrats” evaluate project funding requests on objective criteria and decide which ones will receive government money. My response to this, having spent some time as a volunteer grant writer, is that the organizations or groups that can afford to pay professional grant writers are more likely to get funded. And while Toomey is correct that bureaucrats would not try to buy votes by awarding money to constituents, there would still be the opportunity for graft and corruption, but we would not have the ability to vote them out.

The next section is on deficits. Toomey thinks that it is not the size of the deficit that matters, but how it compares to the total economic output. In his discussion of the current growing deficit he says this:
It is one thing to incur this much debt to fight an existing threat such as the Axis powers of World War II. It is quite another to borrow vast sums to fund today’s consumption whether it is entitlement spending, bailouts, or pork projects. (94)

It took my breath away – no mention of Iraq? How many young Americans have died over the past years in Iraq and Afghanistan? Aren’t they deserving of at least a mention? War is expensive and has without a doubt contributed to the current deficit.

In the last section of this chapter Toomey discusses controlling government spending. he also takes a moment to point out the George W. Bush only vetoed one bill during the six years that Republicans also controlled the House and Senate. This compares unfavorably with other recent presidents. Toomey served in Congress while Bush was in the White House

Toomey thinks the president should have a line item veto, to cut out wasteful spending. Another of his suggestions is reinstating “paygo” which required any new spending be balanced by cuts elsewhere. The old paygo rules equated spending increases and tax cuts as the same, both requiring cuts somewhere else. Toomey does not think tax cuts need to be balanced. Lastly, he thinks cutting spending would be easier in a strong economy. I think we can all agree with that.

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