May 19, 2011
Dear Mr. Stark,
Thank you for your two emails in December regarding deficits and economics. I appreciate you writing to share your thoughts and I apologize for my delayed response.
There are many perspectives on the economics of government spending, some asserting that deficit spending is key to economic growth and some asserting it actually reduces it. Persuasive-seeming arguments could be made for any number of economic theories. The ultimate test of truth in economics, however, is how these theories play out in the real world. The reality is that virtually no nation that has consistently pursued a policy of deficit spending has improved their economic growth as a result.
Our own recent experience with deficit "stimulus" spending has confirmed this trend. When the Senate passed the American Recovery and Reinvestment Act of 2009 (H.R. 1, also called the "stimulus") 60-38, and I was one of 38 senators who voted against this bill. I opposed this legislation because it represents the worst act of generational theft in our history. The $787 billion cost of the bill was funded entirely by borrowed money, meaning that our children will pay the cost of the current Congress' irresponsibility.
Equally important, I was strongly convinced the stimulus would not create jobs. The current administration promised taxpayers that the stimulus program would "save or create" nearly four million jobs and that if Congress passed its program, the unemployment rate would not exceed eight percent. Yet the unemployment rate exceeded eight percent soon after the passage of the bill and has remained near ten percent for more than a year.
The stimulus has largely failed, first and foremost, because it was based on a flawed theory that simply by spending money, the government can create jobs. An increasing number of professional economists now reject this theory. Nevertheless, the idea of "stimulus" has remained very popular among professional politicians because it provides a rationale for what politicians love to do most-spend. Most Americans assume their leaders would consult the best science and evidence before signing away hundreds of billions of dollars of the nation's wealth. In reality, many politicians embrace astonishingly unwise, harmful policies in order to increase their own power, putting themselves first and the country second.
It is important for Americans to understand the only ones who really benefit from "stimulus" are politicians. The massive spending allows politicians to appear like they are working hard to help the people, earning them votes. It also often allows them to funnel taxpayer money to their political friends, earning contributions and support in the next election. The reason our country has so many "stimulus" programs is not because they help the economy-it is because they help politicians. It is absolutely essential that American citizens become aware of this deceptive political tactic, and send a clear message to Washington that they will no longer vote for, donate to, or support politicians who engage in it. This is the only way this practice can be ended.
Some argue government spending will put more money into the hands of consumers, consumers will spend more at businesses, and businesses will hire more workers. More economists today recognize, however, that in order to put money into the economy, the government must first take money out of the economy. Before it can increase spending, the government must either raise taxes on the private sector, or borrow money from the private sector. Both options take money out of the hands of consumers and businesses. "Stimulus" programs, therefore, simultaneously take money away from consumers and give money to consumers, but do so in a very inefficient and ineffective fashion.Ultimately, such programs do little or nothing to boost the economy. It is better to simply leave taxpayers' hard-earned money in their pocketbook and never take it for government use.
If a "stimulus" program is designed poorly, it can actually harm the economy. I am convinced the current stimulus program has slowed our economic recovery. In too many cases, stimulus projects are wasting money we do not have on things we do not need, and in some cases have even hindered job creation or eliminated existing jobs. For example, Washington's efforts to "stimulate" the economy are increasing utility costs, repairing bridges nobody uses, building tunnels for turtles, and renovating extravagant train stations in remote areas while widely-used bridges and roads in poor shape are passed over. I have released two oversight reports detailing hundreds of specific examples of wasteful spending funded by the stimulus: Stimulus Checkup and Summertime Blues (http://coburn.senate.gov/
The American people need to hear the truth about those initiatives that will stimulate the economy and those that will not. True stimulus happens when individuals operate in an environment of limited government, free markets, entrepreneurialism, and personal responsibility. Government spending for the sake of spending, new entitlements and subsidizing poor business decisions and risky loans will do little to stimulate our lagging economy, and in fact put it in even more danger.
While the economic challenges we face seem insurmountable, the American entrepreneurial spirit remains alive and well. I am confident we will tackle these economic challenges and emerge as a stronger and more prosperous nation.
Again, thank you for contacting me. Best wishes.
Tom A. Coburn, M.D.
United States Senator