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Dear Congress, Wanna Help Your Country? Cut the Fat

by Ryan Guina

The US economy is in a financial crisis, that much is something most people agree upon. How should we fix this crisis? Well, that’s another story.

Many of the greatest minds in our government think that an emergency economic bailout is the best way to stabilize our sagging economy. They stipulate that buying troubled debts from banks will infuse them with the capital they need to continue creating more debt by making new loans. Never mind the fact that unrestrained lending is what got us into this mess in the first place.

So Congress banded together to create The Emergency Economic Stabilization Act of 2008 (here is the full text of the bill. Note, it’s 451 pages long). After passing it back and forth, the bill was passed – but not without a lot of added fluff.

I don’t profess to be an economist, and I can’t say whether or not the bailout plan will work. What I do know is that the bailout plan is unpopular among many people in the US, particularly those in the middle and lower income ranges. But sometimes unpopular decisions are the right decisions to make. Maybe the emergency bailout plan is the best option to help our economy?

Assuming the bailout plan stabilizes our economy, what comes next? How can the government improve the economy in a way that affects the majority of the US populace – what most people refer to as the middle class.

Well, several bloggers and I decided to try and answer that question and we are posting our answer at the same time this morning. You will find links to their articles at the end of this one. None of us is an economist; we are just regular citizens – similar to the majority of the voting population and the kind of people that Congress should keep in mind when making decisions on policy.

This is the question we asked ourselves:

“What is the single most important initiative that the next administration should undertake to improve the economic health of the U.S. middle class?”

My Answer:

“Cut the fat.”

I will not contest the idea behind the emergency bailout bill. As I previously mentioned, I have no training as an economist and I do not know if it will work or not. But it doesn’t take an economist to see that our country could scarcely afford the original version of the $700 billion economic bailout plan, and spending an additional $110 billion in pork barrel spending was not only unnecessary, it was grossly out of line.

The brightest economists in our nation recommended to President Bush that we need this emergency bailout bill to pass or we may face a global financial meltdown.

Here is my question to Congress:

If our economic situation was that perilous, then why wasn’t the bill quickly passed in its original form?

Answer: because it didn’t pander to any special interest groups.

To be fair, the version of the bailout bill that passed had a few enhancements that may have enticed additional Congressional voters. Chief among these were a tax credit for research and development and an increase in insurance for bank accounts, both of which could have a broad economic impact.

But there was also a substantial amount of fluff added to the bill – added expenses that don’t benefit Americans as a whole. Instead, some weak Congressional leaders gave into temptation and peer pressure and withheld their votes from an emergency bill so they could hold out for a sweeter offer – one that would pander to their special interests, never mind that our economy was in an emergency situation.

Here are some of the more disgusting examples of Congressional misuse of power (This list from CNN):

  • Provisions related to film and television productions – $478 million over 10 years.
  • A refund of excise taxes on rum imported from Puerto Rico and the Virgin Islands – $192 million.
  • Extension and modification of duty suspension on wool products, wool research fund and wool duty refunds - $148 million.
  • Creation of a seven-year cost recovery period for construction of a motorsports racetrack – $100 million.
  • Income averaging for amounts received in connection with the Exxon Valdez litigation – $49 million.
  • Transportation fringe benefit to bicycle commuters – $10 million.
  • Exemption from the excise tax for a specific arrow used by child archers – $2 million over 10 years.

I don’t have a problem with our government spending money on necessary items. But how can any of these expenses be labeled as an emergency? The answer is, they can’t.

Several Congressional leaders determined they could extort votes for their special interests by using The Emergency Economic Stabilization Act of 2008 as leverage. These members of Congress put their interests and needs before that of the American people.

Congress, if you want to help the average middle class citizen, cut the fat. Spend the money where it is needed most – on projects that benefit the general American economy, not on your special interests.

Here are the other synchroblog participants and their topic:


Published or updated December 29, 2011.
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{ 16 comments… read them below or add one }

1 Mr. ToughMoneyLove

Ryan – You’ve hit on an unfortunate reality of our political system: Very little gets done just because its the right thing to do. Instead, every bill has to have a major dose of “what’s in it for me” before it can pass.

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2 Blaine Moore

That’s the problem, though. If they don’t do what they can for their special interests, then they won’t have the funds to get reelected and they will have to get a new job after somebody that does pander to special interests takes their place.

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3 David

What are you talking about? We need more pork; with the depression coming, we will all need something to eat. You communists are all the same. ;-)

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4 CapHill

The additional provisions in the bailout bill are not pork by the traditional definition. Pork generally benefits one particular state or city because the respective Congressman or Senator inserted an earmark into legislation. The provisions added to the bailout bill, was actually a new bill known as the “Tax Extenders bill”. This bill is passed every year by Congress. The provisions are tax credits and deductions for various industries, that promote American competitiveness, fix errors in previous legislation, provided tax cuts for American companies, etc. These provisions benefit many companies in many geographic areas, and are not earmarks in the traditional sense. They have bipartisan support, and in fact the senate voted on the Tax extenders some 8 times this Congress.
Take the arrows tax provision for example. It’s a fix in legislation to repeal the excise tax on wooden arrows used by children and for practice. The wooden arrows generally cost .30 each, and the tax is .39 each, therefore the tax cost more than the arrow and more than doubled the arrow’s cost. So each year Congress exempts this provisions so as not to double the price of practice arrows.
Another example is the Film production provision. The provision applies to qualifying film and television productions throughout the country, in any state. It is designed to discourage small, independent productions from being shot in other countries, like Canada, which provide attractive tax incentives to lure them from the U.S. Like the racetrack provision, this is not a permanent tax decrease. It is rather a timing shift that accelerates the ability of taxpayers to use deductions that would otherwise be delayed, thereby creating a cash-flow benefit without reducing total taxes paid to the Treasury.
The tax extenders have received a lot of attention only because this bill received a lot of attention. In reality these are normal and beneficial provisions that Congress passes every year. They are not pork, even by the most rabid anti porkers. I hate pork as much, if not more than, the next guy. But let’s not get distracted. For more information on the tax extenders added to the bailout bill, look for a press release from the Committee on Ways and Means, Ranking Member Jim McCrery from October 3, entitled “Important Facts about the Tax Extenders in Rescue Bill.”

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5 Ryan

CapHill: Thanks for clarifying this information. I admit I made my assumptions based on the article CNN and similar articles from other news outlets which labeled these additions “pork.”

My knee jerk reaction is probably a common one right now, and I think it is based on frustration. I appreciate you sharing this information.

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6 Brian

I still think they should have kept the two bills separate. They used the tax extender bill to win votes. There are tons of better ways they could help the economy in the short term and long but they decided on a band aid while blaming others.

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7 Ryan

Brian: Agreed. If it is truly an emergency act, then treat it as such and pass the bill based upon that merit alone.

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8 Mrs. Micah

Whether these are pork or not, they should keep these things separate. The tax extenders bill may be well and good, but it deserves its own separate debate. So unless they were going to pass it anyway as is, then sticking it onto the bill is irresponsible.

Does an ambulance driver stop to buy milk on the way to the emergency room? Or perhaps better yet, does she attempt to sell you girl scout cookies?

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9 Kirk

I agree with Brian. The bills should be different. Furthermore, the tax law should be simplified to negate the need for the extenders. If we had a lower corporate tax that was consistent, we would attract more capital and business.

Cutting the fat is huge. I was at an event with Senator Ben Cardin (of Maryland) and Knight Kiplinger (founder of Kiplingers personal finance). Knight stood beside Senator Cardin, and he made a fantastic point. Our perilous economic situation is due to a lack of savings. He said it wasn’t only individuals who fail to save, but Capitol Hill and the White House. He stood by the Senator and said these guys need to act like adults and get their house in order. Gutsy comment, but so true.

As far as the bailout, it won’t work. It might help, but it won’t take us out of this mess. In fact, there is a strong case to be made that government intervention in the economy drags out the inefficiencies that recessions get rid of.

Most think the Great Depression was a fault of capitalism and it was the government that brought us out. No. The government took what would have been a difficult recession and turned it into a depression. The Fed tightened money when it was needed and the Smoot Hawley tariff created a worldwide economic battle that caused economies to shed jobs in large numbers. Later after FDR took office, he tried price fixing assets and goods, and this made things worse. Of course, a strong case could be made the huge leverage and inefficienies of the thirties may not have come about if not for the Fed.

If we just let the market correct, this would be painful. We would see 10% unemployment and probably further losses in the markets. However, we would get through this much quicker.

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10 Ryan

Mrs. Micah, I couldn’t have said it better. :)

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11 Ryan

Kirk: I agree; letting the market correct itself would be painful. But it is quite possibly the best way to weed out the inherent weakness in our financial system.

Congress won’t allow that to happen though because people would lose jobs, some companies would fold, and pension plans and retirement funds would lose a lot of money. Many people would need to put off retirement for several more years. Of course, these things are already happening, but the effects would be magnified, and they don’t want to be held responsible for that.

Allowing the market to correct naturally would be viewed by the media and many people in the public as “inaction” and public outcry would force the government to act… bringing us right back to where we started.

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12 Ryan

jarhead: not off-topic at all. There are many issues that need addressed in our economy, tax system, political system, etc.

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13 Jarhead

Simplifying the tax bill should be any candidates first priority upon entering the white house. Second should be to cut the pork. After that is done the economy will be just fine. too bad it will never happen.

I know that was all a little off topic but I had to get my point out.

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14 No Debt Plan

There are many things wrong with how our legislation/Congress is setup… too many special interests. Sad…

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15 deepali

I am not convinced that letting the market self-correct is necessarily the right approach. I worry that part of the self-correction would be a business flight overseas. In theory, I’m not opposed to globalization, but in practice, I also appreciate the need to circle the wagons at certain times…

I also agree that it is confusing when bills are mixed up and the media mishandles the situation. I should also point out that all riders are not bad, particularly if one of them happens to fix the AMT.

I also think we can’t have it both ways. We want lower taxes, but we oppose anything that “costs the taxpayer”. Some of those “costs” are lost tax revenue, from lowering taxes or creating tax breaks.

I think we’re bring distracted from the true problem here – this ridiculous bailout bill.

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16 Zhu

I’m not an economist either but I recently grew interested in how tax money was spend, either locally (i.e city hall) or at the highest level.

My conclusion was, a lot of money seem wasted. It seems that politicians invest in the great picture which could be fine on the long run… but they never stay in power long enough to accomplish the plan and the following gov’ doesn’t follow up.

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