Continuing on the Road to Ruin

Floor Speech

Mr. McCLINTOCK. Mr. Speaker, throughout what was supposed to be a recovery summer, the President has repeated a familiar theme, that the Republicans ran us into a ditch and now they want the keys back. That's an important point. We need to understand exactly what it was that the Bush administration did to run us into a ditch.

In fact, President Bush made two major policy blunders. The first was to preside over unprecedented regulatory intervention into the housing market that deliberately enticed people who couldn't afford homes to buy them anyway. At the same time, these policies deliberately encouraged lenders to make irresponsible loans by promising them that Fannie Mae and Freddie Mac would cover the risk. This created a massive artificial housing bubble that ultimately burst with catastrophic impact.

But my question of President Obama is, if we know that this road leads to ruin, why does he continue down it at even higher speeds? Failing to learn from the damage that government intervention does by creating artificial bubbles in the economy, the President has repeated and amplified Mr. Bush's blunders not only in the housing market with mortgage subsidies and home purchase credits, but now also in other markets like automobiles and home improvements. Each time he has squandered billions of dollars merely to borrow from future demand, leaving behind economic craters each time these bubbles have burst.

President Bush's second blunder was to increase Federal spending at an unsustainable rate, transferring economic decisions from the productive sector to the government sector and crowding out the capital market by excessive government borrowing. Now remember, the $168 billion stimulus bill was a Bush brainchild. That's when we all got those $600 checks. If massive deficits and record government spending create prosperity, well then the final Bush years should have produced a golden age for the American economy. Has the President reversed these irresponsible Bush-era policies? On the contrary. He has amplified and expanded them.

In his first 19 months in office, this administration has run up more publicly held debt than all 8 years of Bush combined, with a promise that this would keep unemployment under 8 percent. Yet all this has accomplished is to crowd out trillions of dollars of capital that could otherwise have gone to employers to add jobs or to homebuyers seeking to re-enter the housing market or to consumers seeking to make consumer purchases. Thus, instead of the sharp V-shaped recovery that normally follows a recession, America is now entering its third year of economic distress.

The reason these policies have not worked is because they cannot work. They didn't work under George W. Bush, and they have not worked when Barack Obama doubled down on them. The core of Obamanomics is the proposition that, if government can inject enough money into the economy, it can stimulate consumer spending and, therefore, demand for production.

Unfortunately, government cannot inject a single dollar into the economy that it has not first taken out of the same economy. It's true, if the government takes a dollar from Peter and gives it to Paul, Paul will have an extra dollar to spend--but Peter now has one less dollar to spend in that very same economy.

On paper, the economic effects of income transfers always net to zero. In practice, transfers net to much less than zero because they shift huge amounts of capital away from decisions that would have been made in the productive sector based on economic return towards decisions that are made in the government sector based on political return.

We see very clearly the government jobs that are created when government puts that dollar back into the economy. What we don't see as clearly are the productive jobs that were prevented from forming as government first takes that dollar out of the economy. We see those lost jobs reflected in a chronically high unemployment rate and a stagnating economy.

It's time that we stopped wrestling for the steering wheel and recognized bad public policy for what it is, whether the driver is a Republican or a Democrat. The problem is not the driver but the direction, and the direction hasn't changed.

We all know the road to prosperity. We've taken it before. When we've reduced the burdens on productivity, the economy has blossomed. It worked when Ronald Reagan did it. It worked when John F. Kennedy and Harry Truman did it. And it will work again, but we will need leaders with a far better sense of direction than what we have today.

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