Wednesday, September 28, 2011

Obama's Bridge Problem

Standing beside a 'functionally obsolete' bridge last week, President Obama insisted Congress must pass his $447 billion jobs bill so that aging bridges across the nation can be repaired and Americans can get back to work. While a few remaining Obama enthusiasts support the plan, most Americans and lawmakers on both sides of the aisle are skeptical, and understandably so.

The claim we lack funds for bridge repairs is an obvious red herring. Federal law requires states to use 10% of transportation funds for 'enhancements,' including the establishment of transportation museums, scenic areas, and pedestrian education programs. The set-aside has been used to build a 'twin dragons' gateway to Chinatown in Los Angeles, a Corvette simulator in Kentucky, and a squirrel observation area in Tennessee. Entertaining as these enhancements may be, they hardly seem prudent when America's bridges are supposedly on the brink of collapse.

Of course the idea that we cannot repair our transportation infrastructure unless we raise taxes and/or sink the country further into debt is absurd. The number of federal spending programs that most Americans would consider dispensable are too numerous to list here, and the GAO recently reported that duplication in government costs taxpayers over $100 billion per annum. Surely amongst all this waste there are ample funds for bridge repair.

There is, however, a more fundamental problem with the American 'Jobs' bill: it is based on the false premise that government spending programs will create lasting jobs and strengthen the economy. While infrastructure repairs might create temporary jobs, raising taxes above sustainable levels will result in reduced economic activity, increased unemployment, and declining tax revenues over the long-term.

Proponents of higher taxes as a solution to our economic woes ignore the reality of human behavior. We acknowledge, and even hope for, potential behavior changes when advocating for 'sin taxes' like those on cigarettes and alcohol, but Leftists assume there will be no resulting change in behavior due to taxes on economic activity.

In practice, excessive taxes remove incentive and the very ability of private citizens to invest in economic activity, and they transfer capital into the hands of government bureaucrats. According to economic analysts James Sherk and Rea Hederman, each $1 increase in government spending reduces private-sector investment by as much as $.97. Historically, taxes above Laffer Curve levels have reduced economic activity and income levels, and resulted in declining tax revenues.

But the economic problems created by high taxes and excessive government spending and debt are not limited to the federal government. Texas has fared relatively well in this recession due to (relatively) conservative state fiscal policies, but analysts are sounding the alarm on local government activity. In our own community, the Leander school district's $1.2 billion in bond debt has led to one of the highest ISD property tax rates in the area and a 'negative outlook' designation from the Fitch Group. These problems are beginning to impact the local economy, which is seeing reduced growth and falling property values.

While the Left argues that deficit spending creates needed jobs, government programs are notorious for waste and inefficiency. Analysts note that recent 'stimulus' bills cost taxpayers a minimum of $228,055 for each job created or “saved.” Although government spending has increased 4.8% since 2008, national unemployment and poverty rates continue to grow at alarming rates.

If our elected leaders are serious about 'stimulating' economy, they should look at factors that inhibit business. The United States has one of the highest corporate tax rates in the world, and according to Senator Susan Collins, federal agencies are working on another 4,200 new regulations that will further handcuff American businesses. A better solution would be to reduce corporate taxes and burdensome regulation.  Add to this picture some $14.7 trillion in debt, and the outlook is dismal indeed.

It is past time to get serious about our economic problems, and we must address these issues at all levels of government. Tax, Borrow, and Spend policies are destroying this country, and raising taxes to repair bridges or construct school buildings that stand empty for years is not the answer. Yes, Mr. President, let's repair those bridges, but not in a way that further injures our ailing economy.

1 comment:

-KenB said...

I enjoy your blog. Keep up the good work.