Republicans Don’t Even Pretend Anymore
After requesting a $7 billion loan from the U.S. Treasury, Governor Schwarzenegger is likely relieved now that the state has been able to secure $6 billion in loans from the credit markets. Politicians had feared California’s credit history would make such a loan difficult.
But the fact is, the loan was not nearly difficult enough. In a supposed era of tight and “frozen” credit markets, why is a government that goes further into debt every year, that finances its lavish operations with ever more bonds and budgetary trickery, able to get such an enormous loan? Credit is probably not as tight as is claimed, and governments in particular have far too easy a time obtaining more. In the long term, this is terrible for the taxpayers who have to pay the interest.
Furthermore, when a government borrows money, it competes with private borrowers for credit and drives interest rates up. This situation slows down economic growth. Politicians, a notoriously spendthrift class of society, with no sense of responsibility since they are borrowing on behalf of others, should be the last ones able to get loans.
What’s notable here is that Schwarzenegger has given up even the thin pretense of being the budget hawk that he portrayed himself as five years ago. Since being elected he has foisted on the state economy bond after bond, spending increase after spending increase, in everything from education to infrastructure. He was onto something earlier this year when he contemplated releasing some nonviolent prisoners—people who shouldn’t even be in jail in a free society, and whose detention costs the state tens of thousands of dollars each annually. Then the prison guard union went after him.
From the looks of the last budget, a staggering $103.4 billion that was instituted almost three months late, prisons and schools are two areas where Sacramento will resist any cutting. But “those are the two services we spend the most money on,” as State Senate pro tem Don Pereta pointed out this week. With the police state and welfare state as the two third rails of local politics, it appears there’s not really much else remaining to cut.
On the national scene, the Republicans have proven themselves equally devoted to big government across the board—devoted to the police state, the welfare state, and, of course, the warfare state. Everyone knows the Republicans stand for an ever-growing and exorbitantly expensive military apparatus and for incredibly pricy wars. But the insidious myth that they are otherwise for free markets persists.
President Bush came in and immediately began doubling the Department of Education budget and inaugurating the largest expansion of entitlements since Lyndon Johnson, in the form of the prescription drug benefit for seniors. In eight years he has doubled the national debt.
In the last month, both Bush and presidential candidate John McCain backed the most significant government intervention into the market in several decades, perhaps longer, when they signed and voted for the Emergency Economic Stabilization Act of 2008. This act gave the Treasury virtually dictatorial powers and nearly a trillion dollars to buy up practically any American financial instruments it deems desirable, making it the biggest player in the market and essentially nationalizing the entire financial sector.
McCain has gone on to propose an enormous plan for Washington to buy up troubled mortgages directly, at a price tag of hundreds of billions by conservative estimates. He copied the plan almost exactly from Hillary Clinton, called her to ask her advice on it, and has pitched it as resembling her proposal. Even Barack Obama thinks it is unwise and reckless. Meanwhile, McCain continues talking about reforming earmarks, a drop in the bucket constituting half a percent of the national budget and probably some of the least absurd things the government finances.
The conventional wisdom is that Democrats are socialistic big spenders who love huge government programs and economic regulation, while Republicans are somewhat less profligate in their spending and somewhat more committed to the free market.
Well, at least that’s half true.