Sunday, February 1, 2009

GOP Leaders Doubt Stimulus Bill Will Pass Senate

Senate Republican leader Mitch McConnell said Sunday on CBS's Face the Nation that the massive stimulus bill backed by President Barack Obama and congressional Democrats could go down to defeat if it's not stripped of unnecessary spending and focused more on housing issues and tax cuts.

Note to McConnell: It's all unnecessary spending.

Sen. Jon Kyl of Arizona, the No. 2 Republican in the Senate, said he was seeing an erosion of support for the bill and suggested that lawmakers should consider beginning anew.

Fear mongering continued on the Democrats' side of the aisle.

"We cannot delay this," said Sen. Dick Durbin of Illinois, the Senate Democrats' No. 2 leader. "We can't engage in the old political rhetoric of saying, 'Well, maybe it could be a little bit better here and a little bit better there.' We've got to pull together."

Despite the Republican challenge to the package, they are likely to simply tweak it, when it needs to be junked in full. As I have blogged before, the Keynesian foundation for the economic stimulus is based on a faulty economic theory that has nothing to do with the cause and effect of the business cycle.

Greg Mankiw has also been pounding away at the fact that tax cuts are the way to go.

However, the Keynesian spending myth remains popular with big spending lawmakers, and the most we can hope for from this Senate is that the Republicans will force a few additional tax cuts. Tax cuts are always a good thing, but so are spending cuts. The economy doesn't need larger deficits, larger government spending or larger government. Larger deficits, larger government spending will simply make the inevitable dollar crash that much more severe, since the Fed will most assuredly be called in to print dollars to absorb a good portion of the new debt created because of the "stimulus" package.

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