Bailouts seem to have become commonplace as Americans endure one of the worst economic climates in recent times. And since New York is the epicenter of our country's financial services industry, it's reasonable to assume no place needs a helping hand as much as the Big Apple.Well, here in Washington, D.C., a new Congress and a new administration think they know just how to boost our ailing economy. Unfortunately, they're touting a bad prescription.
With Congress back, leading lawmakers have already promised to spend, spend and spend some more. After all, most voters are nervous about the future, so Congress faces pressure to "do something." But what?
Unfortunately for many the answer is for our government to spend its way out of economic hardship. Many are convinced that the only way that we will be able to regain our economic footing is by increasing infrastructure spending on costly transportation building projects. Recent reports indicate that President-elect Barack Obama wants a stimulus plan on his desk by Inauguration Day that could top $750 billion, with much of that devoted to infrastructure spending.
The problem is that infrastructure spending to boost the economy has been tried before with little success. Look to our ally Japan, where the government charted a similar approach in the early 1990s when the country entered a deep recession. As my colleague Ronald Utt details in a recent report the Japanese government built roads and airports, yet still endured 15 years of economic stagnation. The Japanese economy grew at an annual rate of only 0.6 percent between 1992 and 2007.
And with our country facing record deficits, it's more important than ever that we spend our money wisely. So if spending lavishly isn't the answer, then what?
For starters, Congress could approve the pending trade agreement with Colombia. Doing so would open our economy to one of our strongest allies in Latin America.Rather than close ourselves to the global economy, Congress should take a bold step to lift barriers and tariffs. That would be likely to increase the transfer of goods and services to create jobs here and elsewhere. Congress and the president-elect would undoubtedly face stiff resistance from powerful labor unions. But history shows the perils of protectionism. Our country tried to erect trade barriers in the early 1930s, only to plunge deeper into The Great Depression.
To be sure, Congress and the president-elect will want to act to steer our country back to less choppy waters. But our leaders should resist repeating yesterday's mistakes. Cutting taxes while opening our economy to even more global markets could be part of a much more fiscally responsible approach to really fixing our economy. Simply trying to spend our way out of this mess would only mean investing even more money we don't actually have.
Israel Ortega is a Senior Media Services Associate at the Heritage Foundation and has more than half a decade working in Congress and Washington, D.C.
First appeared in El Diario (NY)