Can America spend its way to economic recovery?
Conservatives, resisting big government outlays on principle, begin to build the case for other options.
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Opposition from Senate Republicans sank prospects for a congressional bailout for the auto industry earlier this month, and seven GOP senators signed a letter last week to President Bush urging the administration not to use Troubled Asset Relief Program (TARP) funds to bail out the auto industry until Detroit automakers and the United Auto Workers union make serious concessions.Skip to next paragraph
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“Absent such restructuring, we do not believe any amount of money will succeed in saving these companies,” they wrote.
But many GOP lawmakers concede that there isn’t yet consensus within their caucus on how to use government clout in tough economic times.
“There’s the obvious concern that we’ve become addicted to the ready flow of government cash when there is trouble in the markets,” says Sen. Jeff Sessions (R) of Alabama, who opposes using TARP funds to help automakers.
“Now, you see business commentators and talking heads on the business channels repeatedly making snide and disparaging comments about these spending programs and the things that are being done to undermine the normal business cycle,” he says. “But what is troubling is that there is no rigorous body of thought that questions the wisdom of [using] TARP or the additional trillion in spending that President-elect Obama is looking for.
“The power is with the Chamber of Commerce and the Republican president and the Republican secretary of Treasury, and if they concede free-market principles for short-term gain, then we’re in a world of hurt,” he adds.
But critics say eight years of the Bush administration’s economic policies have damaged the Republican Party’s credibility to contest the claims of big government.
“I see a seamless transition from Bush to Obama – the only difference is that we’re replacing an interventionist, big-government, borrow and spender with an interventionist, big-government, tax and spender,” says Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank.
The case to be made is that the economy is in free fall precisely because government has done so much to it, he says, and the excesses of the GOP years in power – from expanding government to outright corruption – have not helped. “A lot of people on my side have been so dispirited by what has happened in the last eight years that you’re not really seeing a lot of vigor [in opposition],” he adds.