Danny Davis Watch

If you want to understand just how twisted Congressman Davis’ economic views are, his recent appearance on Fox News’ Your World with Neil Cavuto is a great introduction.

In the interview, which discusses the “Jobs Bill,” Davis makes the following outlandish arguments:

1. Not passing the bill would mean the government is “hoarding” money from the economy

Davis has said this before, and it’s patently ridiculous. Our government is currently running both the highest debt and highest deficit in our country’s history. For decades, we have been operating at the extreme polar opposite of “hoarding” — spending all of our all savings as well as some of the savings of other, poorer countries. By contrast, countries that could truly be considered as hoarding money (such as China, India, Brazil and Singapore) have economies that are continuing to grow.

2. Not giving jobs to the unemployed will cost the country more in care for these people

This might be true if Davis was talking about eliminating barriers to productive employment, but he’s not. The kind of stimulus programs Davis has largely supported have been the kind that rely on money “trickling down” to those in need, usually through corporate sectors like the automotive, real estate — and recently — coal freight car manufacturing industries. It would actually be cheaper — and more humane — to simply give the money directly to the needy (through either tax cuts or stimulus checks), rather than making them toil at an artificial job for a small cut of the cash.

News, Prosperity Issues Fiscal Policy

While Danny Davis may want to encourage Americans to go further into debt by replacing their working used vehicles with new ones, the folks over at the the Onion know what car is truly right for the country.

Ford Unveils New Car for Cash-Strapped Buyers: The 1933 Taurus

And I write this as someone who has never owned a vehicle newer than fifteen years old and who currently owns no vehicle at all (meaning I never qualified for Davis’ “cash for clunkers” boondoggle).

Prosperity Issues Fiscal Policy

Public Enemy Number One, to hear Danny Davis tell it

On occasion, Congressman Davis has been a good champion for some causes, but economics has never been his forte, and he proved that all too well this Tuesday on Fox News when he insisted that the government has been “smothering” the economy by not spending enough.

“If you hold your fist too tightly, and nothing goes out, nothing comes in. And ultimately, you smother whatever is in there to death,” Davis said.

But is that really the case?

The federal government is currently running the highest deficit in history, $1.36 trillion, and counting the shortfall in Social Security, it has been running deficits for most of the past several decades. Personal savings in the U.S. have been falling since the 1980s, and the debt accumulated by corporations like GM and AIG is now legendary.

Despite all this very un-tight-fisted spending, America is now facing an enormous economic crisis.

By contrast, China, which has had the highest personal savings rate in the world since 2000 and whose government holds the world’s largest foreign reserves, has shown double-digit economic growth for decades, despite the “tight-fisted” attitudes of its citizens and government.

Why is this?

It’s because the Chinese have been spending their money in a better way than us. They’ve been saving it.

In the modern world, all savings is actually spending. When money is saved in a bank or in a stock or bond market, it gets invested in the economy to produce things like machinery, bridges, and college educations. This creates jobs, expands the economy, and makes society wealthier.

In the U.S., however, money goes increasingly not towards investment but toward consumption. When Americans aren’t being deterred from saving by government-slashed interest rates, politicians like Congressman Davis tax them and “invest” their money in failing car companies, worthless housing stock, and ongoing wars. But real investments always produce something more, not something less. The spending that the Danny Davis’s of the world are perpetuating is just more wasteful consumption masquerading as investment.

Consumption destroys wealth, and when wealth is destroyed, there is less left for everyone, including the government, to spend.

So, if Congressman Davis really wants to point the finger at someone for being too tight-fisted on spending, all he really ought to do is find the nearest mirror.

News, Prosperity Issues Fiscal Policy

Despite his continued cries that more money be spent on health care, Congressman Danny Davis announced yesterday that he will attempt to make less of that money available by supporting an extension of the first-time home buyer tax credit. The current credit has given up to $8,000 to qualified first-time buyers to purchase homes. “Qualified” buyers has included those who earn up to $150,000 a year individually or $300,000 a year jointly. Those who are too poor or whose credit is too weak to purchase a home get zero assistance under the program.

The problems with the credit are legion, but here’s a short summary of some of the major one’s that apparently didn’t faze Davis during his decision making.

Low- or no-down payment mortgages were one of the major contributing factors to the housing crisis, yet the tax credit allows this same practice to continue. Since the credit can be used toward down payments, it can be combined with products like the 3.5% down FHA loan to effectively purchase homes with zero money down, just like at the height of the risky lending frenzy. This means that the credit may just be fueling another real estate crash down the road – not mending the current crisis.

The credit does little if anything to solve the cause of the housing crisis. Home prices are falling because there is too much housing and too few people. By convincing people to stop renting and buy homes instead, the credit simply replaces an empty house for sale with an empty house for rent. As vacant rental units rise, rents will drop, as they already are, motivating fewer people to buy homes and therefore undermining the effect of the credit.

The program spends a lot of money to accomplish very little. According to the real estate lobbying group the National Association of Realtors (which supports the tax credit) the vast majority of those who take advantage of the credit would have purchased a home anyway. Taking these numbers into account, the estimated cost to create one extra home sale with the credit is $43,000. If the credit is extended, the price tag will rise to $258,000 per home.

The program helps many of those who need no help. As stated above, the tax credit can be claimed by individuals who earn up to $150,000 a year – hardly the kind of people who are suffering economic hardships. A cut of the money will also go to real estate agents and mortgage brokers, two of the very groups that helped create the crisis in the first place. The IRS is also currently examining 100,000 cases of possible fraud concerning the program, including $4 million in credits claimed by children under 18-years-old, another source of significant waste.

The credit encourages more people to go into debt. By definition, most first-time home buyers are renters who have no mortgage. By encouraging them to stop renting and take on home loans, the program is incentivizing debt. This could also have disastrous effects for the economy down the road if new buyers are unable to keep up with their loan payments.

The program may be bad for the environment. As Harvard economist Edward Glaeser recently wrote about the credit, “Federal tax policies toward housing have long encouraged Americans to emit more carbon. President Obama could do the country, and the planet, a service by either refusing to sign the extension of the $8,000 credit or by insisting that it be accompanied by offsetting reductions in the home mortgage interest deduction.”  The The New York Times has also written on how housing subsidies contribute to carbon emissions.

All told, the first-time home buyer credit, like the “cash for clunkers” program Davis supported, does very little and helps those who need very little helping in the first place. What’s particularly bizarre is that Davis supports tax credits for programs like this, yet despite his stated concern about health care, he hasn’t bothered to cosponsor the Child Health Care Affordability Act, which would provide tax credits for children’s health care. Surely that would be a better use of limited resources than new houses and new vehicles.

If you’d like to help Congressman Davis see the light on this issue, contact his office and politely ask to have Davis reverse his position on this program. If Davis does correct his stance, we’ll be the first to give him credit here.

Update: Davis, disappointingly but predictably, has voted “yea” on the tax credit extension as part of H.R. 3548. By the estimate on his own website, the extension will cost $10.8 billion over ten years, an amount of money that could have given private health insurance to 430,000 people for the same period of time. Unbelievable.

Action Alerts, Danny's Bad Calls, News, Prosperity Issues Bailouts, Fiscal Policy, Subsidies

With the national debt rocketing past $11.6 trillion, Congressman Davis and other members of the Congressional Black Caucus recently released a letter to President Obama and Speaker Pelosi mocking the “spurius claim” by some Democrats that our nation cannot afford Obama’s proposed health care plan.

“Spurious?”

Does Congressman Davis know something we don’t?

U.S. Government Stages Fake Coup to Wipe Out National Debt

Freedom Issues, News, Prosperity Issues Fiscal Policy, Health Care

In another demonstration of how low health care, fiscal responsibility, and personal freedom are on Congressman Davis’ priority list, he voted yesterday to approve an additional $2 billion to help people who already own cars buy new ones. That amount of money could have bought health insurance for 800,000 people (the population of San Francisco) for one year at the average Illinois individual market rate. Instead, if this measure passes the Senate as well, that money will be gone forever.

The $2 billion will go to the “Cash for Clunkers” program, which rewards buyers with a discount of up to $4,500 for trading in old vehicles for new ones with higher MPG ratings. The program had exhausted its initial $1 billion in funding, which Davis voted for as part of this bill, just days after commencing.

While supporters of the program have claimed it benefits the environment, that claim is only weakly supported by the program’s actual terms. For example, under the plan, a driver who trades in a 16 MPG Hummer for a brand new SUV that gets a marginally better 18 MPG can apparently receive a rebate of up to $3,500. Furthermore, these discounts give personal vehicles an unfair advantage over already disadvantaged mass transit systems such as Chicago’s CTA.

Another cause that doesn’t benefit from this program is that of America’s working poor. Those who don’t own a vehicle, own one that already gets high mileage, or can’t afford to buy a new vehicle even with a rebate, get little or no help under the Cash for Clunkers program.

Sound ridiculous? It’s all in a day’s work, apparently, for Illinois’ 7th District “progressive” Democrat congressman.

Update: A recent report by Edmunds.com has concluded that because so many “cash for clunkers” sales would have happened anyway, the total price to taxpayers for each new car sale created by the program was $24,000.

The Mises Institute has also pointed out that the program’s destruction of used cars contributed to an increase in the cost of living in October.

Danny's Bad Calls, Freedom Issues, News, Prosperity Issues Bailouts, Environment, Fiscal Policy, Subsidies

Corporate bailouts. Mid East war funding. Massive stimulus packages. How does Davis expect to pay for it all? Perhaps this is the answer:

US To Trade Gold Reserves For Cash Through Cash4Gold.com

Prosperity Issues Fiscal Policy

This past Tuesday, Davis cast an enormously hypocritical vote by approving continued, no-strings-attached funding for the War in Iraq, despite previously vowing not to do so. The bill in question was the Supplemental Appropriations Act of 2009, which among other things, provided the funds to continue America’s Mid East wars.

Davis had previously signed a letter, along with 91 other House members, promising not to vote for any Iraq War spending that didn’t also include funds for “the protection and safe redeployment of our troops out of Iraq”. Davis is also a member of the Out of Iraq Congressional Caucus, which advocates the return of U.S. troops from Iraq.

And as if that weren’t enough, Davis had recently signed another letter demanding that the terms of $100 billion in funding for the IMF in the supplemental bill be changed to ensure the money would truly benefit the needy. Even though it appears that those changes were never made, Davis still voted for the bill.

So while the Congressman talked a big pro-peace, pro-reform game when his word wasn’t being put to the test, once it came time to vote, he folded faster than a rusty lawn chair under the weight of a well-fed Soldier Field tailgater. That’s apparently what passes for “progressive” politics in Davis’ mind.

Danny's Bad Calls, News, Peace Issues, Prosperity Issues Fiscal Policy, War in Iraq

Congressman Davis, along with all but 17 Democrats, has voted “yes” on a record $3.4 trillion federal budget that will increase America’s federal deficit to a new high of $1.2 trillion.

As I wrote previously, defenders of the budget have claimed it will create jobs, but Americans don’t need jobs, they need paychecks. If Congress truly wanted to help, it could do so immediately through stimulus checks to the needy. Almost 100% of that spending would reach the recipients, with little bureaucracy or corruption to skim from the top.

Now, we know that this largely will not happen. The victims of the recession will get paid last, not first from Congress’ new spending, and the country will sink further into debt for the effort.

Hopefully, Congressman Davis and his colleagues will wake up to this truth and act more prudently on this issue in the future.

Danny's Bad Calls, Freedom Issues, News, Prosperity Issues Fiscal Policy

Just about every American claims to support freedom. When conservatives refer to “small government” and liberals talk about “not forcing one’s beliefs on another,” they are both driving at a common principle: letting individuals make the decisions that effect their lives.

Sadly, Obama’s new proposed budget will mean less freedom for both conservatives and liberals alike. It represents a massive spending increase  (the largest since WWII) and though it is accompanied by some tax cuts, the long-term effect is undeniably that Americans will spend less time working toward their own goals and more time working toward the government’s (whether Republican or Democrat).

This is justified as being necessary to help Americans through the recession, but truth be told, if that were the objective, stimulus checks could be issued and aid could be in the hands of the needy in weeks. Instead, the money will largely trickle down through the government and corporate bureaucracy before what’s left finally reaches those who need it.

Thankfully, it’s not too late to stop this slow-motion power grab. Call Congressman Davis’ office (or your representative, if you’re from another district), and tell him to reject all federal spending increases short of direct, immediate aid to Americans through checks or tax cuts. Alternatively, you can send a “Priority Gram” (whatever that is) on the subject through the Campaign for Liberty page here.

Stay tuned for updates on how Davis, the rest of the Congress, and the President act on this.

Action Alerts, Freedom Issues, Prosperity Issues Fiscal Policy