KEY DATA: Only 36 of 535 members of Congress were economics majors.
One stimulus is never enough. Now the wastrels in Washington have plans for another go at arousing the economy.
Speaker of the House Nancy Pelosi and her comrade-in-spending, House Appropriations Committee Chairman David Obey, D-WI, are looking for new ways to spend money the government doesn’t have. Are these people crazy or just plain dumb?
The verdict is out on the former, but as for the latter, the answer is a resounding yes – at least when it comes to economics.
In a study soon to be published by the Employment Policies Institute in Washington D.C., I examined the educational background of members of Congress compared to their voting record on minimum wage increases.
Economic logic tells us that increasing the minimum wage causes higher unemployment; therefore, an economist should be against such laws if their objective is to preserve jobs. Economics majors in both houses of Congress did, in fact, vote against the minimum wage increase in higher numbers than all other college majors.
Unfortunately, only 36 of our 535 representatives in the House and Senate have formal training in economics. Even those with economics degrees are not all free-market advocates.
Senators Richard Durbin, D-IL, and Barbara Boxer, D-CA, who regularly rank among the most liberal members of the Senate despite being economics majors, voted for the minimum wage hike.
There might be more sanity to the legislative process if the rest of Congress actually knew something about economics. The main architects of stimulus thus far appear to be Pelosi, a political science major; Obey, also a political science major; and Senate Majority Leader Harry Reid, D-NV, a history major.
The Republican swing votes for the first plan in the Senate were Arlen Specter of Pennsylvania, an international relations major, and Susan Collins and Olympia Snowe, both from Maine and both political science majors.
President Barack Obama was also a political science major, so those plotting our economic future are not nearly as well-informed about basic economics as We the People might like.
This isn’t to say that economic training is absolutely necessary to write good policy, but it couldn’t hurt. One of the reasons there aren’t bigger, permanent tax cuts in the bill is the fear that people will just save the additional income or use it to pay down debt, which isn’t stimulative according to the conventional wisdom.
This is just plain hogwash. A few years ago, Americans were being condemned for not saving enough. Now that savings rates are on the rise, we’re being told – again by the economic wizards in Washington – to go spend money, stop being so responsible.
It would be more correct to say that savings are not a short-term stimulus, and politicians can’t see past the next election cycle. Savings, however, are a long-term and ultimately more beneficial stimulus than government spending.
After the dreadful economic times of the 1970s, the economic boom begun in the 1980s was triggered by lower taxes and an average savings rate of 8 percent from 1980 through 1994.
Savings provides capital for business expansion and liquidity to banks, not to mention that it allows people to acquire big-ticket items without incurring debt, another process Congress also knows little about.
Perhaps a new stimulus package will include a basic economic course for legislators. Understanding where money comes from and what happens when you print too much of it would be a good first lesson.
TAKE HOME: Few members of Congress have formal training in economics, which helps explains the horrendous economic decisions recently made inWashington.
Brian O’Roark is an associate professor of economics at Robert Morris University.
