"If it Bleeds, it Leads"

By U.S. Senator Jon Kyl In keeping with the old axiom of journalism, "If it bleeds, it leads," the media have focused on every bit of bad economic news to seemingly convince Americans that the economy is in a recession. In fact, according to columnist Peter Bronson, 54 percent of Americans think the economy is in a recession. But the bad news being reported does not reflect the economy's real performance. Over the last six years, the economy has yet to experience even one quarter of negative economic growth, and during the first quarter of 2008, the economy actually grew by nine-tenths of a percent. That's not strong growth, but it's a sign that the economy is not in a recession, which is officially defined as two quarters of negative economic growth. So if we are not in a recession, why is everyone so concerned? The answer is that food and fuel prices are skyrocketing, and declining home prices have made it harder for some to pay their mortgages, leading to defaults and foreclosures. Declining home prices are, indeed, a problem for homeowners needing to sell; but they are a boon for those needing (or wanting) to buy. Food and gas prices, on the other hand, affect us all. Congress, nevertheless, must be careful in responding to the call to "do something," or it can cause more harm than help. Neither Congress nor the President can repeal the laws of supply and demand; nor should they interfere in the market. In responding to economic ills, we have a responsibility to understand the root of problems, not to just "do something" for its own sake. Too often, such short-sighted actions lead to bad policies which ultimately cost taxpayers. For example, earlier this year, Congress approved a $150 billion economic stimulus package, and rebate checks are now being sent to taxpayers. The latest estimates are that this money will not stimulate the economy as had been hoped, but will, instead, mostly help defray the costs of food and fuel temporarily. And the rebates will not create one more drop of oil or get at the reasons food prices are escalating. Finally, the same taxpayers who received the checks eventually will have to bear the $150 billion cost of the rebate program. Bottom line: Congress and the President believed they had to "do something;" but in the end, all they did was add $150 billion to the deficit, which is why I voted against the rebate bill. Congress is now considering legislation to respond to the foreclosure crisis and authorize the government to guarantee some $300 billion in high-risk mortgages. That means taxpayers would have to come up with another $300 billion potentially, or add that amount to the deficit. Obviously, this needs to be carefully considered before adding more debt for our children to pay. Congress can help mitigate rising gas prices, but it must understand the reasons for high prices. First, demand is outpacing supply. The only reason U.S. supply is not increased is because Congress has put most exploration for energy off limits. Second, the Federal Reserve's slashing of interest rates (to help boost the economy), has caused our currency to lose some of its value. That means it takes more dollars to buy the same amount of gasoline (or anything else). Congress could address the causes of rising prices by: (1) increasing U.S. oil supply by lifting the moratoria on energy exploration in the United States; and (2) promoting economic growth (and, therefore, a stronger dollar) by ensuring tax rates are not raised and federal spending is kept in check. It should reject proposals to impose a windfall profits tax (which would further increase prices), authorize more price-gouging investigations (which have never found collusion), or authorize lawsuits against OPEC (why sue OPEC if the United States isn't willing to increase its own supply). In short, we should resist the urge to allow bad news to lead to bad policy, which could needlessly cost taxpayers billions of dollars. U.S. Senator Jon Kyl is the Assistant Republican Leader and serves on the Senate Finance and Judiciary committees. Visit his website at www.kyl.senate.gov.