Congress: Full speed ahead...

June 1, 2010: One would think that the United States Congress would learn a lesson from the fiscal mess engulfing the European Union, but alas, no such luck for American Taxpayers.

As Europe's politicians deal with the sovereign debt crisis that threatens to spread from Greece to Spain, Portugal and EU countries beyond, they are being forced to make tough decisions on government spending that should have been made years ago.

Portugal which ran a deficit of 9.4% of GDP last year has cut unemployment insurance and put major public works projects on hold. Spain has announced they will cut government salaries by 5% to 15% and will freeze them next year. In addition, Spain plans to also reduce public works projects which will allow them to drop their current account deficit from 11% to 6% by the end of 2011.

Greece has drawn the most attention with its austerity measures, more so because there have been riots in the streets over the move to cut public salaries and benefits in an attempt to reign in a decade of loose government fiscal policy. 

Give them credit for trying to make the tough fiscal decisions.

Meanwhile our own elected officials in Washington D.C., who have managed America's fiscal policy just as poorly as Greece, have decided to take the opposite approach; spend more money and take on more debt.

On Friday, May 28, the House of Representatives voted 215-204 to pass the "American Jobs and Closing Loopholes Act," which is a hefty $190 billion in additional spending.

The bill extends unemployment benefits, grants more money to state's for Medicare costs and provides a whole host of tax breaks for everyone from sheep growers to Hawaiian sugar cane cooperatives.

It hides the true amount of spending by classifying some of it as emergency spending, which means it doesn't fall under the pay as you go rule or "paygo" that was recently brought back by Congress after being suspended under President Bush.

The bill would extend no less than 70 expiring subsidies at a cost of $28.5 billion over the next two years alone. There is little evidence that any of these subsidies has ever created jobs, so the extension of those tax breaks does little or nothing to achieve what the title of the legislation says it will do.

In fact, the biggest item is $65 billion to prevent a 21% cut in Medicare reimbursements. This was hotly debated during the recent battle of health care reform, as lawmakers who purposely failed to include the money in the initial bill to keep the cost down, now are trying to sneak it through the back door.

But the question is do we need this additional stimulus? Last year Congress passed a whopping $862 billion in stimulus money to create jobs and keep the unemployment rate at 8%. Today their are few jobs being created and the unemployment rate is now at 9.9%.

So what exactly makes Washington D.C. think this additional money will do anything for the economy, other than postpone the day of reckoning?

Furthermore, one could argue the measure is premature.

New estimates from the Organization for Economic Co-Operation and development (OECD) show America's economic growth projections being revised upward. The OECD now predicts the U.S. economy will grow at a rate of 3.2%, up from 2.5% just last November. 

There is concern once the initial stimulus money spends through the system, the economy might be hit with a double dip recession. If this is the case, it proves that the government's initial spending did little to bolster long term economic growth.

Spend, spend, spend seems to be the misguided philosophy in Washington D.C. Meanwhile, European nations are cutting spending and adopting austerity measures.

For all the criticism Americans make of the socialist government spending in Europe, we are quickly losing our ability to make that critique of our European brethren.