Understanding Why Obama and Members of Congress Never Read the Stimulus Bill

Everyone already knows that Pres. Obama and many members of Congress did not take the time to read the text of the $787 billion Stimulus Plan that was passed last month. The real question we must explore is why is it so easy for many of our elected officials to pass legislation spending billions of taxpayer dollars while proudly claiming they didn’t read the legislation? Many people throw this issue to the side and treat it lightly. I believe this acceptance by politicians to pass “emergency” legislation without reading the legislation is a symptom of the greater problem that exists in government.

Before I begin, let’s establish some context and perspective to what our elected officials are doing. Ask yourself what would happen to these individuals in the real world of private industry: (1) a CEO or business executive intentionally fails to read or study his company’s financials and performs no research or fails to consult research provided to him regarding his industry and the affects of certain prospective decisions the CEO is contemplating on implementing. As a result, certain monies from the company are misappropriated due to the CEO’s failure to notice/research/read information related to his business decisions; (2) a lawyer is hired by his client to create an estate plan. The lawyer asks his legal assistant to compile the information provided by the client and draft an estate plan. The lawyer then fails to read the estate plan but informs the client that the estate plan is in place and will be in his best interest to have the plan as soon as possible to ensure his affairs are in order. Ultimately, the lawyer failed to notice the legal assistant omitted certain provisions that would cause the client undue tax obligations. In both scenarios I have described, not only would the CEO and lawyer lose their job/client, they would face possible professional discipline, civil liability and criminal charges as a result of their incompetence and lack of discipline.

Unfortunately, politicians and government entities are held to a different standard and expectation level. This different standard and expectation level explains why the American electorate allows bureaucrats to be re-elected term after term, despite our federal government running dangerously high deficits with no attempts to reform such deficits through a balanced budget. So what is it about a politician, who may have had good intentions when he/she was first elected, that changes internally when they obtain the power of their position that allows them to justify spending OUR money so irresponsibly? Milton Friedman’s principle regarding the “Fallacy of the Welfare State” perfectly explains the dilemma by illustrating the spending and decision-making process using four different scenarios:

(1)It is a natural law that no one spends your money better than you because you have an incentive to spend as little as possible and get as much value as possible from each dollar you spend. (2) When you spend your money on someone else, you have an incentive to pay as little as possible, but little incentive to get as much value as possible from each dollar you spend. (3) Spending someone else’s money on yourself creates a strong incentive to receive high value but no incentive to keep the spending in check. (4) Finally, spending someone else’s money on someone else is the worst of all possible combinations because you have no incentive to keep the spending down and no incentive to take the time to ensure you receive as much value as possible from each dollar you spend.

As Friedman noted, “legislators vote to spend someone else’s money . . . Legislators are inclined to regard someone else as paying for the programs the legislator votes for directly and the voter votes for indirectly. Bureaucrats who administer the programs are also spending someone else’s money. Little wonder that the amount spent explodes. Bureaucrats spend someone else’s money on someone else (Scenario #4 above). Human kindness, not the much stronger and more dependable spur of self-interest, assures that they will spend the money in the way most beneficial to the recipient. Hence the wastefulness and ineffectiveness of the spending.”

Friedman’s insight illustrates why we see politicians constantly passing costly legislation that sounds good on the surface, yet those same politicians never take the time and effort to follow up and ensure the legislation is effectively administered or provide oversight regarding its effectiveness. Hence the modern era of people judging politicians by their intentions, not their results. Obama and members of Congress failed to read the legislation because they knew they would be judged on their intentions, not their results: Who cares if we read the bill if we are spending money on programs that sound good, regardless of their effectiveness or the possible unintended consequences such programs and spending may create.

Let’s apply Friedman’s insight to the most recent scandal: If a bailout of AIG and other banks were really needed, it would be imperative that Congress and the President read the text/language of the bill and be responsible with taxpayer money. Bailouts were allowed under the premise that they would benefit every American by securing our economy. Ironically, the decision by members of Congress and Pres. Obama to not read the language of the bill allowed them to pass a bill endorsing $165 million in bonus payments to AIG employees (many more bonuses are on the way, including Fannie Mae and Freddie Mac) and $20 - $35 billion in bailout funds for overseas banks (admittedly, this issue was dealt with primarily by the Federal Reserve bailout of AIG).

All of this brings me to the hypocrisy and arrogance we witnessed when members of Congress excoriated Ed Liddy, CEO of AIG. Watching members of Congress question Liddy was remarkable. They acted as though they were sinless and had the credibility to pass judgment on private citizens of a company who received bonuses under a contract, when such politicians themselves misused and abused their duties as an elected official when they deliberately chose not to read a bill that effectively cost the American taxpayer $165 million, thus far (with many more bonuses due from bailed out companies this year). We all expect private citizens to accept a retention bonus that is paid to them by their employer but do we expect our politicians to blame and threaten private citizens with 90% taxation for accepting compensation under a contract that those same politicians could have prevented if they had just READ THE BILL they voted into law? Power corrupts and absolute power absolutely corrupts. Perhaps the audacity of arrogance and hypocrisy was illustrated when Senator Dodd indirectly claimed that the reason they didn’t know about the bonus provisions was because they didn’t read the final version of the bill – like that is supposed to be a valid excuse for this mismanagement.

Next time you want to take out a loan or a mortgage and don’t feel like paying it, just tell the company that you didn’t read the contract and that is why you didn’t realize you couldn’t afford it. See how that works out for you. Then again, in this bailout environment, you might just get a bailout for your incompetence. Who will bail out Congress and Obama for their incompetence? Taxpayers for generations into the future. Last question – do you really want to trust Washington to run your healthcare, energy, and our already broken education system when they can’t even manage the details of a bailout or a stimulus plan? Why is there so much faith in government when government consistently fails us?