Saturday, January 31, 2009

Stimulate This!

Well, its about time I am back.  I take a couple weeks off and they try to pass every special interest pet project dreamed up over the last 40 years all at once in the name of economic stimulus.  Folks, don't be fooled by this.  There is very little in this bill that will stimulate anything except more government.

First of all I want to explain the supposed logic behind government spending as a way to jump start the economy.  John Maynard Keynes was a British economist in the early 1900's who believed that economic growth was best managed by government spending, and more specifically deficit spending.  This is in direct contrast to classical economics on which capitalism is based, which states that the market itself, if left unfettered, will create the maximum amount of growth in an economy. Keynes theories were not initially popular among economists, but were widely accepted by bureaucrats, as you might imagine.  The prospect of having the power to decide where other people's money is spent in an economy is a politicians dream.  FDR was a student of Keynes and his New Deal was built on Keynesian theory.  This was the biggest expansion of government in the history of the country and prolonged our recovery from the Great Depression.  Why?  Well when capital is used for things that don't produce wealth (i.e. transfer payments, subsides, etc.) the economy doesn't grow as fast as it would when that money can flow to more efficient uses.  

How do we know what the efficient uses of capital are?  The great thing about economic laws is that they happen naturally.  What do you like to spend money on?  Those are the goods and services that are providing the most benefit to society.  They are the places where the jobs are, and where the opportunity for expansion lies. If the government has to subsidise something, its because no one wants it in its current state.  If no one wants it, then there is no profit being generated to attract investors or participants.  If there are no profits, then there are no jobs created or dividends for stock holders.  

So how does this apply to the current situation?  In an effort to stimulate the economy, our fearless leaders are going to accomplish this goal by spending almost ...Dr. Evil voice... ONE TRILLLLIOONNNN DOOLLARSSSS .../Dr. Evil voice...  But rather than leaving that coin in the taxpayers pockets where we could spend the money on the things we like (efficient uses of capital) they will choose for us.  They claim they are spending it on things that "create jobs". How many jobs has the National Endowment for the Arts created?  They get $50 million.  Jobs from global warming research? $400 million.  And don't forget the factory that is producing the digital television conversion coupons...$650 million.  If you haven't seen fit to get a $40 conversion box for your television already, then who am I to judge...I mean, we've only known about this since 1996.

Even Keynes has got to be rolling over in his grave over this one.  At least he favored spending on public works projects like building roads and bridges.  Only $90 Billion of the $1,000 Billion are earmarked for infrastructure and tax cuts.  The rest is pure, unadulterated pork.  $250 Billion in income transfers, $66 Billion to the Department of Education (the glittering jewels of efficiency that they are), and don't forget $335 million for STD programs.  Do we even want to know what kind of jobs that will create????

They say we get the government we deserve.  I am afraid that the level of ignorance out there with regards to economic principles is so bad that we are on the edge of a precipice from which we may never escape.  What saved our economy from the Great Depression was a world war, I hope it doesn't take anything like that to clean up the mess we are about to create.  The answer to bad government is not more government.  And those chanting their hope for change are like the lemmings running for the cliff.  They won't even know what is happening until its too late. I'm sure some other government official will be there to explain how its the fault of the free market.  Just promise me this...when all of this goes to pot, remember who voted for it and that Keynes is a bad word!


Star said...

Well put Kirk. Listening to the stuff in this bill, it's just so frustrating. How can we stop this? I'm glad there was a united front as far as the republicans were concerned, but the way Obama is talking about his wishes for bipartisan support, will there be? and who will it be and what will be sacrificed to win the support? HELP!

Tammy said...
This comment has been removed by the author.