So I figure I’ll post on the stimulus package being signed soon by President Obama (aka the “American Recovery and Reinvestment Act”). It begins at $787 billion dollars and is certain to cost over a trillion dollars once everything is taken into account. I have a few problems with this bill and think it is going to make things worse, not better. I hope I’m wrong, but I’m afraid I’m not.
I don’t think government spending is the right way to get the economy out of a depression. Keynesian Economics follows the principle that when an economy hits a downturn one of the chief ways for the Government to stimulate the economy is to increase spending. In this way the Government is supposed to be creating demand that the consumers aren’t creating, thus keeping business in business and keeping people employed.
While FDR gets a lot of credit as one of our greatest Presidents, no serious historian or economist argues that the New Deal is what got the U.S. out of the Great Depression. For those of you who don’t remember your U.S. History, the New Deal is the name for the unprecedented Federal spending undertaken by FDR in an attempt to get the U.S. out of the Great Depression in the 1930’s. He started all kinds of Government agencies, instituted Social Security, and greatly expanded the role of the Federal Government. We take it for granted today that many things are the responsibility of the Government that used to be the responsibility of individuals. That’s a whole different post – but it appears to me that when massive Government programs have been tried in the past to rescue the U.S. from a depression, they have not worked. In fact, a recent study led many economists to believe that the New Deal actually had the opposite effect and prolonged the Great Depression.
What makes this so difficult for people like us is that we have “expert” economists telling us opposite things. Some say this massive stimulus package is necessary and others say it is not. They all have lots of degrees and knowledge and whatever else that is supposed to make them know more than us…but they have totally divergent points of view on whether this will work or not. It seems to me if you’re going to borrow and spend around a trillion dollars you should have a pretty powerful consensus that it’s going to work. I’ve heard those in favor of this bill saying that “doing something is better than doing nothing.”
That may be true – but if that something is an unprecedented amount of spending and taxes foisted upon our children and their children – spending money we do not have – I’m not sure this something is better than nothing. From where I stand the burden of proof is on those calling for this gargantuan spending and I don’t think they’ve met it. Especially when you consider the historical context and the failure of the New Deal to get us out of the Depression.
There is all kinds of spending in this bill that seems to have very little with “stimulus” in the form of creating jobs and is more in line with a bunch of government programs that people have wanted to get passed and now they have the chance under the guise of “saving the economy.” I understand there is a genuine philosophical difference – for some any government spending qualifies as “stimulus” (therefore “waste” doesn’t matter because you’re not spending for product, you’re spending just to spend because that by its very nature is supposed to be stimulative – a la this article) but I don’t think it’s controversial to question the stimulative value of much of the crap in this bill. It’s telling that those in favor of the bill would actually argue that inefficient use of money doesn’t really matter as long as we’re spending money.
I for one would like to know that if the Government is taking my money they are spending it efficiently and not just to spend it. Especially in this case when they are spending hundreds of billions of dollars they don’t have – that they are going to take from you and me and our children and their children. We have to borrow this money from foreign countries like China. It can’t be conjured up out of thin air. If we borrow at this rate there’s no guarantee we won’t see some super inflation and see foreign investors stop loaning us money. I see it as a massive trainwreck and I honestly have some fear about how it’s going to work out (or not work out).
Obama has recently been criticizing the opposition to the bill, saying that those in opposition are obstructionists who (and he says this repeatedly) think “tax cuts alone” will solve the problems and have a “knee jerk anti-government reaction.” That kind of dishonest rhetoric coming from someone who talks big about being bi-partisan is pretty disheartening. While Republicans have zero credibility in criticizing wasteful government spending because they spend like crazy, that does not mean there is no valid reason to criticize the stimulus package.
Many who oppose the bill are like myself – believe some Government spending may be a good idea, in combination with tax cuts – but don’t want to spend such a massive amount of money or spend it on so many questionable and wasteful programs. Especially after the TARP (bank bailout) has seen us throw hundreds of billions away with nobody having any real clue what happened to the money (other than executives giving themselves large bonuses at our expense).
I hope this stimulus package succeeds. I hope I am wrong and this spending really does get the economy back on track. History gives me very little reason to believe this will be the case, but I’ll hope for it anyway. That’s all I can do. But mark me down as someone opposed to this stimulus package and someone who is looking at the future of the U.S. with less optimism than I used to.
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