Wednesday, August 17, 2011

STIMULUS WAS TOO SMALL TO STIMULATE?

You can't pick up a newspaper or watch a cable show these days without some Democratic apparatchik claiming the stimulus was too small. The party line seems to be it saved us from a depression but to really get the economy going it needed to be at least twice as big (some have suggested 3 trillion... that's right, 3 trillion!). So, what we must do now is raise taxes immediately on the "rich" and spend, spend spend; this time around on infrastructure. Yeah, that's the ticket, infrastructure.

I vaguely remember FDR trying this very thing with the WPA. Oh we got some dams built but it did very little to revive the economy. Hank Morganthau (FDR's Treasury Sec.) said "We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!".

Adding to the confusion of our liberal friends is the fallacy that WW II with it's massive expenditures brought us out of the Great Depression. You may recall from Mrs. Piaski's tenth grade history class that Britain had been fighting two long years before the U.S. entered the war. Now the Luftwaffe made it very difficult for our British cousins to keep up with all the little things one needs in a war, so we gave the Brits lots of support with Lend-Lease and other programs. But before we gave Churchill his Gold AMEX, we emptied the Bank of England. A paying customer is what stimulated the American economy, not tax and spend or borrow and spend.

Government stimulus spending never works. It may improve one sector over another, but you are robbing Peter to pay Paul. The money is either coming out of the economy in the form of taxes, or out of the credit markets and thereby drying up money for productive private sector borrowing, or the government is printing money and diluting the value of the currency. Putting unearned money into the economy does nothing for productivity and creates dependency. It's like a perpetual motion machine, it sounds great and it looks good and by golly it just might work, but it never does.








2 comments:

LL said...

We need to find a way for China to send us the money back to repay some debt (real or imagined)...

The ObamaNation is a train wreck and we're riding on the train.

Bill Shuster said...

"Government stimulus spending never works."

It can prevent an invasion from outer space.

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