New Year. New Administration. New Stimulus Packages.
I've taken a few weeks off constant news consumption, but today it hit me: more stimulus is coming. Well, continuing. The stimulus efforts of our government have been carrying on at a steady pace with no signs of slowing; and we all seem to be getting used to it. We are growing more comfortable with the growth of government control and diminishing economic results.
Bickering in Washington between Republicans and Democrats is going something like this:
Democrats: We need a $775 billion package.
Republicans: That's too much.
Democrats: Okay, how about $600?
Republicans: That sounds better, as long as you throw in a little extra for Wall Street.
Democrats: I think we can handle that, as long as you give us automotive, green energy, and infrastructure initiative spending concessions.
Republicans: Agreed!
And everyone walks away happy?
That fictious vignette is meant to make everyone laugh at a little at the tragedy of misconceptions floating around Congress about what will help the economy, but in reality, according to the Wall Street Journal, Democrats are pushing for "...spending as much as $850 billion over two years...'The weak economy demands quick action, and that is our intention,' House Majority Leader Steny Hoyer (D., Md.) said in an interview Tuesday. 'But significant work remains to be done. We need to do this right and make wise investments...' "
Republicans are faring marginally better, hoping to merely tame the stimulus package plans. They should squash them in my opinion. The Wall Street Journal shows the GOPs bi-partisan solutions are simply PR repair tactics, "Top Republican lawmakers are positioning themselves for battle over President-elect Barack Obama's economic recovery plan, signaling Monday that they will cast themselves as guardians against excessive spending rather than outright opponents of the Democrats' stimulus package."
I don't know. I don't understand it. Money doesn't materialize from nowhere. If the government wants to stimulate the economy by putting more money into the hands of consumers and businesses, doesn't anyone realize that money is coming from somewhere else in the first place? The government has to either tax or borrow more - and neither activity creates wealth or economic growth, it simply shuffles the funds around so that any economic gain in one area will be offset by economic loss elsewhere.
So while there may indeed be isolated areas of the economy that are positively affected in the short term by such stimulus plans, it's a mere magic trick, because another area is suffering, but perhaps it's an area that is less politically important, and deemed worthy of sacrifice based on legislative manipulation. In other words, the government gets to pick the winners and losers. I'm not comfortable with that, and you should not be either.
The following video commentary by Dan Mitchell of the CATO Institute reveals the myths and realities of government stimulus programs. They fail theoretically and in reality.
After watching this video, reading articles about the stimulus package proposals make me cringe, because it is obvious the programs will not lead to the intended promises of true economic growth, despite whatever benefits may be won by politically powerful groups for their causes. But the great thing is, now you can cringe and know better too!
Be sure to pass this video on to anyone you know interested to know how proposed government policies are likely to turn out.
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I'm curious to see what you are thinking...