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Update on: The Big Stimulus

January 29th, 2009 · 1,714 Comments- add yours

Ed.Note: This is an update on The Big Stimulus.

The House version of the economic stimulus package was passed 244-188 almost entirely on party lines (so much for bipartisanship) with every Republican voting against it.

Republicans wanted to strip spending for rebuilding roads and bridges and upgrade healthcare and schools, and instead provide only tax cuts of about $478 billion.

Ed.note:  I didn’t think so during the campaign, but Obama was right.  The Republicans are out of touch.  The members of Congress don’t see the need for upgrading health care, since they are part of the Federal Employees Health Benefits program that gives them top-level health care with many choices, mostly paid for by the government.  They can’t see roads and bridges in need of repair from private jets and limousines.  And they don’t need jobs, but what good is a tax cut to the millions that are out of work and have no income to tax?

There are also aggressive groups against the stimulus, collectively known as the “Do-Nothings.”  Their arguments include that the stimulus money is aimed at getting consumers spending and borrowing again where spending and borrowing were the problem in the first place.  I would feel better if they understood the problem was centered on borrowing to spend, not spending by itself. 

Our economy relies on the balanced and even flow of money.  For the individual, this boils down to monthly payments.  The economy collapsed because the supply of money in paychecks, etc. suddenly failed to keep up with the speed of the stream of capital required to pass from debtor to creditor.  Since everyone is both a debtor and a creditor, the flow slowed to a trickle for all, and creditors stopped extending credit.

The opponents quote the government regrets spending in crisis, quoting the Iraqi war (preemptive strike against a dictator with a history of attempted genocide by poison gas?), the Patriot Act (more than 700 thwarted terrorist attacks?), and the $700 billion bailout plan (still in process, but judged a failure by opponents).

Many of the Do-Nothings argue that a painful recession is the best way to cure American’s runaway culture of irresponsibility and debt and the government should allow the economic chips to fall where they may.  It is brutal but it is called capitalism and it works, where the alternative is socialism and it doesn’t work.

Ed.Note: These are all Republicans speaking who would do anything, including the destruction of America to make the other party look bad.  And Socialism is not an all or nothing policy – that’s called Communism.

Full-page ads against the stimulus will include the names of 250 economists who oppose the stimulus.  According to the Bureau of Labor Statistics, there are 12,740 working economists (SOC code 19-3011) in this country, at an average annual salary of $86,700.  That is less than 2% that have a dissenting opinion; hardly a mandate. 

The Do-Nothings advance that it is morally improper to deliver a crushing debt load to the next generation.  The thought passes my mind that the next generation will be a lot fewer if people feel they have no economic future and refuse to bring children into that world. 

It is also historical fact that these bailouts are mostly recovered by the government over a period of time through an increased tax base and compliance from working Americans.  What better way to spend our money than to attempt to provide for our children’s future, especially by improving the educational system, which is the lion’s share of the spending.

The Do-Nothings point out that housing sales rose 6.5 percent from November to December and this could be an indication that lower prices will draw buyers into the system.  They minimize the point that the increase for that month was based on the strength of bargain hunters picking up foreclosed properties. 

Ed.Note:  I am not sure I trust an economist who considers a single month a trend.  I know two young couples, both with high-paying jobs and no children who have purchased five foreclosed properties with the intent of renting them.  They are not exactly a portrait of the average American family.

On the other hand, to be fair, the Do-Nothings point out that without the stimulus, corrections are being made naturally.  Weak companies are going bankrupt.  It is hoped that the stronger ones will pick up their market share and laid-off employees.  Other companies, like the automakers are facing the facts that they haven’t been making the products that customers really want. 

American families are paying down their enormous debt.  This helps the economy because the money is paid to the credit card company or bank, where it can add to its reserves and extend more credit to those who need it.  When backs are against the wall, Americans know the right thing to do.

“Our standard of living must come down to the point where it can be supported by organic output,” quoting an interview with an investment consultant.  Weren’t those guys some of the ones who helped topple the economy in the first place?

The Do-Nothings fully expect to lose their argument, but put out the ads because they feel they have to Do Something.  And even though they are against it, they think it won’t work because it is not enough.  ??

 

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