3 Questions.. then a Lifeline
Question One – How is it that there is one man, unanswerable to the legislative branch of our government, who has the power to allocate over $1 trillion of US Taxpayer dollars to any firms, companies, organizations or groups of shareholders, without oversight, explanation or accounting? To whom does Paulson report? Just listen to his testimony to see if you can figure it out. Then read this for a different interpretation.
Question Two – Is there anyone in government, Republican or Democrat, who has a clue about basic economics? Senator Charles Schumer said on ABC’s “This Week” that the new stimulus package has to be “between five and seven hundred billion dollars”. Is that the most informed estimate we can get? A variance of $200 billion dollars? Why not $200 billion, why not $1 trillion? And one of the newly minted economic team of president-elect Obama, opined with great gravitas “that the number needs to be large enough to startle the thing into submission”. Frankly, I am already startled – into incredulity.
Question Three – Can anyone explain how, taking a dollar from one segment of the population and giving it to another group of the population, stimulates the economy. That is, the Treasury taxes everyone (or those who pays taxes!), then gives that dollar to some others. Moving the dollars from one house to another does not stimulate anything. Does anyone remember the promises made at the time the first (now paltry) $150 billion package was announced? By any measure, looking at today’s economy – that stimulus package failed.
The $150 billion stimulus was a failure because it merely shifted income from one sector of the economy to another. The government cannot create new purchasing power or dollars; it can only change the allocation of dollars. Productivity growth requires an increasing amount of capital, not by injecting previously extracted funds. To create the rebates, then, government had to take money away from another part of the economy.
Of course, those arguing for another package are offering that 1) the short-term failure of the package is, well, too short sighted. “Granted, GDP data did not show any meaningful economic growth from the stimulus”, they say, “Fiscal demand policy takes a longer time to take effect”. Or, 2) we obviously needed more. This is the same argument every soon-to-fired sales manager tells his boss: “Yes we are losing money on each package, but we can make it up with volume!”
So we are left with a ballooning federal deficit, spurred by ineffective stimulus packages, yet to be proven bailouts to large corporations (and all along I thought it was the Republicans who favored big business), and the declaration that, according to “Obamanomics”, the nation has little choice but to boost government spending, something Obama said conservative and liberal economists agree on. This post and this blog reference respected economists and research that does NOT support the idea of government spending as the only solution to the current economic turmoil.
In the absence of anything stemming the current tsunami of handouts, bailouts and giveaways, there are a few bright spots. The tax increase on the rich may have to wait (given the current economy, no tax increases should occur and there may be less “rich” anyhow), the “cap-and-trade” tax on fossil fuels should be delayed, and we even hear that Obama may delay his election promise to repeal Bush’s “tax cuts for the rich”. Conservative economists and monetarists have always known that any tax increase in the middle of a recession is an anathema. It may end up that “Obamanomics” only works when there is earned income available to redistribute.
Imagine that.
