Wednesday, January 30, 2008

Stimulus package nonsense

From Walter Williams over at WND this morning.....

Some Democratic and Republican presidential hopefuls are preaching economic doom and gloom, disappearing middle class and failing health care industry. What's their solution? The short answer is give them more control over our lives. Baltimore's political satirist, the late H.L. Mencken, explained this strategy, saying, "The whole aim of practical politics is to keep the populace alarmed, and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary."

The imaginary hobgoblin this time is the threat of an oncoming recession, even though it is by no means clear that the U.S. economy is in a recession. To head off a recession, politicians, including President Bush, are calling for a stimulus package.

Before we talk about stimulus packages, let's get one question out of the way: Is there any evidence for the existence of a Santa Claus or Tooth Fairy? Most grown-ups would probably answer no and ask, "Williams, this is a serious issue. Why are you talking about silly things like Santas and Tooth Fairies?" The reason is quite simple. Let's look at it.

The White House proposal is to give individuals and households tax rebates ranging from $800 to $1,600, respectively. Congressional Democrats, in addition to tax rebates, want a stimulus package that targets the poor through increases in food stamps and greater unemployment benefits. The details of different stimulus packages aren't as important as where the money is coming from. You can bet the rent money it won't come from Santa or the Tooth Fairy.
(Column continues below)

There are three ways government can get the money for a stimulus package. It can tax, borrow or inflate the currency by printing money. If government taxes to hand out money, one person is stimulated at the expense of another who pays the tax, who is unstimulated and has less money to spend. If government borrows the money, it's the same story. This time the unstimulated person is the lender who has less money to spend. If government prints money, creditors, and then everyone else, are unstimulated. As my colleague Russell Roberts said in a NPR broadcast, "It's like taking a bucket of water from the deep end of a pool and dumping it into the shallow end. Funny thing – the water in the shallow end doesn't get any deeper."

If we are headed into a recession, these proposed stimulus packages will make little difference. Previous experiences have shown that 1) it takes a long time to enact tax law, making it too late to prevent a recession, and 2) many people save a large portion of any tax rebate.

A far more important measure Congress can take toward a healthy economy is to insure that the 2003 tax cuts don't expire in 2010 as scheduled. If not, there are 15 separate taxes scheduled to rise in 2010, costing Americans $200 billion a year in increased taxes. Adding to the economic effects of that tax increase are the disincentive effects of the measures that Americans will take between now and then in anticipation of those tax increases. According to economists Tracy Foertsch and Ralph Rector, making the 2003 tax cuts permanent will annually add $76 billion to the GDP, create 709,000 jobs and add $200 billion to personal income.

The call for stimulus packages represents the triumph of political arrogance over common sense. The U.S. is a massive $14 trillion economy. The size of proposed stimulus packages range from $150 to $200 billion, which is about 1 to 2 percent of our GDP. Economy-wide, that's a drop in the bucket likely to have little or no effect. Congress ought to focus on measures that create greater long-term productive incentives such as reducing corporate taxes, estate taxes and personal income taxes, as well as economic deregulation.

I know that I will personally put the money in the bank. Why? Because it was my taxed money to begin with. Money that went to pay for all kinds of silly and stupid things; the biggest of which is Planned Parenthood. Planned Parenthood receives over $300 million of taxpayer dollars a year to perform abortions. P.P. says it doesn't use the taxpayer money to actually do abortions, they say they use it for public information purposes. Even if we give them the benefit of the doubt on that whopper, the $300 million we give them sure does free up P.P. monies that do go to funding abortion on demand at any term of pregnancy.

Yeah, I'll be putting that money in the bank so that maybe next year I'll be able to afford to do this.


Planesmithy said...

Most stimulus packages--particularly those that are just handouts or temporary tax cuts--make even more private debt public. And, truthfully, the government is already deep in hock, financed primarily by official inflows, i.e., foreign central banks. All pipers must, at some point, be paid. At some point, those foreign banks must be paid. Inflation is not a solution. At the core of all our problems lie the twin deficits.

As U.S. assets cheapen or experience trouble, buyers (often SWF's) will be more than ready to snap up them up. After all is said and done, we are selling off America.

Now, I am not arguing against a temporary stimulus package, but we must think further than just giving the junkie one more--maybe his last--shot in the arm. In short, merely priming the consumer for one more run at the punch bowl is a bit short-sighted. We must think deeper than that. We must look at root causes.

WayneDawg said...

I do understand the shot in the arm theory. It's like, in the old days of cars, pouring a little gas down the carb to start a car that had ran out of gas. The trick was to get the car to fire up and thus the fuel pump would start pumping fuel and the car would be back to its normal self.

I think the problem with this shot in the arm is that we don't have any fuel in the tank to keep the car running. Mearly pouring a little gas down the carb of the economy isn't the long term solution.

Make the tax cuts permanent. Cut spending. Quit coming up with more and more foolish social programs. End the free trade agreements.

That would be a great start to a long term solution.

dmarks said...

"Why? Because it was my taxed money to begin with."

That's why I would support a stimulus package that would basically mean that the government takes less.

However, I would not end the free trade agreements.

WayneDawg said...

dmarks - thanks for stopping by.

Remember, the stimulus packaged is borrowed money. It's not like the government had this money laying around in a giant savings account and decided to 'give' some of it back. No, they borrowed the money and just added it to the already mounting debt 'we' the taxpayers currently owe. In other words, they took money from Peter to pay you, Paul. But you, Paul, will end up paying more back to Peter in the long run in interest.

In order for the government to take less, they must cut taxes and spending. If they cut taxes then your money was never taken from you to begin with. That is the only true way that the government can take less.

pastorbrianculver said...

I watched the video you have, 775 people died while watching it. Good video that really makes you think!