MARKETS, NOT GOVERNMENT, STIMULATE OUR ECONOMY

It is past time to tell the truth about the current "Stimulus" bill before the House. It is, for the most part, close to a one trillion dollar payoff to Democrat party constituencies. It will not serve to stimulate the economy. It will instead stimulate dependency on the part of entire segments of American society on the government generally and on the Democrat party in particular. That, of course, is what it is intended to accomplish. It is a political "Stimulus", not a resolution to an existing economic recession.

There are legitimate areas where government action can, in fact, help to stimulate our economy. Most of those are policy arenas, such as tax policy, trade policy and monetary policy. Since it is and always has been free markets that drive this economy, any and all government activity that encourages the free markets to take action is by far the most effective and immediately applicable use of government resources.

That can include some direct government spending as well. Defense spending, for example, is directly stimulative to the economy. That kind of spending generates jobs, profits and private sector investment that ripples through a number of existing industries and companies. But the kind of spending proposed in the current "Stimulus" proposal does little of that.

Worse, it may or may not accomplish such ends down the road, that is years down the road. We know from the lessons learned during the Depression relative to government spending, that it does almost nothing to get the economy back on track.

The current House bill, however, spends billions on Democrat constituencies.

The enviros gain huge cash benefits over time, some of which may or may not help our economy.

Teachers unions are handed billions via government school budgets to continue down the track of failure and decline in the quality of our public schools.

Colleges and universities, most with large endowments and wildly leftist faculties, are handed billions to open the floodgates to higher enrollments from the failed K-12 government schools so as to further indoctrinate already under educated young minds.

Much of the oft pointed to "infrastructure spending", again totaling billions of dollars, will be long delayed at best. At worst, much of it will be denied by the simultaneously funded enviros who will battle any construction project at literally every opportunity. Ultimately, whatever does get funded into actual work will accrue most of the taxpayer dollars spent on such projects into the hands of construction unions, which will be in complete control of such building activity. Count on every project being over budget and past deadline. It will, after all, be government managed.

If our Washington politicians were serious about supporting the economy and were they to set down their silly partisan agendas, their focus would be almost completely upon finding ways to stimulate our markets, which in fact are the foundation upon which our economy rests.

For example:

1. We know that the real estate market has imploded and it remains as flat as a pancake. We also know that residential and commercial real estate construction employs hundreds of thousands of workers, both directly and through all the real estate related businesses. Finding ways to ignite this market would provide an immediate and significant impact on our economic well being. Particular attention on properly, as opposed to what has been done to date, invigorating the financial markets would be paramount to such an effort.

2. Thoughtful trade policy, not based upon partisan agendas but based upon positive economic outcomes, would be very smart indeed. Read, for instance, this piece, "Preventable Job Cuts", about how the blockage, by Democrat pols, of a simple free trade agreement is now costing 20,000 American families their livelihoods. That translates into hard times for a lot of our fellow citizens. Why? Because of union driven political agendas that do nothing, in fact, to help foreign workers.

3. Most certainly, tax policy can grow or diminish our economic well being. The United States currently has one of the very top corporate tax rates of any industrialized nation. Many of our brain dead politicians believe that we must tax these evil entities of private enterprise. They have yet to even remotely understand that those taxes are simply passed through to you and me via the price of the goods or services that those same corporations provide.

Were Congress to cut the corporate tax rate by half, most companies would use those additional profits to grow their business, hire more employees, pay more gross dollars in taxes off the resulting increase in income and gain more investors in support of their increased value and dividend growth. Stock markets would rise accordingly and along with them, millions of individual and collective retirement accounts. Read more on the subject in this piece, "Corporate Tax Cuts Should Be Part Of The Stimulus".

4. As has long been the case, monetary policy plays a key role in economic well being. That is done primarily via interest rates and that card has pretty much been played out at this point in time. Monitoring such policy will be crucial as we move forward since our historically low lending rates can eventually invite runaway inflation.

On the other hand, simply printing more money in order to spend it in prodigious amounts, particularly on useless and unnecessary political payoffs, can lead to a currency deflation that can make a dollar worth a dime. The danger lies in agenda driven politicians who have not a clue about the lessons of history or the consequences of uninformed partisan activity.

Finally, the article that follows speaks generally to the reality of how government impacts the American economy and why politicians are so motivated to get government involved. The lessons of history are clear. Free markets, properly regulated, are the engine that grows and drives our economic well being.

Government spending, on the other hand, has always and will once again prove largely to be a burden on economic growth.

A politically motivated "Stimulus" will not cure this recession. At best it will prolong it and, on the other hand, it could very well make it worse.

Reagan was correct: government is the problem.


'Stimulus' Plan Is Really About Enlarging Gov't
By THOMAS SOWELL

Everyone is talking about how much money the government is spending, but very little attention is being paid to where they are spending it or what they are buying with it.

The government is putting money into banks, even when the banks don't want it, in hopes that the banks will put it into circulation.

But the latest statistics show that banks are lending even less money now than they were before the government dumped all that cash on them.

Even if it had worked, putting cash into banks, in hopes that they would put it into circulation, seems a rather roundabout way of doing things, especially when the staggering sums of money involved are being justified as an "emergency" measure.

Spending money for infrastructure is another time-consuming way of dealing with what is called an immediate crisis. Infrastructure takes forever to plan, debate and go through all sorts of hearings and adjudications before getting approval to build from all the regulatory agencies involved.

Out of $355 billion newly appropriated, the Congressional Budget Office estimates that only $26 billion will be spent this fiscal year and only $110 billion by the end of 2010.

Using long, drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell it that your house is on fire.

If you cut taxes tomorrow, people would have more money in their next paycheck, and it would probably be spent by the time they got that paycheck, through increased credit card purchases beforehand.

If all this sound and fury in Washington was about getting an economic crisis behind us, tax cuts could do that a lot faster.

None of this is rocket science. And Washington politicians are not all crazy, even if sometimes it looks that way. Often, what they say makes no sense because what they claim to be doing is not what they are actually doing.

No matter how many times President Obama tells us that these "extraordinary times" call for "swift action," the kind of economic policies he is promoting take effect very slowly, no matter how quickly the legislation is rushed through Congress. It is the old Army game of hurry up and wait.

If the Beltway politicians aren't really trying to solve this crisis as quickly as they could, what are they trying to do?

One important clue may be a recent statement by the president's chief of staff, Rahm Emmanuel, that "a crisis is a terrible thing to waste."

This is the kind of cynical revelation that sometimes slips out, despite all the political pieties and spin.

Crises have long been seen as great opportunities to expand the federal government's power while the people are too scared to object and before any opposition can get organized.
That is why there is such haste to do things that will take effect slowly.

What are the Beltway politicians buying with all the hundreds of billions of dollars they are spending?

They are buying what politicians are most interested in — power.

In the name of protecting the taxpayers' investment, they are buying the power to tell General Motors how to make cars, banks how to bank and, before it is all over with, all sorts of other people how to do the work they specialize in, and for which members of Congress have no competence, much less expertise.

This administration and Congress are in a position to do what Franklin Roosevelt did during the Great Depression of the 1930s — use a crisis of the times to create new institutions that will last for generations.

To this day, we are still subsidizing millionaires in agriculture because farmers were having a tough time in the 1930s.

We have the Federal National Mortgage Association (Fannie Mae) taking reckless chances in the housing market that have blown up in our faces today, because FDR decided to create a new federal housing agency in 1938.

Who knows what bright ideas this administration will turn into permanent institutions for our children and grandchildren to try to cope with?

Copyright 2008 Creators Syndicate, Inc

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