As much as I’ve tried not to watch the news any more than I have to, it’s hard to get away from all the talk about Washington’s “stimulus package” and the subsequent unbelievable spending that’s followed in its wake. President Bush, proving once again not really to be a fiscal conservative, participated in the first “rescue plan” last year for hundreds of billions of dollars, which was at that time the largest single charges against the federal credit card in the history of the nation. Now, President Obama, in no way conservative, has broken the record with a second package at about $800 billion dollars. Both will top $1T easily when you include interest payments. Democrats and Republicans alike (shame on those calling themselves conservatives!) have taken us from $6T to $10T in national debt under President Bush, which took 8 years. Now we’re likely to jump another $1T in the first MONTH of President Obama’s presidency, and the new budget has the deficit at $1.6T, so the debt will be climbing from this point at a rate of over $1T per year, unless something changes. Now, there’s talk of TARP 2.0, government taking over healthcare and the banks, the auto industry asking for more money, mortgage bailouts, and STILL the Omnibus for 2009-10 is packed with pork. I think the latest estimate is like 8,500 to 9,000 earmarks.
I don’t know about you, but my head’s starting to spin … and my stomach’s starting to churn.
Not only is this amount of debt totally irresponsible, it’s ridiculous. It’s borrowing against the future and writing checks our children and grandchildren and great grandchildren will have to try to cover, and likely won’t be able to. But what’s even more ridiculous to me is what we’re spending the money on, which in my view will NOT “stimulate the economy”. I didn’t like the first stimulus/rescue/crazy spending plan (whatever you want to call it) under Bush, and I like the official Obama stimulus plan even less. And I don’t even want to think about a third, which DC is already doing. If it were up to me, I’d recommend less government involvement in the free markets, not more. In my view, it’s not capitalism that’s failed here, it’s government’s interference with capitalism that’s (once again) been clearly shown to lead us down the wrong road. My concern is that we’re finally getting to the stretch of road where Socialism replaces Capitalism, and we get to be like France and Canada … yippee!
So, as much as I’ve tried not to blog political lately, I really do want to try to understand how what we’re doing right now makes any sense at all. I have a few ideas on what I’d do to stimulate the economy if I was king for a day, and they’re all totally opposite what we’re doing. But rather than posting those (and fighting over them), I’m more interested in getting answers to two basic questions…
First, how will what we’re doing actually stimulate the economy? I truly don’t understand the thinking here. First, it seems like we’re spending when we’ve already overspent. It’s like gorging yourself on the all you can eat buffet, and then when you feel sick to your stomach, someone prescribes that the solution is to chase lunch with a 3/4 pounder from Fuddruckers (with extra fries and those awesome cookies). How does that make any sense? If you came to me and said that you had credit card debt equal to 2/3 of your annual income, and I told you that what you should do is increase your spending by 60%, you’d laugh in my face. But that’s exactly what we’re doing. National debt is $10T, 2/3 of the GDP which is roughly $15T. 2008-09 budget was $2.9T (already insane). Obama’s proposed 2009-10 budget is $4.6T, an increase of 60%. How does that make any sense?
And Obama’s stimulus plan doesn’t make any sense to me. Even if I concede to his declaration that there are NO earmarks (a debatable point) and believe every word about the jobs he claims he it will create (another debatable point), still all the jobs will be government jobs and temporary at best. If the bill funds building a new road, then the government pays a construction company to build a road. That’s good. But when the road is done, the construction company is no better off than before the road was built. It seems like we’re asking for a cycle like the auto industry is in… Come ask Uncle Sam for money, spend it, then come ask for more. That’s the wrong idea. Wouldn’t it be better to use government money (if we’re going to use it at all) to give private industry the tools to create more jobs, open more lines of business, create new markets, etc? Doesn’t seem like we’re doing much of that.
All I see when I look at the current “stimulus” plans are short term fixes and more dependency. What am I missing?
Second, what would you do if you were in charge? How would you guide / lead America right now?
I’ll give you an example to get us started. If I were in charge, I would create a couple year window during which you could deduct 100% of capital investments. Currently, you have to ammortize your deduction over several years. If all of a sudden companies could buy a new piece of equipment or build a building and deduct the whole expense immediately, wouldn’t they be incented to expand NOW rather than wait to do so. Wouldn’t that create new jobs and expand business immediately and entirely in the private sector, without creating increased dependence on the government?
Another example: I’d increase military spending by 10%, not decrease it. Then we’d spend more money on planes and tanks and other equipment, which American companies could build. Why wouldn’t that stimulate the economy?
But I want to hear your ideas. What would you do?