Feb
13
Why the Stimulus Package Will Not Work
Filed Under Economics
The proposed stimulus package Washington is working on will not revive our economy as we are being promised. The stimulus might provide a temporary boost to certain beneficiaries, but this will only worsen our existing problems and push the inevitable difficulties further down the road.
The main reason the stimulus is a poor idea is simply because the United States does not have the money. The actual “stimulation” will be done by Japanese and Chinese central banks lending our government the money. If you or I borrow money when we’re deep in debt, it is a miserable idea unless the money borrowed can miraculously pay off the debt one is currently in. By focusing on projects which do not yield positive returns, the existing bills guarantee the money spent will not be worth it.
Large portions of the proposed bills revolve around improving infrastructure. Pouring tax dollars into repairing bridges will not provide a positive return for the taxpayer since the money we are borrowing will never be paid back, it is simply maintenance. This plan might temporarily decrease unemployment, but that does not constitute a long term economic solution.
Companies overexpanded during the easy credit period from 2003-2006. As a result, we are left with huge overcapacities in factories, stores, and residential and commercial real estate. This easy credit-induced expansion was never sustainable and to try and prop up failing businesses and homeowners with a stimulus bill is a bad idea. The market does not need a kick-start, it needs a self-correction, where businesses close and orderly defaults take place since only a true correction can lead to normalcy and, then, legitimate expansion.
Future growth will also be far less than projected by this bill. If a corporation or “green company” needs to get federal assistance from the government to pay the bills and hire employees, is it really a solvent company? Also, why is government taking the risk with our money instead of entrepreneurs and venture capitalists? Why is the taxpayer put on the hook?
Lastly, the bill is chock full of good ol’ pork barrel spending and constituent handouts. Any politician that thinks spending $20bn on food stamps and $1bn on airport screening equipment will lead to future economic growth is delusional.
Once the stimulus has been spent, what are we left with? Bigger bills to pay. The almost trillion dollars we will have borrowed and spent will need to be paid back, with interest. Will new roads, green buildings and Head Start funding create a boom that will create enough economic growth to pay off over a trillion dollars? Obviously not.
We as a nation have grown accustomed to a lifestyle based on a continuous stream of credit from which to draw upon. The notion that the State will always be there to lend everyone money and make economic reality go away is ridiculous. The stimulus package is the last thing our country needs and will only worsen our existing problems.
To read how “right” the experts have been, read here.
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