Thursday, September 17, 2009

Stimulate Shmimulate

There has been a lot of crazy ideas that have come out of this recession, but by far the most idiotic has to be this idea of stimulus spending bringing us out of recession.

It is the most natural thing in the world for politicians to want to spend money like it is water. That's because they didn't have to earn it. They confiscated it from the citizens through forced payroll deductions and it magically appears in the coffers thanks to our modern financial system. It comes to the coffers so easily they now call it "Government Revenue". No, "revenue" comes from real work, a business. I think "spoils" or "booty" is the accurate descriptor. Anyway, the crazy thing is how the everyday person has been hoodwinked into allowing it! Or hoodwinked into believing it! The stimulus.

Get this: The Keynesian fools were actually claiming that tax reductions as a stimulus were bad because, wait for it, people would NOT spend the money. This has to be the most absurd argument I have ever heard in the face of these economic times. I realize that everyone wants the economic recovery to happen as fast as possible and for the stock market to rebound right back up where it was before the crash, but wake up! It isn't going to happen! And how can the idea of saving be considered bad in this environment, really? With millions of people losing their homes, their jobs, maxing out their credit cards and only paying the minimum every month, do we really want to demonize the concept of slowing our spending and saving a little?

'We can't lower taxes because people might not spend their tax refund right away.' For one thing these people must not have friends like I do. Because if they did, they would know that the surest thing in the world is how fast the tax refund gets spent. So right there their argument is blown out of the water and in fact is the exact opposite to reality. People spend their tax return immediately, so there is no faster, more deterministic way to stimulate an economy than by lowering taxes retroactively. Because you know that within 1 year there will be a massive spending spree had by virtually all.

Right, so what about those evil people (like myself), who actually discipline themselves enough to take their tax return and... oh the horror... save it. Well, you are covered there too because all my savings go into some form of investment. So the worst case scenario is you have a large portion of the stimulus spent immediately on useless depreciating assets, yearned after by people incapable of differentiating between wants and needs (cash for clunkers anyone?), and a small portion who provide capital to private business as an investment, or help out the banks with their deposits.

Instead, what did we get? We got the government blowing years of disciplined budgeting, turning to massive deficit spending. But all that means is that a few government bureaucrats will get to do all the spending instead of the regular folk. And they are spending our money! Here is a perfect example to illustrate my point: I heard that the city of Toronto used stimulus money to hire Bill Clinton at a speaking engagement, however, they are having trouble selling the tickets! So the regular folk don't want to see Bill Clinton, but that doesn't matter because the government bureaucrat has already spent the money. How the hell is that a stimulus? And the bureaucrats go on and on about the absolute crisis that we are apparently enduring with our infrastructure. Like at any moment all the sewers are going to explode and destroy all the city streets. So we should go out and replace it all at the same time! Now! Before it is too late! Give me a break.

What we have now is a huge $50B - $60B deficit being added to the massive federal debt that we racked up the last time our government went Keynesian. And we have been trying to get out from under it, without success, for the past 30 years!! See, government fat cats understand the first part of Keynes theory, about the massive deficit spending during the lean years, but they always lose their train of thought when the good years return and they conveniently forget about using the surpluses to pay off the debt.

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