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Wednesday, Feb. 4, 2009

Ask not what you can do for your country…

The stimulus package will do it for you

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"Never allow a crisis to go to waste… They are opportunities to do big things." This is the view that Rahm Emanuel, Barack Obama's resident pit bull and chief of staff, takes of the current economic downturn. President Obama has certainly taken this advice to heart, crafting an "economic stimulus package" that incorporates 40-plus years of unfulfilled Democratic Christmas list items.

Is using an economic downturn, brought about by excessive spending and borrowing, as an excuse to spend more borrowed money really a reasonable response? Once again, the Democrats in this country are doing what "Feels Good" rather than making the hard choices and doing what is right. Funneling funds borrowed primarily from foreign countries through government is just about the least efficient and effective way to slow this economic spiral and ultimately reverse it. The free market naturally moves investment to the most effective and efficient places to use those funds. The government intervenes in this natural process, by funding legislators' pet projects, bloated bureaucracies, and failed programs that never go away.

Here are a few examples of what the money your children and grandchildren will be paying back will be paying for:

  • Continuing failed programs: An extra $142 billion for the Department of Education. Ten years ago, this department's budget was between $60-$80 billion, depending on what you include in the figure. Under President George W. Bush, education spending doubled. Still, our students perform poorly when compared to students from other industrialized countries. Clearly, more money is not the answer to falling test scores and high school graduates that can't compete.
  • Zero-sum games: The bill will create a few "green jobs", but only by reducing the number of coal plants that can be built, and thus, the number of workers that will staff those plants. Not to mention that the windmills and solar panels that will "replace" the coal plants will produce lower and less reliable energy outputs. Buy your candles now.
  • Local waste as a gift to President Obama's union supporters: According to the Milwaukee Journal-Sentinel, Milwaukee Public Schools could get $88.6 million in construction funds under the proposed stimulus bill. The district currently has 15 vacant school buildings, property that is unused, and no current "shovel-ready" plans for new construction. And why would MPS have plans for new construction? The district is losing thousands of students every year to better, older, and less modern private schools. Yes, the voucher program allows parents to choose to send their children to these private schools and the state picks up some of the tab. But shouldn't we look to President Obama's example? His girls won't be navigating the dangerous halls of a DC public school.

The larger point is best illustrated by a real-world example: Let's say you spent more money than you earned every year for decades and you have been borrowing the shortfall each year so that you can continue the spending (that's government). Your payments were manageable for the first years, difficult for the next few years, and for the past several years, you haven't been able to make the payments at all (that's the national deficit). So you decide to give yourself a raise (this is the Treasury printing money without gold to back it). Unfortunately, since you've given yourself the raise, it doesn't really mean anything, and each dollar of the "raise" you've given yourself buys less and less (this is inflation and a weakened currency).

Given this situation, can anyone reasonably say that borrowing more money, and spending those borrowed funds on things you don't need is the way to get yourself back into financial shape?

What if the only person left who will lend you more money is a neighbor who wants to control your every move for his own benefit? (that's China) Your neighbor wants you to take down the fence that keeps his dogs out of your yard. He agrees to forgo your payments for a month if you take the fence down, otherwise he'll call the debt and take your house. Now his dogs are using your yard as a lush, green bathroom (those turds in your yard are unfair trade practices that favor China).

On the other hand, what if you could keep more of the money you've earned and both pay down your debt, and buy a product that your neighbor manufactures (this is called a tax cut). Now, you're on the road to financial recovery, and your neighbor wants you to be happy so that you'll keep buying his products. He keeps his dogs out of your yard by building his own fence, which he funds with the profits from the products he sells to you (that's an infrastructure improvement).

Bottom line, by the Shepherd Express editorial staff's estimation, less than 25% of the stimulus bill will be spent on infrastructure, even if you include a fuzzy reference to health care and extended unemployment benefits in the definition of "infrastructure". The bill should be split 50/50 between tax cuts, including "corporate" tax cuts, and immediate infrastructure improvements. This is the only way the bill could legitimately be called a "stimulus package."