Thursday, January 08, 2009

No New Economic Stimulus Package

In a speech today, President Elect Obama tried to gain support for an almost $1 Trillion economic stimulus package. "I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said. Writing on the Real Clear Politics Blog, Marie Cocco argued against tax cuts in the new package, but also noted, "Without question, a large and quick stimulus is urgently needed." I wish to question the need for a government bailout that adds more money to the insane amount we have already wasted in hopes that something new will happen.

According to CNN Money, the United States allotted $7.2 Trillion in rescue funds for the failing economy during 2008. As of December 2008, $2.7 Trillion had already been spent, and the economy doesn't look any better today. These numbers don't include the FDIC Temporary Liquidity Guarantee Program. This program has an unlimited budget, and it is unknown how much it has spent. We have already spent Trillions of dollars and we have allocated Trillions more, and now the President Elect wishes to spend another Trillion. The President Elect intends to spend a portion of this money on alternative energy, updating federal buildings, converting paper medical records to an electronic format, expanding broadband networks, and updating schools and universities. All of those are separate issues that are worthy of their own debate. None of them are going to spur our economy.

We have heard a lot about the infrastructure spending in the new economic stimulus package. Some states are planning their own infrastructure packages. None of our elected officials have bothered to look at Japan's economic infrastructure spending. The Heritage Foundation notes that from 1992 to 2000, Japan took the road most of our elected officials want the United States to take. The massive increase in government spending on infrastructure has caused Japans per capita gross national income to fall to 74 % of that of the United States. The Heritage Foundation notes that between 1992 and 2007 the Japanese economy was almost flat. Yet we are now expected to spend more money than the Japanese while not having the same terrible results.

"We have to do something!" seems to be the motto of today's politician. In any situation there is always the "do nothing" approach. Perhaps the U.S. government should simply get out of the bailout business and let our businesses solve these problems for themselves. Some will fail, others will succeed. That is the nature of a free market. People and business should be allowed to succeed or fail based on their own efforts, not the will of the government. Massive Government spending didn't help the Great Depression, and it won't help our economy either.


pack04 said...

I do not know the answer to this but hopefully somebody does. The market crashed in 1929, when Hoover was in office. Did the government start spending money than or did it do nothing until 1933 when FDR got in there? If it did nothing how did the economy do? Did the economy immediately start getting better when the government started getting involved? There are a lot of questions from the Great Depression that come up. Did the government spending help, hurt, make it longer? I do not believe in one instance of something being the "end of the discussion." The fact that this happened in Japan is starting to show me that government spending money to "fix" the economy might not be the best idea.

Andy D said...

If you really want to do your homework on this, I would recommend The Forgotten Man by Amith Shlae. She does a very good job of tracking the events of the Great Depression. She uses unemployment rate and government spending throughout the Depression to make her argument. It is very well written and very easy to read.

If you come across an example of government spending pulling an economy out of a Depression, I would love to see it.