“It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their consciences.” So said C. S. Lewis. The robber barons of the past have been reincarnated and are doing their dirty work in Washington D.C. Under the guise of taking care of us, of rescuing us from a disastrous recession, our elected officials (specifically Congress and the President) claim to be rescuing the banks, helping the middle class, creating jobs, and preparing our country for an unimaginably bright future. In reality, these are the omnipotent moral busybodies of our day that would punish profitable companies, reward failing businesses, horrifically expand government programs and spending, control nearly every aspect of our existence, and wreak economic havoc in all of our personal lives.

In my last blog, I discussed the nature of recessions. Today, I’d like to discuss the elements and implications of the current economic stimulus plan.

The Background
In case you haven’t heard, Obama and Congress are aggressively pushing a huge spending plan, claiming it is the only way to save our country from economic demise. Here are the top headlines.

• The House of Representatives approved a $825 billion dollar economic stimulus plan, on top of the previous $700 billion dollar attempted bail out of the banking system. That is $1.5 trillion.
• The US budget deficit scored a new record in 2008: $438 Billion. The projection for the 2009 budget deficit is $1.2 trillion (nearly triple the record) and that is before we add in the cost of the stimulus plan. Afterwards, $2.7 trillion.
• Total national debt in 2008 was $5.8 trillion. It is expected to double by 2015 and triple by 2019.

Government Spending Will Not Help the Economy
Don’t believe the dominant media with their blind love affair with all things Obama. Don’t believe the prophecies of doom or the promises of salvation coming from our elected officials. Instead, learn what history has already proven.

• Government spending (stimulus) is sleight of hand and does not work. It simply takes money out of the economy and redistributes it after removing a big chunk for administrative costs. Government does not create wealth or any new spending. It only redistributes the money and changes who spends it. Ask yourself this question: who do you want spending your money, you, the government, or someone else  whom the government gives it to?
• The chairwoman of Obama’s council of economic advisors states that money policy (the Fed) is fairly effective in ending recessions, but government spending is not.
• The stimulus plan follows the same model used by Japan during its economic crisis. What resulted there was an economy that stagnated for a decade and fell from its position as the world’s leading economy, even falling behind China — and it will soon fall behind India.
• Central planning does not work. Simply look at social security, welfare, US energy policy, and countless other government programs. The best and most current example is the total failure of the recent emergency bank bailout. The government approved $700 billion to rescue the ailing banking sector, authorizing $350 billion for immediate distribution. A couple of months later, when it was time to release the second half, no one could explain how the first half was spent (though there is significant evidence of misuse) and there was no improvement in the availability of credit (loans), which was a primary objective.
• To pay for the stimulus plan, the government will be forced to borrow money. Borrowing means repayment. The only way the government can afford to repay the debt will be to raise taxes or print money, the latter resulting in significant inflation. Keep in mind that inflation works just like taxes in reducing the amount of buying power that individuals have.
• You want proof that government spending doesn’t work? Take a little time to research the topic and you will find mountains of economic data proving that the expansion of government spending cannot work and that it only hurts the economy. Or, consider the mountain of economic stimulus spending the government has shelled out over the last year and how effective it was. Did you know that the federal government:
  • Increased spending by 11% to $3 trillion this last year? (How big was your raise in 2008?)
  • Enacted a $333 billion “emergency” spending bill? (Did it fix the emergency?)
  • Authorized $105 billion in tax rebates/refunds? (Significant evidence has already demonstrated, that reducing/refunding taxes does not work unless the reduction is seen as permanent.)
  • Pushed the budget deficit to a record $455 billion in the name of an economic stimulus? (It looks like that one didn’t work!)
  • Tried massive spending in the 1930’s, 1960’s, and 1970’s? (All failed to help during those recessionary periods.)
• Heavy government spending reduces productivity and future growth by:
  • Raising Taxes. Increasing taxes creates a less motivated workforce and reduces the amount of money businesses have to invest in their operations and create new jobs.
  • Social Spending. Money-for-nothing programs subsidize leisure and unemployment. It reduces incentives to be productive and self-reliant as it shifts money from investments (building future wealth) to consumption.
  • Creating Inefficiencies. The government has a consistent record of economic inefficiencies. When they run a program, it is done more poorly and more expensively than when the private sector runs the same kind of program. Additionally, government overlays the cost of a program with heavy and unnecessary administrative costs.

The Stimulus Plan Has Ulterior Motives
If the economic stimulus plan will not help the economy, why is Congress and the President so anxious to pass it? In short, for the same reasons they have been on a massive spending spree for the last several years. One, spending helps them get re-elected. Two, they are able to reward donors and the special interest groups that supported them. Three, they seek to achieve their ideological objectives (socialism for many). One clear indicator is the President’s strong push for immediate action. This recession was months in the making, and it will last a long time (by his account anyway). In reality, if Congress took one or two months to make smart, reasoned decisions the delay would not cause greater suffering than if they acted now. Yet, the House passed the biggest spending bill ever with just 8 hours of debate, while the leadership banned Republicans from participating in the debate.

By doing so, Congress hopes we won’t observe that:

• Nearly half of the stimulus funds are directed to organizations that sponsor or employ Service Employees International Union, federal, state, and municipal employee unions, or other unions closely associated with Democrats.
• One quarter of the funds will be given to governors, mayors, and local school boards to spend on their pet projects.
• Most of the “infrastructure” projects in the plan won’t pay out this year or next — until after the recession is already over.
• Countless billions of dollars with absolutely no connection to the economic recovery are committed to special pet projects (researching STDs, forcing the military to buy electric cars, stop-smoking programs, environmental programs, education spending, public housing, hunger programs, job protection for government employees, expansion of Medicare and Medicaid, and many more). See for yourself by reviewing the Congressional summary.

This Stimulus Package is Big — REALLY REALLY BIG!
Sure, everyone admits this plan is big money, but everyone seems so at ease saying the word trillion. Let’s take a moment and put the numbers in perspective.

• As a percentage of GDP (the best method of comparing), Obama’s plan is nearly double the amount spent to recover from any other recession. It is more than 4 times greater than what was spent for the 2001/2002 recession.
• It is nearly half of the current annual US budget.
• The plan promises an increase of 600,000 new government jobs.
• The cost to create the 3 million jobs Obama promised is $285,000 per job.
• If the same funds were divided between those unemployed for a longer period of time, each would receive $300,000.
• The Bloomberg News Service has run the numbers on all the Bush/Obama stimulus and bail out plans for the 2008/2009 recession and estimated the final cost to you and me will top $7.76 trillion. To put this in perspective, this is more than all of the following combined (using inflation-adjusted dollars): the old New Deal, the Louisiana Purchase, the Marshall Plan, World War II, the Korean War, the Vietnam War, both Iraq Wars, the S&L Crisis in the ’80s, and every single NASA project (NASA was established in 1958).
• Still, the true cost is grossly understated. Why? Because this emergency spending bill is like every other appropriation bill. The government has never cut real spending - ever. They might cut the rate of growth and call it budget cuts, but they never cut spending. So once this precedent is set, they will certainly continue spending the same amount or more.

Does that help give you an idea of how big this package of pork really is?

You Will Spend Your Life Paying This One Off!
What does this mean to you? Well, if the only cost to us is the payback, you will spend all of your life paying this scam off. Your children will spend their lives paying it off. Likely, your grandchildren will spend their lives paying it off as well. This payback will take the form of much higher taxes and run away inflation.

If the authors of the plan achieve their ideological goals, we will also lose our free market economy, industries and businesses will be nationalized, and the medical system will be run by the government (socialized medicine) with government bureaucrats making your health-care decisions for you. We will see stagnant economies, persistently high unemployment, and stifled innovation much like France and other parts of Western Europe. Our ability to protect ourselves from foreign and domestic threats will be severely diminished. We will live in a very different country.

It is amazing to think we are willing to do this to ourselves simply because we are going through a normal part of an economic cycle, a short term recession that will likely last less than a year.

TAKE ACTION!
The House has passed its version. The Senate is seeing some opposition. We still have some time, though not much. Do two things and make a big difference. 1) Call your senators and the senate leadership. 2) Share your concerns with friends and family (maybe email a link to this blog) and ask them to take action. Please do it today.

• Find your Senators phone numbers here.
• Senate Majority Leader Harry Reid: (202) 224-3542
• Senate Minority Leader Mitch McConnell: (202) 224-2541