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To Stimulate or Not to Stimulate

The more I read Robert Rech’s comments on the current economic crisis, the better I like what I read. He’s been calling for stimulus that involves rebuilding the infrastructure. He’s calling for the same, but also suggesting that the lame duck congress will not be the ones to create a well-crafted stimulus package. He says:

The coming stimulus package could be even more nonsensical. It will be voted on by a lame-duck Congress, many of whose members will want to reward campaign donors with juicy pieces of pork. Other lawmakers will see it as their last opportunity to include their pet project or tax perk, and some who won’t be accountable because they’ll be out of office in a few weeks anyway. In other words, it’ll be less a stimulus than a Christmas Tree.

That brings up one of my pet peeves-the across the board cut in spending, related closely to the “throw money at it” idea. True deficit hawks, you know, sort of like the current Republican crop who keep increasing the deficit, like across the board cuts. Everybody cut 10%, for example. But that often cuts the essentials, things that help keep the economy going.

I have a small business. I’ve had to cut some expenses. Where did I cut? Ten percent across the board? Did I go straight to my power bill? (Well, actually, I’ve managed some significant cuts in power consumption.) No, I looked for my least effective advertising, and for marginally performing activities and cut there.

If I borrowed money, what would it be borrowed for? Would I choose to spend it evenly on my everyday bills? After all, it would still be more money going through my business! But no, if I borrowed, it would be for a specific activity that I had good reason to believe that would produce more money.

I would like to think that the government will listen to the voices of folks like Robert Reich. Unfortunately, that would be unrealistic.

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One Comment

  1. Any competent businessperson or homemaker would agree with your line of reasoning. The problem is that when it comes to matters such as the budget, Congress does not have the mindset of a competent businessperson or a homemaker. When it comes to the budget, Congress has a mindset more reflective of a department store Santa Claus making promises that can only be kept if someone standing in the crowd does all the work and pays all the bills. Unlike that department store Santa Claus, Congress then adopts the persona of a incompetent parent, taking out a home equity line of credit to pay for all the promises that were made. Congress has been doing things this way for so long that there is little reason to think it will stop. Nevertheless, it is not possible to borrow one’s way out of debt. By deficit spending Congress can shift responsibility for payment to a later date and to other people who are not yet sitting on Santa’s lap or possibly standing in the crowd. Sooner or later, someone’s going to have to pay. Then Santa Claus is going to have to put a lot of coal in stockings.

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