Thursday, January 17, 2008

General rant on "economic stimulus"

The government has a problem, and a different perceived problem. The perceived problem is that the economy is headed toward a recession, and the various government institutions should take actions to prevent that. The actual problem is that the government takes a bunch of dumb actions trying to help the economy, which causes the economy to bounce up and down like a 5 year old on a see-saw blowing bubbles (and financial insiders to get rich while everyone else gets screwed). Regardless, it looks likely that this will not chance any time soon, and I fully expect the next president to come up with a stimulus package to do more long-term damage to the economy (more-so if it's a democrat proposal, which looks likely).

The goal of "stimulus" is to cause more money to be spent in the economy, so businesses sell more stuff, there are more jobs, etc. Americans have been spending their home equity over the last 5 years, and it's run out, which is what's causing the current "downturn". Americans have a negative savings rate, so in general they have no other money to spend, and credit is getting tighter as everyone defaults on loans they couldn't afford, so people don't have credit to spend either.

You might think, "ok, so give everyone some money to spend, like a tax break across the board." Two problems with that, though:
1. The government is already hugely in deficit (not a real problem, since they can print money).
2. Smart/wealthy people are not over-spending, so their less likely to wastefully spend extra money they receive.

Given this, the obvious best solution is to give money to the stupid people who overspend every penny they get, take out enormous debts they can't afford, are not fiscally responsible, and go to any means to preserve their spending for as long as possible. Give those people $100 dollars, and you can bet they will waste it on crap instead of paying down debts, saving, investing, or any of those other things that don't "stimulate" the economy.

And here were come to the happy coincidence with bailouts and stimulus: the best people to give money to are the same people most likely to need government bailouts! It's a win/win... the government gets their stimulus, people get to keep spending and ignoring their debt/savings/retirement/etc, and everyone's a winner! Right?

Well, almost everyone... the few people that get absolutely screwed are the fiscally responsible people, who see their earnings dwindled by socialist redistribution ("tax breaks for the middle/lower class"), their savings wrecked by inflation, and their financial responsibility made a laughing stock by their government. Well, that's not strictly true... everyone loses in the long run, when the currency is inflated into literal worthlessness, and the economy collapses. I can only hope our elected officials can successfully borrow against that day of reckoning until I, or anyone I care about, is no longer around to be destroyed by it.

Go go economic stimulus.

No comments:

Post a Comment