Sunday, March 8, 2009

the other side of the coin...

what could be wrong with a government stimulus designed to employ people, build infrastructure, and get the economy out of a recession? well just as there are two sides to a coin, there is also a flip side to any money a government proposes to spend, that's what. clearly for those in a direct line to receive the stimulus money there's an immediate benefit. with the income they're able to make purchases and support themselves, which in turn will benefit those businesses and people they patronize. so far so good, more jobs and people consuming again, where's the trade off?
in order to understand the ill effects of government stimulation we need to recall the source of the government's ability to stimulate: taxes. taxes imposed on other citizens and businesses who's income and purchasing power are proportionally reduced. in the best of cases the net effect would be zero, what is taken from one in the form of taxes, is given to another as a "stimulus". no net increase takes place, we are simply removing it from Peter in order to pay Paul. of course we aren't in the best of cases, and 100% of the levied taxes do not pass directly to the "stimulants", rather the government itself takes a piece in order to provide for it's own expenses. real money actually leaves the economic system!
worse yet is what is presently being done: taxes are not being increased to pay for the stimulus. the money is coming from the printing press and ultimately debt issued by the government. those saddled with the burden of paying our debt will be our children and our children's, children. it's like giving money to Paul and expecting Peter's kids and grand kids to pay it back! we are making it a little easier on ourselves and sticking our posterity with the bill.
so why do it? the simple answer is it's easier to ignore the ramifications of our present actions than to suck it up and deal with the problem now. politicians aren't elected when they talk about difficult decisions, as a nation we elect legislators who promise to give us something for nothing!
like most things that sound too good to be true, the governments ability to "fix" an economic recession is dubious. even if it worked (which it doesn't) the citizenry payed the bill not the suits in washington.
i'll finish with a quote from Thomas Jefferson, "If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy"



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