The Stimulus Bill Will Fail... Again

The Stimulus Bill will not work because it can not work. Anyone who truly understands what is transpiring in the economy will recognize that this is the largest, single instance of waste in the history of the World.

An economic overview:

• Overvalued assets are returning to equilibrium prices based on dramatically different market conditions.
• Dramatically excessive and inappropriate leverage attached to individuals, corporations and government entities is being resolved through lengthy pay-downs or restructured through bankruptcies and foreclosures.
• Consumer spending, which was distorted by excess liquidity, credit availability and a Housing Bubble, has collapsed because it was unsustainable.
• The Savings Rate, which was also unsustainable, is returning to some reasonable level. Increased savings, while positive for the long term, will continue to crush an economy overly dependent on consumer spending and geared for unsustainable growth.

Spending huge sums of money that we don’t have, burdening our economy with the liability of having to service and repay another trillion dollars of debt, all to create a few government dependent jobs which produce no real economic value will do nothing to alleviate any of the economy’s problems. What it will do is distort the economy further, obscure what is really transpiring, slow down the economy’s inevitable reset, deepen the economic crisis and threaten the US Government’s solvency and credit rating.

The argument being advanced is that we MUST pass the Stimulus Bill NOW or we face DISASTER. They have it backwards. Every major government initiative to date has made things worse not better. Yet, even though each program has failed, policy makers advance the factually incorrect and cowardly explanation that “Things Would Have Been Worse” without government action.

• The Federal Reserve slashed interest rates in an uncoordinated fashion causing massive volatility, devaluing the dollar and creating an oil bubble that undermined consumer confidence. The economy imploded anyway, yet policy makers argue that “things would have been worse”.
• Congress mailed out Stimulus Checks to low income Americans arguing that this was EXACTLY what the economy needed. This was the stimulus which would stop the slide and lead to a rapid recovery. The initiative was a total failure, accomplished nothing but to increase the deficit yet backers argue that “things would have been worse”.
• The Treasury argues that without a $700 Billion TARP plan to buy up toxic assets IMMEDIATELY the global financial system would collapse. Congress didn’t pass it immediately and the Treasury wasted the money on a totally different boondoggle. The global economy has continued to worsen.
• The government has instituted a myriad of misguided programs designed to forestall foreclosures. Each is designed to help homeowners and stabilize the housing industry. All have failed dramatically but in doing so have slowed down the inevitable collapse of housing prices.
• Now the Stimulus Bill is the “right size” and “exactly what we need” to stabilize the economy. When it fails policy makers will argue that “things would have been worse”. They can always argue that things would have been worse! This is an intellectually vacant argument based on faith not fact.

There are a number of smart people who predicted the current financial disaster. These people have credibility. The policy makers who created our troubles and were oblivious to their impending manifestation have none. Prognosticators who understand what is transpiring have consistently pointed out that the government’s initiatives would fail and make things worse. These people have correctly predicted the future based on a dynamic understanding of the facts, and yet they are ignored. The politicians who have only been consistent in being wrong are allowed to continue to make extraordinary policy errors, are not held accountable for their mistakes and every time they are proven to be wrong they argue their own self-importance by advancing the notion that “things would have been worse”.

Things will get worse. This is inevitable. No government initiative designed to distort economic activity, prop up prices or encourage a return to unsustainability amongst consumers will work.