As debate continues on the federal “stimulus package” in Congress, I continue to discuss four possible objections to it: 1) It won’t work. 2) We can’t afford it. 3) It will be rife with waste, fraud and abuse. 4) It will drive up inflation. In Part One, we saw the poor track record of Keynesian “stimulus.” Let us continue:
The Treasury currently lists the total public debt as $10.7 trillion. To clarify how much a trillion dollars is, keep in mind that it took from the founding of our country to 1987 for our government to accumulate ONE trillion in debt. Since 1987 we’ve added another 9.7 trillion.
And the pace is accelerating. We added about a trillion dollars to that debt in 2008 alone, and we’ll probably add almost TWO TRILLION of additional debt in 2009. With levels of debt like this, it’s amazing that Congress should need convincing to NOT add on almost another trillion of debt in a single bill, especially with the coming tsunamis in Social Security and Medicare spending as baby boomers retire.
How much money is in this bill? Here are some factoids from the Heritage Foundation:
- The $900 billion Senate bill is equal in size to the entire economy of Australia. It is twice the size of oil-rich Saudi Arabia.
- That is enough money to provide every current high school Junior and Senior student a four-year education at a private university, and still have $150 billion to spare.
- The House spending bill last week of $819 billion is equivalent to borrowing $10,520 from every family in America. This borrowed money equals what the average family spends on food, clothing, and health care in an entire year.
- 2010 spending from this bill would more than double New Deal spending in 1936, in today’s dollars. Despite doubling federal spending, unemployment after the New Deal was enacted remained above 20 percent until World War II.
Whether you think the stimulus is a good idea or not, our children will be staggering under the weight of its debt into the foreseeable future.
3. It will be rife with waste, fraud and abuse.
Like most of the Senators and Representatives now voting on it, I have NOT read the stimulus bill. Nor do I need to in order to know that whatever version passes will be full of wasteful spending, dirty deals and political paybacks.
Wasteful spending? How about $88.6 million for new construction for Milwaukee Public Schools? Due to declining enrollment, MPS currently has 15 vacant schools and no plans to build more. I guess no one told Congress.
How about $650 million for the digital television converter box coupon program? Or $248 million for furniture at the new Homeland Security headquarters. Or $50 million for the National Endowment for the Arts. While American families and businesses are tightening their belts, Congress has taken theirs off. You can search the bill at http://readthestimulus.org
In this bill there will also be plenty of ways for Congress and President Obama to pay back those who helped them get elected. Some are speculating that, as the bill is currently written, groups that backed the Democrats, such as Association of Community Organizations for Reform Now (ACORN) and MoveOn.org could receive millions, if not billions of stimulus dollars. It’s easy to see that the Democrats are as concerned with “stimulating” their political fortunes as they are the economy.
4. It will drive up inflation.
Most of us don’t think much about inflation. It’s just kind of there, like gravity, death and taxes. We should think about it.
Inflation is not the yearly increase in prices. That is just the symptom. Inflation is the increase in the amount of money in circulation every year, causing the money itself to be worth less and less.
It’s not a hard idea to conceptualize. Imagine that you’re holding an authentic 1952 Mickey Mantle baseball card. Worth some dough, right? Now imagine that you wave a magic wand and create 820 billion more. Guess what happened to the value of each one.
Now imagine that you’re holding a dollar bill. Congress is going to wave its magic wand and conjure up 780 billion to 900 billion more just like it. Guess what happens to the value of each one. (I borrowed and paraphrased this analogy from Ron Paul, by the way.)
As this wave of new money washes across the economy it will be worth less and less. This aspect of the “stimulus” bill will hurt everyone in the country, but especially the poor who already have a hard time stretching their dollars without having them shrink more than usual.
Those of us in our 30’s or younger have never had to deal with the ungodly inflation that America had in the 1970’s and 80’s. We might want to prepare ourselves.
So, there are four possible objections to the stimulus package. It won’t work. We can’t afford it. It will be rife with waste, fraud and abuse. It will drive up inflation.
I thought about adding a fifth objection, that the stimulus bill is unconstitutional, that Article I, Section 8 gives Congress no authority to do most of what the bill spells out. But 10th Amendment federalism is already a dead letter. I’ll honor it’s memory by not disturbing it now.