I was reading the news recently when I opened the Drudge Report and saw his banner headline, "Dems Plot Second Stimulus." I thought to myself, "That headline is wrong."
It wasn't wrong because the Democrats are not considering yet another "stimulus" package. They are. It's wrong because it would be the third.
In February of 2008, then President Bush began his abandonment of the free market principles in order to save the free market system by signing a $170 billion economic stimulus package. Bush's stimulus sent single people $600 and married couples $1,200. You also received $300 per child. Clearly, the plan failed to stimulate the economy.
So, being the clever animals that they are, Congress came up with a new plan. In Denver, President Barack Obama signed into law a monster bill no one had read, creating $787 billion worth of stimulus.
They said if the stimulus was passed, unemployment would not rise above 8 percent. They warned it would rise to 9 percent by 2010 if it wasn't passed. Today, after passage, unemployment is near 10 percent.
They said the stimulus package would create over 3 million jobs. Since the passage of the bill, almost three million jobs have been lost.
It's failed to produce the postive results it promised. According to Vice President Joe Biden, it failed because they didn't know how bad the economy really was, but it's also working better than they expected. That's the type of clarity we have working on this issue.
The second stimulus has not prevented the economy from declining further, so now the plan is...an economic stimulus package.
Abraham Maslow said, "If the only tool you have is a hammer, you tend to see every problem as a nail." The government as spent almost one trillion dollars trying to stimulate the economy. That's one expensive hammer.
Now they want to try to nail it by spending more when they have already quadrupled the federal deficit.
How exactly are they planning to stimulate the economy this time?
First up is to extend unemployment benefits. This is expected to have bipartisan support. Secondly, they will extend a tax credit for first time home buyers. Finally, the Associated Press reports a possible extension of subsidies for COBRA.
I have to agree with Rep. Dave Camp, R-Mich., who said, "The fact that they're putting forward all of these things is really an indication that the stimulus was a failure. It didn't work." Neither of them did, which is why trying a third time simply compounds the fallout.
There are ways to stimulate this economy, but they don't involve more government meddling in the free market. Yaron Brook wrote in Forbes in February 2008 that a liberation package, not a stimulus package, was what was needed to pull the economy out of its freefall:
If the Bush spending plan can't productively stimulate the economy, what government economic plan can? None. Production does not need stimulation from the government; it needs liberation from the government. What a productive, dynamic economy requires of a government is that it restrict itself to protecting property rights from force and fraud, and refrain from interfering in free production and trade.
The Heritage Foundation wrote in October of 2008 that if the government would simply get out of the way and allow access to America's natural resources, "capital and talent would leave other parts of the world and travel to the U.S., forward-pricing markets would feel the downward pressure on prices as the result of impending supply increases, and ordinary Americans' concerns over their economic future would lessen." Instead, the Department of the Interior has "frozen oil and gas development on 60 of 77 contested drilling sites in Utah," creating a chilling effect on development of such programs in America.
Finally, the most powerful stimulus to the economy is to cut government spending. I know this goes against all the great economic minds of the left, but frankly, Keyensian economic theories follow the same pattern through history:
- First comes implementation and increased spending.
- Then, following failure to stimulate a recovery, the excuse that they just didn't spend enough.
How about this: if the government doesn't spend as much, it doesn't have to take as much. Then, if I have more money left in my paycheck, I have more money to spend, thus stimulating the economy by my consumption. Better yet, let's cut spending and reform the whole tax system, replacing the income tax with a consumption tax. What better way to stimulate the economy than to give the consumer all his paycheck?
Economic recovery is possible when governments allow freedom to flourish. This recovery can happen, but it requires government to get out of the way.
Duane Lester's Bio
Duane Lester is a former Navy journalist turned blogger and podcaster. He also writes at All American Blogger and hosts All American Radio on RFC Radio . You can follow him on Twitter at @bodhi1 .
Posted
10-12-2009 12:01 AM
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