Podcast: Updated weekly in the wee hours of Sunday night/Monday morning. Subscribe on Stitcher, Spreaker, Apple Podcasts, Google Podcasts, or iHeartRadio
A few observations about the colossal economic-stimulus package that just passed Congress and is slated for Presidential approval on Tuesday:
- The Federal debt is already at $10.759 trillion. The $800 billion stimulus bill just approved adds billions more to that debt. In 2008, the interest alone on the Federal debt cost $451 billion. By comparison, the entire economy of the state of Iowa was only worth $129 billion in 2007. The interest alone on the Federal debt costs more than three times the entire economy of the state of Iowa.
- China is by far our biggest lender. Which means that our ability to continue borrowing is, in part, dependent upon their ability to keep their own country from falling apart. So if you're worried about human rights in Tibet, for instance, then you'd better worry first about getting the US government to balance its own books.
- Isn't margin borrowing and overspending on homes and other items Americans couldn't really afford what got us into economic trouble in the first place?
- Would you force your grandmother to pay for this decision?
- Would you trust your opponents with this power?
- Will this decision make it easier for people to trust one another?
- Have you really done your due diligence before making the decision?
Here's another problem we face: Despite the "somebody do something" mentality evident in the President's recent press conference on the stimulus package (and inherent to much of the news coverage of the same), sometimes the best answer is to do nothing. Doing nothing isn't very sexy -- and it certainly doesn't create ribbon-cutting opportunities for those politicians who are hoping to get re-elected -- but it can be the right thing to do. So when the President says this:
Most economists, almost unanimously, recognize that even if philosophically you're wary of government intervening in the economy, when you have the kind of problem we have right now -- what started on Wall Street goes to Main Street, suddenly businesses can't get credit, they start carrying back their investment, they start laying off workers, workers start pulling back in terms of spending -- when you have that situation, that government is an important element of introducing some additional demand into the economy....it's also important to hear from real economists, who have a vastly more diverse array of views than the "unanimity" the President imagines. Among other things, there may be broad agreement that government can affect the economy, but spending isn't the only way. Moreover, there's essentially just as much agreement that perpetual deficit spending by government hurts the economy. And there are already arguments being made that the stimulus isn't big enough. Yet who remembers the $600 billion Bush stimulus package from 2003? Ah, those would have been the much-derided "Bush tax cuts".
And just as importantly, we need to recognize the role of unintended consequences. For instance, By loaning money to the automakers back in December, the government may have made it certain that the companies would go bankrupt.
Here's an alternative view of the overall situation: We lived on borrowed money -- depended upon it, really -- for a decade. And the economy, overall, has finally reached its credit limit. Now, we have to pay it down. And until some of that gets done, people aren't going to trust one another, and no amount of new government spending or new tax cuts will really set us up for economic growth.
The good news in all of this: Human ingenuity will prevail. After all, people living in the Soviet Union figured out how to listen to Beatles records by copying them onto X-ray films. If people are willing to try crazy things like that just to listen to music, then we'll probably figure out a way to keep on feeding ourselves. Just a hunch.
Other good news: We're now adding new podcasts almost every day. Want to share your feedback? Contact Brian Gongol online through his website, or try using Twitter.
Keywords in this show: automakers • bankruptcy • Beatles • Bush, George W. • China • Chrysler • debt • deficit spending • economics • economic-stimulus packages • Federal debt • General Motors • human rights • ingenuity • innovation • interest • intervention • Iowa • law •; margin borrowing • Obama, Barack • Public Decision-Maker's Checklist • "somebody do something" • tax cuts • Tibet • USSR