Thursday, January 24, 2008

Economic stimulus in search of economic science

Will the proposed economic stimulus packages improve the economy? Will a few hundred dollars in my pocket solve anything?

If you adhere to the long-refuted mush of Keynes, you will answer yes. If, on the other hand, you subscribe to economic truth, you will answer no.

In order to improve the economy, the government needs to: reduce taxes, reduce spending, and get out of the money/credit creation business. Putting a few hundred dollars in every pocket is a game that's been played for centuries. The Roman emperors sought the same end -- placating the masses, though the Romans ran games and festivals instead of simply slipping a few hundred bucks into open hands.

Isn't it ironic that a politician cannot hand over money to voters, yet, during an election year, he can offer the very same bribe in the form of an economic stimulus package.

Economies grow when money is invested in capital goods. A few billion bucks chasing consumer goods that have already been produced leads to more inflation. Yet, come November, the voter will not see the inflation, he will only remember the cash.

If Bush and the rest are serious about stimulating the economy, they need to take the three actions specified above. Will they? Never.

OK, so who will? Ron Paul of course. His platform is based on solid economic science; a platform that will stimulate the economy in perpetuity.

Vote Ron Paul

5 comments:

DeltaWhiskey said...

Good post, Jim. My proposed $800 "stimulus" just might "stimulate" Ron Paul's campaign.

Jim Fedako said...

You are absolutely correct. Count mine toward the same end. Thanks!

Anonymous said...

Dumb. The checks that went out for that last "stimulus" began to hit mailboxes as the we were already coming out of recession. Worse; only 2/3 of the money was spent, and half of that was spent on clothing, which is manufactured overseas. Rounding out the Top Three types of spend were food and healthcare. After that came (foreign made) consumer electronics (have to have my iPod!) and other, frivolous crap. Somewhere down toward the bottom of spend choices was "paying down credit cards".

Dumb, dumb, dumb.

Paul said...

Coming from a Libertarian orientation, I agree with what you say.

However there is a role for the government to play in stimulating an economy that gets 'stuck.' I'm not sure we're there yet, but let's say we are.

Putting money in the hands of the consumer will just pump up the economy of China and rest of Asia where consumer products are made.

If we want to stimulate our economy, we need to direct the money towards industries that produce their goods and services here. Reagan did it by cranking up the defense budget. It was no accident that the Navy built a base in every coastal state, and took us from <300 ships to around 600. Same thing in the other services (I'm just more familiar with the Navy).

We can do that today. Go fix all the aging roads and bridges in this country. Build a national solar and wind power complex in Nevada. Update the national power transmission grid.

Do spend a little on the military though. My decorated USMC nephew says he's tired of having to buy his own ammo magazines when he goes to Iraq...

PL

Jim Fedako said...

Paul,

You are espousing Keynesian economics, which really isn't economics at all. (note: Keynesian economics is a central concept of all socialist economies.)

Governments don't stimulate an ecomomies, any true libertarian will tell you that.

You mention that government can create value by investing in industries that produce goods and services. How is that different from fascist Italy, national socialist Germany, USSR, Cuba, or any other failed centralized economy?

As far as I can tell, your orientation is neocon, not libertarian. But, all is not lost.

May I suggest that you read some free market economics over at Mises.org. It will help you understand the truths of economic science.

Also, try LewRockwell.com for a libertarian view of the world.

Good luck!