Just months after millions of checks made their way into mailboxes, there's talk of yet another stimulus package.
Nothing's official, but all signs point to a $300 billion bill that along with tax cuts will increase spending on infrastructure, unemployment benefits, and aid to cash-strapped states … all areas that are, of course, vital to the economy and embarrassingly underfunded.
Like the last package, don't hold your breath for a quick fix. I don't think the stimulus will do anything. In fact, it'll probably make the problem worse, as most attempts at reviving consumers with money fresh off the printing presses do.
Here's why
Few disagree that consumers could use a little boost right now. After a month of nonstop news of banks getting billions, heck, trillions of dollars of taxpayers' money, people have every right to step back and say, "OK, where's my money?"
But, to be fair, it makes little sense to compare the money put forth to keep banks from going under to money spent on propping up consumers.
Who's going to pay for this?
A central theme to the bailout backlash has been, "They're using my (taxpayers') money." Is this true?
Ha … ha …ha. It's much worse than that.
Please don't think the government keeps your tax dollars stashed away in a rainy-day fund to fix the ills of the economy. That would make way too much sense.
The money comes from borrowings. Short of tax increases designed to offset the cost of these bailouts (which, of course, could happen), the money doesn't necessarily come from current taxpayers as much as from future generations of taxpayers. The real questions, therefore, are how, when, and by whom the debt gets paid off.
That's where stimulus packages find a gaping hole.
If you're gonna bail, do it the right way
Whether it's been AIG
That's a tremendously important aspect that all too often gets completely overlooked. Last week's decision to pump $125 billion into banks such as Wells Fargo
There's also a scarcely talked-about section of the bailout demanding that if taxpayers aren't paid back in full after five years, the government can go after the financial-services industry until they are. Yes, the $700 billion bailout will add a sickeningly large amount of national debt in the coming years, but few ever cite the offsetting effects of demanding equity and demanding that taxpayers are paid back.
On the other hand …
Stimulus packages to consumers, though? That truly is accumulated debt. Take the bailout earlier this year. We borrowed money and mailed checks with the hope that consumers would merrily spend them at retailers such as Wal-Mart
Of course, it was all bogus. The benefits have since been forgotten about. But the debt used to fund the stimulus? It's still here. And it'll be here until some politician has the gall to raise taxes and slash spending down to a pittance.
If you're going to print money to bail the economy out, you'd better have a plan on how to recoup those funds. The $700 billion plan does. Stimulus packages don't.
Get real
Rep. Barney Frank went on CNBC earlier this week, rooting for a bailout and suggesting that "this is a time for a … dose of Keynesianism." By Keynesianism, he's referring to John Maynard Keynes, the famous economist who argued that governments should push deficit spending during economic downturns to soften the blow.
What Frank didn't mention was that we've had our Keynesian boost for years … boom or bust. When the economy was on fire? Deficits. When it tanked? Bigger deficits. That wasn't what Keynes had in mind.
As a recent New York Times article put it, "Empires Built on Debt Start to Crumble." At some point, we have to come to terms with the fact that money doesn't grow on trees, and that if there's no plan on recouping this money, the government will be the one looking for a bailout.
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