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The Stevenson Report: The Hair of the Dog |
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Written by Stumo
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Friday, 21 March 2008 |
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The Stevenson Report: The Hair of the Dog
The
Economic Stimulus Package of 2008 is now law. The federal government is
working hard to avert a recession and the stimulus package is part of
that process. Repeated pronouncements that our economy is robust are
contradicted by the flurry of federal activity that is meant to
stimulate it.
There are several things wrong with the stimulus package as it exists
that suggest it will not have the desired effect. It is more like the
“hair of the dog” cure for a hangover. That cure prescribes a follow-up
dose of the alcoholic beverage that caused the hangover in the first
place in order to alleviate it.
Unlike previous economic booms that resulted from increases in
productivity, our latest boom has relied on debt. Sustainable economic
growth depends on domestic productivity increases, not debt induced
spending. The stimulus package only adds to our federal debt, fueling
future inflation. It is not a long-term viable solution. (read more)
Second, much of the money pumped into the economy by the stimulus
will not multiply itself in local economies. Instead, much of the money
will head to foreign locations before it makes the full dose of
turnovers locally. Illegal Mexicans send up to $25 billion annually to
their homes in Mexico. Most large retailers outsource, or their
suppliers outsource, to China. As a result, much of the stimulus money
will head to China after only one or two turns locally.
Instead of handing out money, the government should do some different
things to boost our economy. They should build the fence on the Mexican
border. That would improve domestic incomes and keep our money here.
They should also mitigate China’s trade advantage by passing the
Hunter-Ryan Currency Reform and Fair Trade Act of 2007. That would
improve domestic production, making improvement sustainable. These two
things would do a lot more for our economy than the band-aid approach
that relies on deficit spending.
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