From guest poster Bruce Kesler -
I heard Rush Limbaugh on radio say that the stimulus bill being worked on in Washington should be split in proportion of the popular vote percentages for Obama and McCain between Democrat ideas of “infrastructure” and Republican ideas of “tax cuts.”
One is never sure whether Rush is joking. Regardless, I gagged. (Ed note: It was irony, BK)
Indeed, I’m gagging at the whole stimulus discussions. Whether spending or tax cuts. The concept of the stimulus bill is that by putting more money in some people’s pockets, demand for goods and services will be increased, which will stimulate business spending. There are several slips between cup and lip in this.
First, much of the demand we were accustomed to was speculation, and much else was reckless to prudent family budgets. Much home and auto buying, as well as much other consumer spending, was by those who couldn’t afford the purchases. This should not be restimulated. Those who can afford purchases will make purchases.
Second, relatively few of those who can afford purchases are rejected for credit. Loosening credit will mostly reallow those who cannot afford purchases to resume.
Third, though the stimulus bill is not based on currently increasing most taxes, unless we want to see a future major inflation tax on everyone due to this huge deficit spending we will see huge future tax increases on most to pay for the otherwise unsustainable deficit spending.
In short, the very idea of the stimulus bill is inane.
There may be grounds for some very, very limited and targeted, proven boosts to some people or businesses in real dire need, provided it does not become ongoing or contrary to their getting their affairs and operations in effective order.
The rest is sheer hooey. The politicians who support it are just trying to buy votes and contributions from their constituencies, at the expense of everyone else and of reason.
See John Cochrane's Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies
