Jan 17 2008
Brief economics lesson.
I think economics is interesting, which is why most people don’t like me. Ok, that’s not why they don’t like me, but I imagine it doesn’t help. Nevertheless, I’ve been appalled in recent weeks over the announcement of various politicians promoting “economic stimulus packages” (Like this, this, or that). So, in light of the ongoing debate, I’d like to throw my two cents into the mix: you’re all idiots. Here’s why…
First, understand that the US economy is a market of over $14 trillion (that number looks like: $14,000,000,000,000). The economic “stimulus” is estimated to be at $150 billion ($150,000,000,000). That sounds like a lot until you consider that it’s only about 1% of the total economy. If everything went on sale by 1% would you go out on a shopping spree? No. It’s not enough to greatly influence spending. That’s why stores don’t have 1% off sales. They have 10% off sales, or 20%, or 30% (which would require $1.4 trillion, $2.8 trillion, or $4.2 trillion respectively).
Second, the whole idea of a “stimulus” is misleading to begin with. A stimulus is an outside force that creates a reaction. But what outside force are we talking about here? The $150B has to come from somewhere within our economy. The proposals take money from one hand to place it in another. It sounds nice, it creates nice news clips, but it’s meaningless. It’s like taking a bucket of water from the deep end of the pool and dumping it in the shallow end: you don’t end up with a higher water level.
Finally, I challenge this notion that the politicians even know what they’re doing. They aren’t economists (at least not most of them) and they’re likely to cause more harm than good. If it were possible to “stimulate” the economy, why did they wait til now? Shouldn’t they have been stimulating the economy all along? The notion that your favorite politician has a “quick fix” up his (or her) sleeve is a fallacy. There is, however, one exception: Ron Paul.
Ron Paul proposes to cut tons of government spending (i.e. waste) to create a budget surplus (which would go to paying off the national debt). He proposes to cut income tax by 100%. This equals more money in your pocket. More money means you can buy more. If you buy more people need to make more, and if they make more they need to hire more people who will also not pay income tax and who also will go and buy more. This is the invisible hand that governs the economy. It’s not the one attached to Bush II, Clinton II, or Obama.