The false economy of government “stimulus”

In its ongoing attempts to “stimulate” the economy, the government takes money out of the economy (in the form of cash through taxes or credit through deficits), consumes part of it in waste and administration, and then spends some part of it for a stadium, a bridge or whatever.

All the government can do, at best, is to move some jobs from that portion of the economy where the private sector would have used the money to that portion of the economy for which the politicians can take credit in hopes of reelection. Nevertheless, due to the manifest inefficiencies in government, more jobs would have been created in the private economy had the money not been unceremoniously extracted from the taxpayers' wallets in the first place.

Hence, while the politicians get to take credit for some job creation, the net number of jobs created will always be less than had the private sector been left with the money and regulation reduced.

On “Big Oil” and taxes

Between 1980 and 2005, oil companies directly paid more than $2.2 TRILLION in taxes (after adjusting for inflation) to federal and state governments—including excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to numbers from the Bureau of Economic Analysis and U.S. Department of Energy.

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For comparison purposes that is…

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$88,000,000,000	per year
$7,300,000,000	per month
$803,103	per day
$33,463	per hour

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Still, for Leftists—who hate success and are filled with envy—that's not a big enough contribution to make to our American way of life.

But this contribution does not include the other major contribution of so-called “Big Oil.” The firms in that industry employ—directly and indirectly—several hundred thousand Americans. Many of those American earn above-average salaries and virtually all of them pay state and federal income taxes, pay in millions in consumption (sales) taxes, and the vast majority participate in paying millions of dollars into property taxes.

Here are some numbers to think about

In 2010, the U.S. oil and natural gas industry provided $476 BILLION in direct support to the economy. This stimulus did not require an act of Congress nor that billions of dollars in new public debt be foisted upon the taxpayers of this generation and generations to come.

• $266 BILLION was returned to the economy in the form of spending on new energy projects, improvements to existing projects and enhancements of refinery and other downstream operations
• $176 BILLION paid to 2.1 MILLION U.S. employees in wages and salaries, plus benefits and payments to oil and natural gas leaseholders
• About $35 BILLION in dividends distributed to American shareholders

Big Government spending and the Economic “Wreckovery”

Chris Edwards, director of tax policy studies at the Cato Institute and editor of DownsizingGovernment.com, points out that “[d]ata from the Organization for Economic Cooperation and Development (OECD)  show that total federal, state, and local government spending in the United States this year (2011) is a huge 41 percent of GDP [Gross Domestic Product]. That compares to the average of the 32 advanced economies in the OECD of 45 percent. Until the big-spending Bush and Obama years, we enjoyed a government size advantage compared to the OECD average of about 10 percentage  points of GDP. But that advantage has now shrunk to just 4 points, and we are fast becoming just another bloated welfare state.” (Cato Policy Report, Nov/Dec 2011)

What this means is that more and more of our economic resources are being shifted from producers (those who produce goods and services for consumption) to non-producers (those who produce no goods or services for consumption).

“What difference does this make?” I hear you ask? “Doesn’t government spending ‘stimulate’ the economy?”

The answer is a resounding, “No!”

If the economy is stimulated by government spending, then we should not restrict ourselves to building four-lane highways. We should build eight- and 16-lane highways everywhere. In fact, we really should invest in “bridges to nowhere” and even in “highways to nowhere.” Maybe would should even start a program where four lanes are being jackhammered away while the citizens use the other four lanes. Then, when the jackhammered lanes have been rebuilt, shift the traffic onto those lanes and jackhammer the first four lanes and rebuild them. Then just keep repeating that cycle.

If a little bit of spending by the government is good for the economy, then all that spending should have the economy skyrocketing.

However, with all that money is being taken out the private sector economy and more and more workers and money being used to build roads and bridges and whatever government decides to undertake, that leave less money in the economy and fewer workers to produce what consumers (read: citizens and taxpayers) need day-to-day. There would be less food produced, less gasoline being refined and delivered, fewer automobiles being produced, fewer coffee shops to go to, fewer movies being made and fewer theaters in which to watch them—in short, less of everything.

And, since supply influences prices, that also means that the prices of all those goods and services would be going up. There might be more money circulating due to the wages being paid for all the public works projects, but all that money would be chasing fewer and fewer goods until no one could afford to buy anything.

Edwards tells us: “Stanford University’s Michael Boskin calls government spending a ‘leaky bucket’ because the benefits are a fraction of the cost. For every $1 spent on a government program, the required taxes cause about $1.50 of damage to the private economy. And because programs are so inefficient, every $1 of spending may only produce a return of perhaps 50 cents. Thus, ‘it costs taxpayers $3 to provide a benefit worth $1 to recipients,’ notes Texas A&M University’s Edgar Browning.”

Let’s get real! Tell your Congressman and Senators that you’re onto the scheme and know that all that “stimulus” just leads to “wreckovery,” not recovery.

Please listen to the WARNINGS!

Here's a message I just sent to many members of Congress:

Recently, an essay published by the governor of the People's Bank of China appeared to favor the creation of an IMF currency to replace the U.S. dollar as the world's reserve currency. This, of course, is a tragic sign as the U.S. has been the safe haven for investors from around the world for the greater part of the last century.

In Europe, the outgoing president of the European Union, the Czech Prime Minister Mirek Topolanek, described America's current plan to fight the widening global recession as the "road to hell." Then British Member of the European Parliament Daniel Hannan made worldwide news headlines by rebuking the UK's own inflationary and debt-focused policies.

Meanwhile, Pres'ent Obama's administration carried on an effective public relations campaign to convince the U.S. citizenry and the rest of the world that if the world just worked together, everything would be "okay" -- even if they worked together mostly doing the WRONG things. That seemed to pretty much put most everyone back to sleep.

The Washington drumbeat is that our economic woes result from a lack of consumer spending. Therefore, Pres'ent Obama and the Democrat-controlled Congress seem intent on making up for all the U.S. citizens by spending money the government does not have. It hardly seems reasonable that the cure for the sick man's disease is to drain blood from his leg while trying to inject it back in his arm.

To postpone inevitable (formal) tax increases, it seems the Obama administration is content with a strategy of printing money. Of course, printing money is just another form of taxation. Rather than taking money out of the citizens' pockets, the administration is satisfied with simply robbing the currency itself of its purchasing power.

The things that are lacking in the current worldwide recession are PRODUCTION and CAPITAL (trillions of dollars of capital having been destroyed in the bursting of the "bubble"). It is PRODUCTION, not spending, that will building capital and restore purchasing power -- not the printing of currency that is ever more diluted in value. Besides, if the government simply prints more money, it won't allow Americans to buy more things because the things. They will just be able to buy less stuff at higher prices.

Obama's economic advisers seem to have convinced themselves -- and Congress -- that more debt and government spending will restore growth and ultimately allow the repayment of the huge debt. However, when all of the entitlement obligations come due over the next decade (i.e., Social Security, Medicare and other welfare), these obligations will amount to TENS OF TRILLIONS OF DOLLARS and the federal government will have NO ALTERNATIVE but to repudiate much of the debt (perhaps through hyper-inflation as other nations have done).

But, even if that were not true, Pres'ent Obama's assumption that additional borrowing and spending will restore growth is wrong on the face of it. IN FACT, MORE CONSUMER DEBT AND GOVERNMENT SPENDING WILL UNDERMINE OUR ECONOMY AND KEEP IT FROM GROWING. We borrowed and spent ourselves INTO this current situation. We must now SAVE AND PRODUCE ourselves OUT of the recession.

However, as long as the Pres'ent Obama administration and Congress are intent on propping up the FALSE ECONOMY, rather than letting it COLLAPSE, their CAN BE NO REBUILDING of a GENUINE ECONOMY.

Calls from other nations that actually see things clearer than do we will simply get LOUDER AND LOUDER until we are willing to FACE THE UGLY TRUTH.

What are YOU going to tell them?

A Reminder to Some Democrats in the House

Here's a letter I just sent to several Democrats in the U.S. House of Representatives:

Wasn't it Barack Obama that told us that any stimulus plan should be "TIMELY, TARGETED AND TEMPORARY"? Which parts of "targeted" and "temporary" does the Democrat party NOT understand?

Wasn't it Barack Obama that said, "I'm cutting more than I'm spending, so that it will be a net spending cut." Would you please respond by telling me how that math works with what the Democrats have just done?

And wasn't it Nancy Pelosi that said (three years ago): "[W]e'll go forward with civility, with honesty, with integrity and with fiscal discipline. No new deficit spending, no new bridges to nowhere, heaping mountains of debt on our children..." Please check with Speaker Pelosi to see which parts of this statement she intends to actually perform -- or was it ALL LIES?

The same kind of TRICKERY on the American citizenry that leads the DEMOCRAT PARTY to "move as quickly as possible and write as vaguely as possible" (Tom Daschle) so that Congress may foist upon Americans whatever it chooses -- without having to actually face the citizens or the opposing party in public debate on the issues. Have you NO CONSCIENCE? Have you NO HONOR? Have you NO CONCERN FOR THE CONSTITUTION of the United States of America?

How can you, by any stretch of the imagination, call yourselves PUBLIC SERVANTS?

What are YOU going to tell them?

Just for Comparison

A New Kind of Politics

Here's what I wrote to dozens of Senators and Representatives in Congress just today:

President Obama promised U.S. citizens a new kind of politics. Of course, most of us assumed that meant a "NEW AND IMPROVED" kind, NOT A MORE DEGRADED KIND of politics. Therefore, I am calling upon you to help construct this "new and improved" kind of politics by providing TRANSPARENCY to the U.S. TAXPAYER.

Taxpayers deserve better than being forced to shoulder a package that has been hastily crafted in secret with little opportunity for input from the Congressional minority, let alone the public. Consequently, any compromise emerging from a conference committee should be posted on the Internet in a searchable form for ideally TEN, BUT NO LESS THAN FIVE FULL BUSINESS DAYS before a vote on the conference report can occur.

TAXPAYERS DESERVE NO LESS FROM A CONGRESS THAT, ACCORDING TO ITS OWN LEADERSHIP, ASPIRES TO BE THE MOST HONEST, ETHICAL AND OPEN CONGRESS IN HISTORY.

After a failure to provide accountability and transparency with regard to the “Troubled Asset Relief Program,” and with the passage of this massive spending package becoming more and more likely, Congress and the Administration must work to finally make good on their promises to deliver transparency and accountability when it comes to the implementation of this spending package.

THE TAXPAYER SHOULD BE ABLE TO TRACK - DOLLAR-FOR-DOLLAR - HOW THE GOVERNMENT SPENDS ALL THE APPROPRIATED FUNDS, through grants, contracts and sub-awards through detailed line-item information on expenditures made under these agreements, including access to the actual expenditure documents and all relating documents (the bids, and the terms) in a form that is searchable and downloadable.

Thanks to the passage of the FEDERAL FUNDING AND ACCOUNTABILITY ACT OF 2006, the Federal government already has a website that provides information on federal grants and contracts in the form of USASpending.gov. That website could provide the general framework for housing data on expenditures made under the “stimulus” package.

All data on expenditures made under this package should be provided in a form that allows users to programmatically search and access all data in a serialized machine readable format via a web-services application programming interface, and users should be able to sort data by categories as well as search and find data by single keyword While both the House and Senate bills currently negotiated in conference committee require “data on relevant economic, financial, grant and contract information” be provided online, the language falls short in several areas:

1. Currently available bill language is lacking clear deadlines by which the required expenditure information needs to be made available. Given the implications of this massive spending package for taxpayers, only real-time posting, or at a minimum making the information available within 24 hours, would do them justice.
   
   
2. Providing information on “jobs created or maintained” can only be an estimate and fails to take into account any jobs that are destroyed as money is taken out of one part of the economy to inject it into another. The expenditure information provided online should be spin-free, so that taxpayers can draw their own conclusions rather than being inundated by propaganda.
   
   
3. Along the same lines, the establishment of an “Accountability and Transparency Board” with oversight functions is not helpful unless the board consists of a diverse group of members, representing the administration, Congress and the private sector as well as different political backgrounds. Reports compiled by a partisan board are of little value to taxpayers.
   
   
4. There is concern that organizations engaging in legally questionable activities may receive funds from the package, so recipients should be required to certify that no funds are being used to directly or indirectly fund illegal activities or the election or defeat of a candidate for political office.

Given that any massive government spending package will burden not only current but future generations of taxpayers, they deserve - at a minimum - full transparency, accountability and taxpayer protections in the process.

What are YOU going to tell them?

P.S. Much of this language came from a petition that you may read here.

What About the U.S. Constitution?

Here's what I told more than 50 members of Congress in a letter sent today:

"Until the 1930s, the Constitution served as a major constraint on federal economic interventionism. The government's powers were understood to be just as the framers intended: few and explicitly enumerated in our founding document and its amendments. Search the Constitution as long as you like, and you will find no specific authority conveyed for the government to spend money on global-warming research, urban mass transit, food stamps, unemployment insurance, Medicaid, or countless other items in the stimulus package and, even without it, in the regular federal budget." -- Independent Institute senior fellow Dr. Robert Higgs

"Americans have long ago abandoned respect for the constitutional limitations placed on the federal government. Our elected representatives represent that disrespect." -- economist Walter E. Williams

"[W]hat could possibly be more reckless than spending a trillion dollars you don't have on a plan that you have no evidence will work? What could be more irresponsible than doubling the generational debt for your partisan pet projects in a time of crisis? And what could be more selfish than stifling debate by deploying fear to induce voters into supporting it all?" -- columnist David Harsanyi


PLEASE THINK ABOUT OUR CONSTITUTION -- WHICH YOU ARE SWORN TO UPHOLD -- WHEN YOU DO WHAT YOU DO!

What are YOU going to tell them?

Obama Thinks the New Deal Worked

But actually, federal policies prolonged the depression by an estimated seven years according to this UCLA study.

Check it out.

My Latest Message to Congress and the U.S. Senate

Here's a message I sent to House and Senate members today:

Please stick to your principles on the stimulus package and EVERY OTHER ISSUE you address this year no matter what the cost. Perhaps it would be encouraging for you to go back to look at what the political map looked like the morning after a TRUE CONSERVATIVE -- Ronald Reagan -- ran for U.S. President.

He did NOT cave in to the LEFT. Instead, he carried the message to Americans that what they REALLY believe in and WANT is an America that lives by CONSERVATIVE PRINCIPLES.

Make citizens aware of the DANGERS of the LEFT-WING IDEOLOGIES and the majority WILL stand behind you.

P.S.: Don't cave into the Republican governors either -- including Governors Palen and Pawlenty. Let them face their own music. You are NOT responsible for their plight. They signed the legislation in their own states and spent the money through their own administrations. They can get their own houses in order.

What are YOU going to tell them?

False Hopes of Economic Stimulus

From Mises.org

Economists Against the Stimulus Plan

See the list of economists against the Democrat stimulus plan by clicking here.

Why the Democrats' Economic Stimulus Plan Will Fail

Read this enlightening article here.

Thanks.