If you stop your ears against the constant harping by the mainstream media on economic catastrophe, you might look around and spot a few rays of hope that things are already beginning to turn. It can’t be emphasized enough that the current recession is rooted in an activist, irresponsible government that encouraged bad mortgage lending practices and backed them with the credit of the federal government. The resultant real estate boom produced trillions of dollars in bad mortgage loans that worked their way into the heart of the world banking system, thoroughly poisoning it so that when the real estate bubble burst, a credit crisis ensued which made the oncoming recession far deeper and more dangerous.
Now, however, there are signs that the credit crunch is easing. Salon.com, a left-of-center website, reports that corporations are once again able to raise cash by selling their debt. They quote, to this effect, the Wall Street Journal, Houston Chronicle, and General Electric Corporation. If this is true and the trend continues, the worst of the recession could well be behind us, although the symptoms (particularly unemployment) will linger, like a bad cold. This news makes the predictions of a midsummer upturn by sober, conservative publications like the Kiplinger News Letter and others seem more credible, less wishful thinking.
And at this point, the second half of the TARP bailout funds have not yet been spread around. What then, is the need for another trillion dollars (on top of an existing trillion dollar deficit) in a so-called stimulus package that is being rushed through Congress? What will it accomplish?
According to the Congressional Budget Office, less than 40% of this money will even be spent before 2011. Certainly, it is easy to argue that this recession will end quicker if the economy is “stimulated” by extra cash in the hands of consumers, and tax cuts to corporations so that they will have the operating capital to maintain payrolls. These can be accomplished through corporate tax cuts, and a payroll tax holiday for individuals which could be in place within days.
But how will the $600 trillion to be spent after 2011 have any effect on this downturn? The truth is, it simply won’t, and is nothing more than a wish list of big government spending which we cannot afford by any sober analysis. Go to CNNMoney.com and read “How stimulus affects you.” A small percentage of the total will go into tax cuts, mostly for individuals, and the rest is mostly expenditure by government for government.
A huge dump will land on education, starting with $41 billion, mostly for buildings and equipment, with another $79 billion going to states to offset education costs. $87 billion will go to states to pay for Medicaid costs, promised by glib politicians, but now not affordable. $76 billion will go to highway and bridge construction, and public building improvements. There is $4 billion for more cops and cop cars, (better get home early), and $6 billion for broadband Internet access out in the country.
But the craziest piece of this puzzle is the $80 billion “State Fiscal Stabilization Fund,” asllocated to states which have overspent and face sobering cutbacks. Here in Minnesota, lawmakers are rejoicing over the possibility of a $3.2 billion influx of federal moolah so that the painful budget cuts can be avoided, or at least mitigated. And even in little Winona, local officials are lining up to see if we can’t get the Louisa Street project funded, and maybe even the new bike path we can’t afford otherwise. Allocations of this “stabilization fund” money stretch into the future as far as 2019.
There will be someone to argue for all of these expenditures, but no one to make a credible case that they are anything but political pork which will not address the problems of the current recession at all.
A rare benefit of bad economic times is that it forces us to pare unnecessary expenses, prioritize needs, and become more efficient and productive. We emerge from that process healthier and stronger. It should not be reserved solely for the private sector while government is exempted.
For that matter, government is funded by the private economy, although many politicians seem to believe the reverse. Hard times are the absolute worst time for government to go on a spending spree which will cripple us all down the road when the bills come due, and they inevitably will, one way or another.