Posted by
Scott Ott on Friday, January 18, 2008 8:25:02 AM
by Scott Ott
Expect bi-partisan support of a new "
emergency economic stimulus package", proposed by President George Bush this week. The Democrats will tweak the details, add more spending and shove in a few projects that couldn't pass on their own merit. The two parties will come together to "rescue" an economy that teeters on the brink of...shall we say, less aggressive growth?
The stimulus package, of course, echoes one of the great ideas that brought down the former Soviet Union -- the idea that the centralized government has a big panel of buttons and dials before it, that simply need to be manipulated in the proper sequence in order to "jump start" or "stimulate" the economy.
Picture House Majority Leader Nancy Pelosi, D-CA, holding a pair of defibrillator paddles, ready to apply them to the chest of "the economy". Problem is, the heart hasn't stopped beating. If it suffers any arrhythmia, it's due to over-stimulation from a welter of taxes and regulations which Rep. Pelosi and her ilk have imposed during decades of attempts to control the economy like the Wizard of Oz yanking levers from behind the curtain.
Memo to Washington: There is no "the economy"
What politicians, professorial consultants and industry lobbyists refer to as "the economy" is not some kind of machine that responds in predictable ways to specific macro-inputs and adjustments. It's not like my '64 Ford Falcon which ran smoother after I gapped the plugs and cleaned the carb. In fact, every emergency government intervention causes numerous, unintended and chronic consequences, and sets in motion forces that will lead only to more "emergency stimulus" legislation later. Adam Smith understood this before 1776.
Rep. Pelosi, do you want to make a law that will impact the economy for good? Try this: No one shall be allowed to serve in any branch of the federal government until he shall have passed a test proving that he understands, and affirms the principles enunciated in Adam Smith's "Wealth of Nations".
Legislative Exuberance
Former Federal Reserve Chairman Alan Greenspan once warned of "irrational exuberance" in the stock market. Now, Fed Chairman Ben Bernanke has partnered with the president and Rep. Pelosi to stir up a little legislative exuberance. Wrong!
Taxpayers don't need rebates, they need permanently-lower taxes. Industries don't need incentives and rapid write-downs of capital expenditures, they need permanently-lower taxes, a radically-simplified tax code, and deregulation. Corporate farms don't need subsidies, they need free and fair markets. Government doesn't need more revenue, it needs merciless downsizing and vigorous cost-cutting.
Give Me That Old Time Economics
Growth, stagnation and decline are cyclical and we all need to recognize that and prepare for it.
The presidency, as Theodore Roosevelt said, is a "bully pulpit" (bully here is an adjective, not a noun). Perhaps President Bush could use his influential perch to teach Americans a little lesson in Old Testament economics.
- Store up grain for the inevitable years of famine.
- Let the land lie fallow every few years to replenish it. Don't sap the soil that feeds you.
- Don't charge usurious interest rates.
- Don't lend unless you can afford to lose it.
- Don't borrow if you need it, only if you can gain from it, and can pay it off from liquid assets, not cash flow.
- Plant your fields, then build your house -- crank up your income before you spend any on comfort.
- Work hard, and put your money to work as well, so you'll have fruit this year, and seed for planting next.
- "It came to pass..." as the King James version reminds us repeatedly. No economic trend lasts forever.
Of course, man, being what he is, will ignore such common sense advice. He will offer his brother a low-interest loan pegged to a wildly-gyrating index, almost guaranteeing a future foreclosure. His brother will eagerly take that low-interest loan, risking his family's home on the delusion that income always increases and outstrips expenses. A mere examination of personal history would disprove that fantasy. Meanwhile, brilliant folks on Wall Street create "investment instruments" to allow other brilliant people to gamble on the outcome of this fools' covenant.
Stop Touching Me!
Nevertheless, government is not instituted to protect you from yourself. If you take a risk, you bear the consequences. When your risk pays off, do you ask Uncle Sam to relieve you of your windfall surplus? Of course not, and you get lathered when he taxes your hard-earned reward. So, likewise, when your endeavor fails, don't ask the rest of us to cover your loss.
And the next time you hear anyone talking about the need to "stimulate" the economy, think of a time when someone touched you in a way that they thought you would enjoy, but you found it abrasive, annoying, and nearly unbearable.
More than anything, at those moments, you want to shout: "Stop touching me!"
If "the economy" could talk, that's what it would yell at Chairman Bernanke, President Bush and Rep. Pelosi right now.