Saturday, July 4, 2009

Recall the Stimulus Plan Now!

Basing an Economic Stimulus Plan on a Social Engineering Agenda is an Economic Train Wreck. Basing an Economic Stimulus plan on 6000 earmarks is an Economic Train Wreck. Legislatures not either reading the plan.. or... in other cases not having enough time to read the plan, is absolutely unforgivable. Not having an extended debate over a 1200 page Stimulus Plan is ridiculous.

The failure of the Stimulus Plan is inevitable on so many levels that it begs to be recalled. The most basic failure of the plan is two fold:

(a) Deploying Keynesian Deficit Government Spending by definition creates short term employment,

(b) while simultaneously making no plans for Private Capital Formation which leads to Private Sector job creation.

If you are going to deploy Keynesian Spending (no matter how badly designed), at the very least understand Keynes went on to say that the jobs created would be temporary until the Private Sector recovered.

This is not hind sight. 90% of Private Sector Economists said: Just Say No to the Stimulus Plan.

The Private Sector jobs will not recover without Private Capital Formation incentives. Matter-of-fact, beyond no incentive for Private Capital Formation leading to Private Sector jobs, add in the following:

(a) the specter of rising Federal, State, and Local taxes further depressing Private Capital Formation,

(b) over regulation causing profits at the margin to fall due to the added cost to comply which in turn depresses the expansion of existing Capital,

(c) Cap and Trade causing producer input costs to rise which in turn causes the producer to seek out sourcing or moving over seas,

(d) your chance to add another 500 reasons, right here: _________________.

That's the Economics.

How about the Political-Economy?

The Political-Economy of the situation is much worse. If you spend an enormous amount of money, on loan, and promise jobs for the American People, they believe you. You must make the economics the priority. People expect a job. In this case, the lesson (again) is never, ever make the Politics first.

When the Politics and the Power trump Economics of a Stimulus plan, during a severe, major, recession you have made a major error. When people need/believe they will get a job, you have merely taken Political-Economy and moved to Political-Political.

Recall the Stimulus Plan.

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