Short Term Gains

The Congressional Budget Office recently reported that the stimulus bill now working its way through Congress would help in in the next 18 months but, overall, will actually hurt the economy.  The reason?  As has been said before, spending taxpayer money like this to stimulate the economy doesn’t work.  Not only that, but there are many questionable elements in this bill that will do nothing to stimulate the economy at all.

According to the Washington Times:

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.

Basically, the CBO estimates that for every $1.00 of debt this bill adds it will smother $0.33 worth of private domestic capital.  As has been said here before, a majority of this debt ($850 billion or so!) will be owned by foreign countries, giving potential rivals like China greater leverage over the destiny of the U.S.

This crisis which we now find ourselves in was not created overnight and is not a strictly U.S. affair.  Its solutions will not be created overnight either, no matter how much of our money the Democrats throw at it.

In economics much cannot be predicted and one can only wonder what complications an additional $850 billion worth of debt will create, not to mention the fact that President Obama is not getting at the root of the problem which is an economy that is overly dependent (70%) upon consumer spending which is fueled by debt.  With the U.S. savings rate being so low and so much money flowing out of this country every month because of outlays for energy and consumer goods the U.S. risks longterm failure and without a serious look at ourselves and how we spend our money, the situation only will get worse.

This stimulus bill only postpones our day of reckoning as a nation.  A real leader should recognize these facts and work towards real energy independence (oil and gas exploration and nuclear plant construction) and the cutting of government programs not to mention initiatives to give people incentives to save their money rather than spend it.

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