They shouted again, “Crucify him” [Jesus].  Pilate said to them, “Why?  What evil has he done?”  They only shouted the louder, “Crucify him.”  So Pilate, wishing to satisfy the crowd …handed him over to be crucified. — Mark 15 

This week, the US Congress along with President Bush passed what is hoped to be an economic stimulus package.   If you hadn’t already heard, individual taxpayers will be receiving a check for $600, married tax payers for $1200.  They’re supposed to be sent out in March.

 

On the one hand, the free property lover in us all can look at this as one slice of the government returning its assets to their rightful owners.  That, however, is not the intent of this act.  The intent, it seems clear, is to attempt to thwart a pending recession by putting money into consumers’ pockets.

 

The crowds shouted at Pilate to have Christ crucified.  Right reason provided no cause, but it was popular for the crowd, and so it remained without question.  And, indeed today, election year politics combine with tyranny of the masses under the fears of a pending economic downturn and they refuse to entertain any questions as to whether this sort of policy is fruitful.

 

If this website serves any purpose at all, it’s to ensure that these questions can be asked and answered.  I don’t believe this ‘stimulus package’ is at all beneficial.

 

The government – aside from the Federal Reserve – has two sources of money: issuing bonds, and taxation.  In general, bonds are purchased by foreign governments, mostly
China and
Japan, whence most American imports come.  While running a budget deficit, the American government has decided to stimulate its own economy by borrowing funds from China so that Americans can buy more goods, undoubtedly largely from China.  Effectively, this becomes a sort of global store credit. 

 

To quote Art Laffer in the Wall Street Journal:

As my former colleague and friend Milton Friedman liked to say, “There’s no such thing as a free lunch,” and this rebate is exactly what he meant. The net effect is that the reduction in demand from those who pay the real resources will be exactly the same size as the increase in demand from the rebate recipients. It’s sad but true. Income effects always net to zero in a closed system.”

That is, the reduced demand from the taxation imposed in collecting funds for future rebates is no less than the increased demand from the rebate’s spender.  In layman’s terms: this stimulus plan is an economic waste of time.

 

If you’re soon to receive a rebate check, of course steward it well.  By no means, though, should you consider it your patriotic duty to run to your local Wal-Mart, though, to spend it all in one place.  In the aggregate, this plan feeds the fire of inflation, a weakened dollar, and a weakened trade deficit; certainly not largely, but still not insignificantly.  To add insult to this injury, this plan occurs during an unprecedented budget deficit, inflation in energy and food, negative aggregate savings, and skyrocketing income inequality; that is, whilst we’re on the brink of an irreversible economic trend.

 

In 2008, I challenge you, the loyal TOO reader, to not be among the crowd that demanded that which was unreasonable and unjust from its leader.