My brother is a great guy. He works two jobs, neither of which he enjoys; neither of which pay well at all. This particular brother is also far and away the smartest member of my family, and he’s not the PhD candidate, or the Mensa member. The other day he mentioned getting his economic stimulus check in the mail from the government, and that the $900 was coming in very handy at the moment (he’s saving money to come to Colorado and work with me).
My brother is also a democrat. He agreed that while he appreciated getting the check, it was a pathetic plan to spur on our otherwise flagging economy. So I have dubbed this generation of politicians in Washington “The Laziest Generation,” in honor of the most simple-minded plan to turn the economy around hatched this side of Nero.
For starters, it is not a lack of spending that has brought about this downturn. Americans do not seem to have shied away from spending their money – despite the fact that they probably should have. The issue is not an “if” we spend, but a “how”.
Americans are buying imported goods and shifting the balance of trade ever more in the favor of foreign markets. As a result the dollar has fallen to a low previously unimaginable. If someone had said on Jan. 1, 2000 that the American dollar would be worth less than the Canadian dollar before the end of the decade no one would have believed them. But here we are, in the last part of 2007 and until March of 2008, the US dollar was only worth about 98 Canadian cents – down from around a $1.40 five years earlier.
Relative to all currency of note, the US$ has lost badly over the past 5+ years. When introduced the Euro was worth less than the US$. Five years ago it was worth about $1.10. Now it will cost you $1.55 to pick up a single Euro. Giving every man, woman and child an extra $900 won’t change that. In fact if traditional spending patterns for disposable income are maintained, a large percentage of the money that is spent by recipients will be passed on to foreign manufacturers. And that certainly does not help our global position.
Our economy has remained fairly stalwart despite a few downturns over then past couple decades. Despite our dramatic trade imbalance, the US dollar has remained strong. What has changed recently that leaves us in this compromised position?
The answer is too easy. And despite the fact that I am a staunch Democrat, I will not pin this specifically on a President that bears a striking resemblance to Alfred E. Newman. Instead I would argue that it is a complicit bunch of politicians more interested in minding their career than our public best interest.
When President Clinton handed over the keys to Air Force One and the White House the national debt was about $5.5 trillion and shrinking. Over the previous three years the debt had shrunk for the first time in a quarter century and a quarter trillion dollar budget surplus was in place. In fact, like many responsible administrations before Pres. Clinton was able to shrink the percentage of debt to GDP by about 10 percent over an eight-year administration.
Much has changed in the last seven years. Our current national debt should top $10 trillion by a fair bit by the time President W is out of office. With a Gross Domestic Product of about $14 trillion that means that once again, as happened during the 12 years of Reagan/H.W. Bush our percentage of debt to GDP is on the rise and over 70 percent.
Given that it is an election year, I assume the fact that the US national debt is growing at an average of $1.46 billion a day becomes irrelevant. When you do the math that means with the current $9+ trillion debt every man, woman and child in the country (or at least those counted in the census), is on the hook for a little over $30K of debt – so I don’t see how a $900 handout is supposed to really stimulate anything.
This handout is nothing more than the power of incumbency gone awry. It is a bi-partisan boondoggle to effectively put cash in your pocket in the hopes that you’ll give your senators and representatives another chance in November. The likelihood that it will do anything to stimulate the economy is remote at best.
This criticism is not to say that stimulating the economy is easy and that if Washington politicians were not so selfishly motivated and lazy that they could do something about it without any real bother. National and Global economics are absurdly complicated. What I would appreciate is something better than pandering. Put some real thought into it. And that does mean that giving another tax break to the super-rich is out, because that has failed a couple of times already…
