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If you borrow $1 trillion dollars from the economy, and then put it back in as spending, you haven’t added anything...

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Obama’s Spendulus Does Not ‘Pump Money Into The Economy’

If you borrow $1 trillion dollars from the economy, and then put it back in as spending, you haven’t added anything…

Here’s an idea for all you small business owners out there.  If you are not happy with how well your business is doing, just borrow a whole bunch of money from yourself and use that money to buy your own products.  Your numbers should skyrocket, as long as you just ignore the facts that A) all the money is borrowed and B) You can’t really borrow from yourself.

If you’ve spotted this idea as stupid for those reasons, then you’ve also spotted two major problems with Obama’s so-called “Stimulus” Bill.  Obama claims the bill is designed to “pump money into” our economy.  But where does he plan on getting all the money from?  He plans on borrowing it — from the same economy, via banks and other purchasers of government bonds.  

If you borrow $1 trillion dollars from the economy, and then put it back in as spending, you haven’t added anything.  You’ve just created a huge debt for the taxpayers at the same time that they are trying to lessen debt in the private sector.  It’s economic musical chairs, as played by Nobel Laureates.

The only thing that will be pumped into the economy that isn’t borrowed will be newly printed dollars.  Printing money is a sound economic policy that has worked wonders for Latin America, Zimbabwe, the Weimar Republic and many other fabulously successful places.  

(For those of you that cannot recognize it, that was sarcasm.  Please don’t write me earnest emails pointing out that printing money destroyed all those economies. One day, I intend to create a special font to make sarcasm more apparent to the humor-impaired.  I’ll call it “Dennis Miller sans serif”.  Please pretend that that last statement was written in 12 point Dennis Miller, bold).

Printing money is a tax that makes savings worth less through inflation.  Borrowing money is a tax that must be paid at a later date, with interest.  Borrowing money for government spending also creates a motivation for governments to cause inflation to inflate away debt.  Obama’s Spendulus Bill does both on a huge scale, just weeks after the Bailout Bill did both on an equally huge scale.

It would be bad enough if the Spendulus just took money out of the economy and then put it right back in to the same places.  But of course it doesn’t.  It will take it out of the private sector and then, through the miracle of government efficiency (Miller 12 pt.), put most of it into black holes, like increased government payrolls, grants to politically correct institutions, and infrastructure that we don’t need (but which will buy votes in certain districts).

Thanks to the government factor, Obama’s stimulus is not just musical chairs.  It’s musical chairs played on a sinkhole.

Also, keep in mind that the current economic recession was caused by a lending and liquidity crisis that resulted from mass deleveraging after the bursting of the housing bubble.  In English, that means banks stopped lending out of fear of losses.  The lack of lending to the private sector then exaggerated the economic slowdown.

Allegedly, the reason we had to spend $700 billion on the Bailout was to inject liquidity into the banking system.  So now, just weeks after the government gave the banks $700 billion (not all of which has even been given out yet), Obama proposes that the banks lend back $900 billion to the government.

How, in the Hell, is that solving liquidity issues?  

Government debt is an attractive safe haven for investors too.  One of the weirder results of this whole economic debacle has been government bonds being sold at zero (or even negative) yields to spooked investors.  Essentially, that means they agreed to lose some money just to know that most of their capital would be guaranteed by government.  

Now the government plans on issuing gobs of new guaranteed debt.  This will act as a sink for world capital, further starving private debt markets of needed capital.

The Spendulus is sham that proposes to suck money out of the economy, put half of it into $700 toilet seats (low flush) and use the rest to skew debt markets away from new investment in real businesses.

Even the Congressional Budget Office has stated that the massive bill will do more harm than good.  All it creates is debt and bureaucracy.

For those of you that thought that George Bush was the worst President ever, it appears that he may not hold that title long.

Written By

Mr. Johnson, a writer and medical researcher in Cambridge, Mass., is a regular contributor to HUMAN EVENTS. His column generally appears on Tuesdays. Archives and additional material can be found at www.macjohnson.com.

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