"When an author puts himself on the line by embracing an unfashionable idea, even though he is guaranteed to generate scorn or indifference, this should somehow be recognized."
Kary B. Mullis, Nobel laureate
"If at first an idea does not sound absurd, then there is no hope for it."
"Conventional wisdom often is wrong." Steven D. Levitt and Stephen J. Dubner, Authors of FREAKONOMICS
"To swim against the current of human intuition is a difficult task." Leonard Mlodinow, THE DRUNKARD'S WALK
The Investopedia says, "The debt-to-GDP ratio indicates the country's ability to pay back its debt." This ratio often is quoted in stories predicting the demise of America if federal debt continues to rise and especially if the debt ever were to exceed GDP. This ratio is so important, the European Union once required, as a condition of membership, the ratio of gross government debt to GDP not to exceed 60% at the end of the preceding fiscal year. The Fed reportedly aims for a debt/GDP ratio in the 30%-70% range.
But, how meaningful really is the federal debt-to-GDP ratio?. In August, 1971, we finally divorced from the last vestiges of the gold standard, giving the U.S. government the unlimited power to create money with which to service its debt. GDP has no affect on that. Even with zero GDP, the federal government could create unlimited money to pay its debts.
Ah, but doesn't "printing money" cause inflation? Apparently not. In the past 50 years, every spike in debt growth has corresponded with a decrease in inflation. One reason for this counter-intuitive lack of expected correlation between inflation and money supply: Inflation has been affected more by the supply and demand for oil than by the supply and demand for money.
Further, GDP is production-based, while inflation is consumption based--two significantly different measures. So in the Debt/GDP fraction, neither the numerator nor the denominator refers to inflation.
And as for that artificial http://angrybear.blogspot.com/, consider these ratios: Japan's debt is 170% of its GDP. Italy's is 100%. "Wealthy" Russia's debt is only 6% of GDP. The U.S. is above 60% and growing. What does it all mean?
It means the oft-quoted Debt/GDP bogeyman measures nothing, evaluates nothing and predicts nothing. It is the classic apples/oranges comparison, effective only at scaring politicians and voters into making the wrong economic decisions.
About the only meaningful statement one could make about federal debt vs. GDP is this: All nine recessions in the past 50 years, have been preceded by reductions in debt growth.
Debt hawks not withstanding, there seems broad agreement that federal deficit spending eventually will stimulate the economy. The opposite of deficit spending is taxing. To the degree one deficit dollar stimulates, one tax dollar depresses.
The Obama stimulus plan totals $787 billion, of which only $44 billion has been spent. With so many government departments, encumbered by so many Congressional directives, the government is completely entangled in its own red tape. The whole program has been an implementation disaster.
It is estimated that about $890 billion in FICA taxes will be collected this year (www.whitehouse.gov), half from corporations and half from employees. Imagine if we were given a one-year vacation from FICA. Corporate profits would rise. More people would be hired. Effective salaries would increase. The entire economy would be lifted.
We wouldn’t have thousands of government bureaucrats and Congresspersons doing everything possible to delay the distribution of funds. The government merely could say, “Starting next month, and for the next twelve months, no more FICA will be collected from anyone. Instead, the government will pay the necessary funds, directly."
Simple, fast and effective. No bureaucrats telling us what to do with the money. Voters should love it. FICA is one of our most regressive taxes. Business should love it. FICA is a major expense, and there would be no worries about whether the money is spent. Half would go directly to companies. The savings would provide broad benefits in a steady, predictable stream.
May 31, 2009:
The government now owns 60% of General Motors. This ownership does not benefit GM, its suppliers, its employees, its shareholders, its creditors, we taxpayers or the economy. The economic value of government ownership is not just zero. It is a strong negative.
GM loses because its leaders will have to contend with business-ignorant, government bureaucrats, when making major decisions like plant closings and auto design. Suppliers too, will need to deal with arbitrary, politically-inspired rules, not even voted by Congress, that will impact efficiency and creativity.
Employees will pay for government ownership through a reduction in salaries and benefits. Shareholders will pay through a dilution of share ownership. Creditors will pay by being cheated out of the money due to them. We taxpayers will not receive any part of the stock; only the government will own it.
Eventually the government will sell this stock, which effectively will be a tax on the economy. There is, in fact, not one good reason for the federal government to own GM stock, and myriad reasons not to. The mere fact that government bureaucrats want this harmful ownership of GM stock demonstrates the government’s lack of economic and business sense.
July 3, 2009
A poverty tax: Perhaps 50 million Americans do not have health insurance. The vast majority cannot afford it. The U.S. Senate offered as a solution to fine each of these people $1,000. (Next, shall we fine homeless people for not paying rent?)
The Congressional Budget Office estimates the fines will raise $36 billion over 10 years. That $36 billion requires 36 million people to remain uninsured. In short, the Senate plan requires the program to fail!
The Senate solution would provide subsidies for poor and “some” middle-class families. That will require complex definitions for “poor,” remembering that a New Yorker earning $30 thousand might be poor, while half that income might do very nicely in a rural town. Then there is the question of how to allow for dependents – children and adults -- on the poverty scale. (Next, shall we fine starving people for not buying enough food?)
And if families are forced to spend money on health insurance, will they be precluded from sending their children to college or even to high school? (Next, shall we fine jobless people for not working?)
If the government is willing and able to subsidize the poor and “some” middle-class, why not merely subsidize them, without taxing poverty? The government's forte is supplying money, not managing it.
June 26, 2009 [To Wall Street Journal]
Your June 26th editorial (“The Albany-Trenton-Sacramento Disease”) lists three states’ efforts to
their economies (“Government spending”), pay for the spending (“Soak the rich”) and provide health care (“Government health care”) as examples of what the federal government should not do. You miss one important fact in these false examples: The states have run out of
The federal government cannot. State government finances do not compare with federal government finances.
In 1971, the federal government divorced itself from gold specifically to give itself the unlimited power to create
Today, the federal debt is $12 trillion, a 1,200% increase in only the past thirty years. Next year the debt will approach $14 trillion. Yet the government has had, and will have, no difficulty servicing this
debt. Throughout this 30 year period, we have heard dire warnings about “unsustainable”debt (a favorite, though unsubstantiated, term of the debt hawks). Yet all seven recessions since 1971 began with declines in federal deficit growth, and all seven were cured with substantial deficit increases. Going back in time, all six U.S. depressions were introduced by years of federal surpluses, and cured by deficit spending. I challenge you to find historic evidence linking federal deficits to recessions, depressions, inflations, high taxes or any other negative economic measure. Federal spending is not the problem; the lack of federal spending is the problem. You are right about “soak the rich.” It is unnecessary and economically foolish, a plan proposed by populist officials cynically hoping to benefit from class warfare. The federal government can pay for all its efforts without collecting one extra penny in taxes, as it repeatedly has proved and continues to prove this year.
As for “government health care,” we already have it in the names Medicare and Medicaid. Do you suggest we abandon these programs? Yes, they have serious deficiencies, but without them, America’s health would be much worse. Correcting the deficiencies, while expanding these government health care programs, would improve America’s health.
Every financial problem facing America today is related to the unproven belief the federal government cannot afford something. Columnists and editorial writers love to bemoan the federal debt, yet I’ve never seen any of them produce any evidence to back their claims. As we used to say in the neighborhood, “It’s time to put up or shut up.”
June 13, 2009: In the discussion about universal health care affordability, one question seems never to be asked or answered: Which hurts worse, large federal deficits or millions of people suffering with inadequate health care?
Most people who don’t have health insurance can’t afford health insurance. So a law requiring people to buy health insurance is silly.
Requiring businesses to pay for health insurance is equally silly. To pay more for health care, businesses would have to lower salaries or reduce the profits needed to survive. Which poison do you prefer?
Any “savings” in the health care system will come from doctors, hospitals and/or pharmaceutical companies. Pay doctors less and you’ll have fewer doctors. Already, some doctors have opted out of Medicare because of insufficient payments.
We want hospitals to offer CT scans and PET scans, lots of well-trained nurses and emergency rooms that accept everyone who walks in. This machinery costs millions. The nurses, always in short supply, cost millions. Pay hospitals less, and you’ll have fewer and less equipped hospitals and fewer nurses.
The pharmaceutical companies we love to hate, spend billions developing drugs to ease our pain and save our lives. Getting a drug developed, tested and approved costs hundreds of millions. For every success, a thousand failures. Pay pharmaceutical companies less and your cancer may not be controlled, and “swine-flu” may kill a million souls.
Now consider those large federal deficits, we also love to hate. The media tell us deficits should be minimized. Except, no evidence exists that deficits have any negative effect on our economy. No, deficits have not caused recessions, depressions, inflations, deflations or stagflations. Deficits actually have cured most of these problems.
No, deficits cannot force the U.S. into bankruptcy. In 1971, we went off the gold standard to give the government the unlimited ability to pay its bills.
No, deficits will not make foreign nations stop buying our debt (though we can pay our bills without borrowing.)
The simple fact the media never tell you: While federal surpluses have caused every depression in U.S. history, growing deficits have cured every recession and depression, and are necessary for a growing economy.
So, which hurts worse, large federal deficits, which historically have had a positive effect on our economy, or millions of people suffering with inadequate health care?
Answer: The federal government can and should pay for universal health care via deficit spending.
May 14, 2009
The latest projections say
will go insolvent in 2017 and Social Security will run out of
are federal agencies. Have you seen any articles telling how the Defense Department soon will be insolvent? Or how the Supreme Court soon will be insolvent? Or the Bureau of Engraving? Or the Corps of Engineers? Or any of the other 400+
funded by the government?
Why are Medicare and Social Security the only two federal agencies ever threatened with insolvency? Why are these the only two federal agencies expected to live within the constraints of an earmarked
while every other federal agency is supported by deficit spending?
says the only way to keep Medicare solvent is to “control runaway growth in both public and private health care expenditures.” Really? The only way? How about supporting Medicare and Social Security the same way we support the Department of Energy or the Department of Education or all the other departments -- with federal deficit spending? Are Medicare and Social Security less important than, for instance, the Federal Aviation Administration or the Federal Bureau of Prisons?
The lack of economic understanding by our leaders is especially galling since all evidence shows
historically have not caused
recession or any other negative economic effect. In fact, all historic evidence indicates federal deficits are absolutely necessary for economic growth.
Contrary to popular wisdom, every
in our history has followed a series of federal surpluses. Every recession since 1950 has followed a series of federal deficit percentage reductions, every recovery has come from deficit spending, and even our largest deficits have not caused inflation. The fear of deficits is unfounded and unsupported by any evidence, while preventing the solutions to many of our most vexing social problems.
No, Tim Geithner. Controlling health care expenditures, also known as “paying doctors and hospitals less” is not the only way to keep Medicare solvent. Your solution merely will guarantee worse health care for America by reducing the number of doctors and hospitals.
As described in FREE MONEY, the only way to keep Medicare and Social Security solvent is to fold these two federal agencies into the general fund and to fund them the same way we fund another federal agency,
The White House. Comments? Write Rodger Malcolm Mitchell
May 3, 2009
“There you go, again.” Once again, the media publishes a sensationalist piece about the
and once again does not provide a single bit of evidence to indicate why a large federal debt is bad for the U.S. economy.
This time, it is
writers Adam Zoll and Steve Layton, who devote a full, 12" x 22" page in the April 20, 2009 edition, not just to disclosing how large the federal debt is ($12.7 trillion), but to saying 12.7 trillion dollar bills would make a stack 687,172 miles high, enough to go to the moon and back, twice. And laid end to end those dollars would stretch from Earth to Saturn. And if laid flat, they would cover North Carolina. O.K., already. We get it.
They researched a great many facts, accompanied by large illustrations, but tellingly, there is not one sentence that begins, “Large deficits caused the following problem in our economy:”
In essence, Zoll and Layton say, “We don’t look for
That takes too much work. Illustrating big numbers is more interesting."
Sorry folks, “large” isn’t evidence.
Even more pitiful, Zoll and Layton claim the federal government’s debts actually are
debts. So, we are told, every man, woman and child owes $41,484, enough to buy a Mercedes Benz or three pounds of gold or 778 barrels of oil or 208 iPhones or six years of college. (Zoll and Layton must believe their readers are too dense to understand just one example, so five are provided.)
The notion that
has been promulgated for years, and seldom debated, though it is totally wrong. The quasi-logic is that some day the federal government will need to pay its debt down to $0, and when that happens, it will need to extract the
from taxpayers. Wrong on two counts.
The federal government never will pay its debt down even to $12 trillion, let alone down to $0. If it did we would have a depression. America has had six depressions, and all came on the heels of federal debt reductions. Zoll and Layton don’t bother to mention that.
In the past 50 years, America has had
Every one of them, including the current one, immediately followed a series of federal deficit reductions. No mention of that from Zoll and Layton. Doesn’t the Tribune employ any fact checkers?
We taxpayers simply do not owe a debt we didn't borrow, no lender can collect from us, and we never will pay.
Further, the federal government does not need
money to pay its debts. Just as the government borrows by creating Treasury securities out of thin air, it as easily can create dollars out of thin air, eliminate the borrowing function and erase all concern about debt.
A month ago, I Emailed hundreds of professors, politicians and media, offering $1,000 to the first person who could provide evidence the federal debt causes recessions, inflations or depressions, or harms our economy in any other way. So far, no takers. Just more misleading articles that would be humorous if they weren’t so damaging.
Why damaging? Because debt paranoia is what keeps us from universal
aiding education, eradicating poverty, improving our infrastructure and fighting global warming.
This time I’ll make the offer directly to Zoll and Layton. Rather than disseminating false, sensationalist information, harmful to America, provide the facts and the $1,000 is yours.
Comments? Write Rodger Malcolm Mitchell
April 29, 2009
Rabies is a disease that causes suffering and death. There is ample proof rabies can be prevented and cured via vaccination. Some people oppose vaccination, because of their unproven idea that God does not want it. However, an unproven idea should not stand in the way of a proven cure.
The current doctor shortage is a “disease” that causes suffering and death. The shortage can be prevented and cured via increased
payments to doctors and federal support of medical schools. Many people oppose more federal aid to schools and doctors, because of the unproven idea that federal
are too high. However, an unproven idea should not stand in the way of a proven cure.
There is absolutely no historical proof federal debt is unsustainable or causes inflation, recession, high
or any other negative economic measure. Unreasoning debt paranoia is responsible for the length of this recession, and our inability to solve problems with health care,
poverty, education, infrastructure, ecology, law enforcement and military readiness.
Comments? Write Rodger Malcolm Mitchell
April 27, 2009
General Motors has received $15 billion in government loans. But GM, desperate to receive more money, belatedly realizes loans eventually must be repaid. Since repaying huge loans guarantees the future demise of the company, GM has asked the government to accept 50 percent of its common stock in exchange for canceling half the government loans.
That effectively would nationalize GM, with federal bureaucrats managing it. Many have criticized GM for not being agile enough to recognize evolving customer needs. Now imagine GM requiring daily permissions from politically motivated Senators and Representatives. These are the very people who repeatedly have proved their business and economic ineptness – which is why the
has lasted so long and continues to worsen.
Government decisions are more likely to be political than profit-motivated. Visualize, for instance, what Michigan Democrats would say about each of the following decisions: Hire a new executive. Negotiate a new union contract. Close a plant. Change suppliers. Introduce a new car. Increase gas mileage. Reduce emissions.
Then there is the more important question: “Why does the government need or even want GM stock?” Voting the stock makes no sense. Selling the stock is unnecessary, because the government doesn’t need the
It has the unlimited ability to create money. Selling the stock also would depress the price of the stock, while removing money from the
exactly the opposite of what this money-starved economy needs.
U.S. ownership of GM would beget foreign ownership of foreign auto companies, and begin a massive trade war.
This all is further evidence that federal loans are the worst way to encourage economic growth. Currently, the government lends money to those companies that will have the greatest difficulty paying it back, thereby assuring economic problems long into the future.
The government, having the unlimited ability to create money, should give money, not lend it. That is the only way to facilitate long-term economic growth.
Comments? Write Rodger Malcolm Mitchell
April 23, 2009
or economic miscalculation, economists tell us, “Aha, now I understand the problem, and steps will be taken to prevent it happening again."
Then it happens again, followed by the same “Aha” realizations, revelations and bold promises.
The severity of today’s
serves only to magnify the economists’ “Aha” moments and to replenish their promises. Yet, there have been no new ideas.
Economists lead us up the same mountain, with the same promises of Apocalypse and salvation, but when the sun rises to another day, economists march us back down, not embarrassed by their failed prophesies.
One might think such failure would induce disbelief, but strangely it seems only to reinforce the
Thus today again, we march to the usual drum beat, urged on by the tenets of the past: “Federal
are necessary to support the government;
our children and grandchildren are liable for the federal
the government cannot spend its way out of a
pays for federal stimuli.”
New thoughts wither in the harsh wind of ridicule and ignorance, both unknowing and unseeing.
Do we still believe federal
are necessary? How then has the federal government spent $12 trillion is just the past 30 years, without the support of taxes?
Do we still believe deficit spending causes inflation? How then have the greatest deficits in our history coincided with reductions in inflation?
Do we still believe our children and grandchildren are liable for federal debt? How then have the massive deficits, beginning with the Reagan administration, not been paid for by we who were the children and grandchildren of that time.
Do we still believe the government cannot spend its way out of a recession? How then has every recovery coincided with federal deficit spending?
Do we still believe taxpayers’ money pays for federal stimuli? How then does taxpayers’ money pay for deficit spending, which by definition is spending beyond tax receipts?
No one dares ask such questions, because the media, the politicians and the economists tell us it is blasphemy to challenge the popular wisdom. Yet I keep hope some great person will shout, “The emperor has no clothes, the earth is not the center of the universe, and federal deficit spending is necessary for economic growth.”
And that hope keeps me alive.
Comments? Write Rodger Malcolm Mitchell
April 22, 2009
Those who trumpet their patriotism loudest, often are the least patriotic. The Bush/Cheney administration, sequestered everything under the patriotic-sounding “national security” lid. But are waterboarding and other forms of inflicted distress emblematic of the American way?
If waterboarding and sleep deprivation are excused because "they work," where do we draw the line? What if stretching on the rack "works"? What if amputation and searing with hot irons "works"?
Are these examples of American morals and ideals to set before the world? Will Iran find justification in waterboarding and otherwise torturing the U.S. journalist, Roxana Saberi, who was convicted and jailed on charges of spying? Will that unfortunate woman pay with her body and her sanity, for what we have wrought?
Thus, the Bush/Cheney un-American, “end-justifies-the-means” doctrine comes back to taint us. We have lost our moral authority in the world.
April 21, 2009
General Motors has received $13 billion in loans and now will receive another $5 billion. This suggests two interesting questions:
One, GM will be in debt at least $18 billion, not counting the many billions it owes to other creditors. With the need to service this massive
load, balanced on a much smaller sales volume, is it realistic to expect GM ever to be profitable?
Two: The government talks about taking GM into bankruptcy, while protecting suppliers. Employees and creditors (who also are taxpayers) will pay the bill. Since the government will be a creditor, will the government accept the same losses as the other creditors, or will it try, illegally, to put itself above the other bond holders?
Both questions bear on a more central question: Why does the government lend, rather than giving,
By lending, the government assures that borrowers will be in debt and be forced to pay money back. These payments will have the same effect as massive tax increases, and are guaranteed to slow future recovery or even create another recession.
Because the government has the unlimited ability to create
there is no reason for it to lend. The money it has lent already has been created out of thin air, without causing inflation or any other negative effect. Since the lent money now exists in the economy, and has cost taxpayers nothing to create, why does the government need it to be paid back?
April 19, 2009
[Sent to Senator Dick Durbin and Representative Mark Kirk]
Congress and the President grope for ways to pay for stimulus packages, universal health care, farm subsidies, the military, infrastructure repairs, anti-drug efforts, etc. The talk in Washington is how paying for these initiatives would cause large, “unsustainable” deficits, and how large deficits are “irresponsible,” and our children will have to pay the for deficits, and large deficits require tax increases on the rich on business or on everyone.
I will give $1,000 to your favorite charity if you can provide evidence demonstrating that large deficits are unsustainable or reduce economic growth, cause inflation or injure the U.S. economy in any way.
I look forward to your response.
April 18, 2009
Economics is a science, which is why Scientific American Magazine periodically publishes articles about economics. Unfortunately, the magazine treats economics more like a religion than a science.
Consider a typical article, written by Jeffrey B. Sachs (director of the Earth Institute at Columbia University) and published in the May 2009 edition. Mr. Sachs says, “. . .the buildup of public debt will threaten the well-being of our children and our children’s children.”
Had Mr Sachs said, “Listening to rap music will threaten the well-being of our children and our children’s children,” SA surely would have demanded proof. That is what science is all about: The search for proof.
But no such demand is made of Mr. Sachs relative to federal debt. SA merely accepts the statement that federal debt will have a negative effect on our descendants. Lacking such a demand from his publisher, Mr. Sachs feels no inclination to offer proof. His credentials are sufficient proof for SA. And that is the definition of religion.
Had SA required evidence, Mr. Sachs would have been hard pressed to supply it. In the past 30 years, federal debt has risen an astounding 1,000%, yet the children of those living in 1980 pay lower taxes than did their parents. Does that sound threatening to our children’s well-being?
Since 1971, there have been six recessions. Every one of them has been introduced by periods of federal deficit reductions. And every recession ended during deficit increases. Does that sound like deficits threaten our children?
Or consider inflation. Since 1971, there have been 6 instances of especially high deficits: 1973, 1976, 1982, 1991 and 2005 and 2009. Every instance coincided with a drop in inflation. When has inflation risen most? 1975 and 1979, when deficits fell. Are deficits threatening?
This single biggest problem facing America today is fear of deficits, a fear that should have disappeared in 1971, with the end of the gold standard. Without that fear, we could end the recession and prevent future recessions, fix Social Security, support universal health care, the military, the infrastructure, the ecology, crime prevention and the many important projects to improve our lives.
But as long as media accept credentials as proof, and common wisdom as fact, we will continue to struggle with the huge economic swings that truly do threaten the well-being of our children and our children’s children.
April 17, 2009
Banks already have begun to return federal assistance money. They don't want to live with restrictions in executive compensation and other areas. While these restrictions have support amongst the uninformed, they are counter-recovery; a classic example of unintended consequences.
Money sent back to the government is functionally identical to taxation. It removes money from the economy and the banking sector. A misguided sense of fairness, plus rich-vs-poor class warfare, made high salaries for "those-who-caused-this-mess" unpalatable. So the government took the cowardly way out. It obeyed mob rule and limited executive salaries, thereby further delaying the recovery.
Federal lending and stock buying, both of which require future payments to the government, are anti-stimulus, and the most foolish step imaginable. The government never should lend. It should give. It doesn't need the money; the economy does.
So why institute what amounts to a huge, future tax increase? In all of history, there never has been a tax payment that benefited taxpayers or the economy.
Wonder not why this recession drags on, when it could have ended a year ago. People screaming in the streets and a feckless Congress never make good policy.
April 15, 2009
Two men stand at the edge of a high cliff, an obese man and a thin man. The obese man's weight causes the cliff to crumble, sending both men over the edge. The obese man desperately grabs a tree root. The thin man grabs the obese man's ankle.
Both men swing precariously above the chasm. As the tree root begins to break, a good Samaritan arrives with a rope and prepares to throw it down to the struggling men. But the thin man calls up to the Samaritan, "Don't throw it. The obese man caused this problem, so he doesn't deserve to be saved. And I don't want to pay for the rope."
And that is the story of the people marching against the economic stimulus packages.
April 14, 2009
Will foreign countries continue to finance us? The answer lies in how the government borrows, which is different from how you and I borrow. First, the government creates Treasury securities from thin air. They cost the government nothing, and nothing backs them. They are as ephemeral and unlimited as a lover's promises.
The government sells these promises, then later buys them back plus interest, using money it obtains by selling more securities. Taxpayers are not involved anywhere in this create, sell, buy-back scenario
Why do countries buy our securities? Not out of charity or good will. They buy because Treasuries are safe and give an adequate amount of return.
If they stopped buying Treasuries, the government would increase the interest payments. If they didn't want a Treasury at 2%, they would buy at 4% or at 10%? There is an interest level at which they will buy, and the government has total control over that level. So never be afraid China and others will stop buying our debt.
Federal borrowing is a relic of the gold standard, which ended to give the government the unlimited ability to create money. I predict one day, the government will stop creating and selling Treasuries, and begin to create money directly. This would eliminate all fears about federal debt, deficits and borrowing, simply because there would be no federal debt, deficits or borrowing.
Are you a stock buyer who believes the government's, the media pundits' or your stock broker's optimistic assessments that the recession will end within the next year or two? Do you believe they see that light at the end of the tunnel? Let me assure you, they have no clue.
The economic recovery depends wholly on how much money the government pumps into the economy, and no one knows how much that will be. So far the effort has been too little and too late.
Much of the stimulus money is in the form of loans, which when repaid, suck money back out of the economy. As a stimulus, federal lending, rather than giving, is the looniest government idea since the Alternative Minimum Tax and privatizing Social Security.
And don't let the recent rise in the stock market fool you. Here are some dates you should know: August, 1929: The Dow Jones Industrial Average reaches 380.
June, 1932: The average hits bottom at about 43.
February, 1937: The Dow reaches 187 and stock buyers see that teasing light at the end of the tunnel.
March, 1938: It's a year later, and the Dow has fallen to 98; The "light" is out.
February, 1939: Another year, and the Dow is back up to 147; Is that a light I see?
April, 1942: Woops! Three more years and the Dow again is down to 95.
October, 1945: Sixteen years after the mid-depression teaser, the Dow reaches 186. Think of all those people who invested prior to February, 1937.
November, 1954: Twenty-five years after its previous high, the Dow finally gets back to 386.
If the federal government would get past its irrational fear of deficits, and pump about $2.5 trillion into the economy, this year and again next year, we would begin a recovery. Until then, the tunnel may be a long one.