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Just for the Record

January 24, 2009

About that so-called economic stimulus… it won’t work. In theory, there could be some short-term effect on the economy – with the bill coming a few years later. But even if you ignore the effects of inflation, pushing money through the black box of government guarantees inefficiency. When taxpayers’ money gets handled by state administrators rather than by the taxpayers’ themselves you will lose time and money. This is true even in cases other than infrastructure projects which are especially hard to get done because of months and years of legal battles – often thanks to the precious environmental groups. Add to this politicians’ keenness to channel money in a way that benefits them personally and you know why in the end contracts go to firms for all the wrong (political) reasons and only after long delays.

Also, even the ludicrously high amount of $800 billion will not be enough to revive the US economy. It will help a few companies that happen to provide artificial snow for Minnesota and goldfish for the lake of the mob museum in Las Vegas, or whatever the pet projects that are going to get funded in the name of “stimulus” are going to be, but they won’t make American companies in general invest more or households spend more. Instead the private sector will be aware of the fact that the economic framework under which they make their spending decisions are subject to the whims of politicians. Insecurity is the main enemy of economic stability.

Beyond the measurable costs of growing debt, inflation, and consumer insecurity Obama’s Keynesian approach will cost the nation dearly in terms of liberty. When the government pays it also decides. And when you teach your citizens to rely on the government to provide you with a good standard of living they lose their sense of self-reliance and before you can say “change we can believe in” the Land of the Free and the Home of the Brave has turned into a second Europe.

The economic downturn hurts and it will probably hurt much more. But massive government intervention is going to make it worse. It is understood that the political costs of appearing passive in the face of economic troubles are high for the Democrats. But their spend-our-way-out-of-the-recession solution has been tried before and with no good results. And it isn’t said that government must keep their hands off entirely. There is always a mandate for helping the very poor to get back on their feet again and there are plenty of government programmes that can get improved, replaced or closed down. This should provide a field of activity for fidgety lawmakers.

Since M Obama has no intention to reduce the deficit any time soon, he could introduce some long-lasting tax cuts for private households and companies. People could decide themselves what to with their money instead of having it pooled and doled out to government employees and a bunch of construction firms in order to build a skating park that will be finished in the year 2012 when the kids in the neighbourhood have become adults.

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