Lesson one: the stimulus

Let me bounce off last night’s post, beginning with the so-called stimulus package.

In this case, though, it’s not just the young voters who want the government to do something, but almost everyone.

There’s no question we’re in a difficult economic period, but it bears repeating that the whole mess started when some of those who borrowed for a larger, more expensive home than they could truly afford found themselves unable to sustain their payments. At that point, the foreclosures began, the overbuilt housing market became even more saturated, and home values plummeted.

As money became tighter, harried consumers cut back on purchases, forcing retailers to close stores or go out of business entirely. In turn, this threw more onto the unemployment lines while at the same time states saw their revenues decrease at a time when they thought spending more on social programs was the way to go.

Enter the stimulus programs of the last 12 months or so. What did you do with your rebate check from last year? Many paid bills, while others put the money away in savings. As economic conditions became worse it was obvious that $150 billion didn’t do the trick – nor has the $350 billion used to bail out a number of banks appreciably loosened the credit market.

Step three seems to be where the Obama Administration and Democrats spend upwards of a trillion dollars on a number of scattershot proposals, including a tax cut for those who don’t pay taxes. In my day, that was called a welfare check – but then there’s no shame for being on the dole anymore. In truth, last year’s check was wealth redistribution too – those who earned above a certain threshold did not get one, either.

Let’s use a little logic here, kids. I know that most of you weren’t taught critical thinking in school, so this may be a foreign concept. Bear with me.

Those of you who are working – it’s likely you make a certain amount per hour and work 40 hours a week if you’re full time. To make math easy, let’s say you make $10 an hour, so your weekly paycheck should be $400. But it’s not, is it? If you’re like me, you have about 1/3 taken out for various reasons, mostly to pay taxes.

For the most part, those taxes go to the federal government. It was a law called the Community Reinvestment Act passed by the federal government which in essence told the banks that they had to lend to those who probably wouldn’t be good credit risks, or they would find it difficult to expand or merge to run more efficiently and profitably.

It was also the federal government who indirectly set the policy of easy credit for homeowners and others in order to make ours an economy based on consumer spending rather than investment.

So, in order to fix the problem they had a hand in creating, the federal government wants to take that money you earned through your hard work and, after they take their cut, give it to a vast array of organizations and inferior (e.g. subordinate to them) governmental bodies (who also take their cut) who will spend some of that money to “stimulate” the economy. Of course, also bear in mind that the money out of your check, even when combined with everyone else’s money, still will fall something on the order of a trillion dollars short of what the federal government would like to spend – for years to come.

Because of that shortfall, one (or both) of two things happen. The debt accrues over time because of interest, making it a larger burden on you later in life; or, the dollars you earn lose purchasing power because there’s more of them out there. You weren’t around for the double-digit inflation of the Carter years, I was. Your $10 an hour would only be worth $9 after a year, yet you work just as hard.

Now imagine that, instead of giving your money to the government who MAY provide you benefits (assuming you happen to be in a group who they target the benefits to at that particular moment, these things are always subject to change) you get to keep more of what you earned and spend it where you want to. Or you could save it and invest for your future dreams, like purchasing a house with a solid 20 percent down payment, as they did in the old days.

Does that sound appealing to you? Well, welcome to conservatism. It’s not practiced by the Democratic Party, so you may wish to rethink that political leaning.

If you’re not convinced yet, don’t worry. I have plenty more where that came from.

Author: Michael

It's me from my laptop computer.