Stimulating stuff

Rats! Just when I was relishing having one of those CIN-study guys from FCC come see how I write this blog, they decide to stand down on the program.  I would have loved telling that guy how my news decisions are simple: will it bring down that darned tyrant? You say, naw, FCC only wanted to control news organizations and newspapers. They will never check your blog. Okay, magazines are classified as newspapers worldwide.  Just slicker paper.  And many mags have a news section.  Vogue has Fashion News. So then can the FCC “suggest” what clothes Vogue writes about?  News is everywhere, even in what I do.

            The 5 year anniversary of the Stimulus Porkulus came and went with Oblamer now wanting more stimuli or else it is the Republican’s fault for the paltry recovery.  It always amazes me how libs can be so saavy and crafty on politics while being such bozos over economics.  The Stimulus or American Recovery Act, didn’t work.  It didn’t because of Keynesianism.  The Keynesians never figure opportunity cost.  Let me explain that economic term.

 John Maynard Keynes in the 30’s said that governments should spend and stimulate economies. This dogma was to lib politicians what heroin was to Hoffman.  Pols had already been experimenting with giving free stuff away and Keynesianism gave them cover, an excuse that vote-buying was actually benefitting the economy.  Hallelujah! The idea of a stimulus in recessions was quickly amended to stimulus all the time. Except that Keynesian stimuli don’t work.  It didn’t work for the British Labor Party or Peron or FDR or Nixon or anybody else. 

            That’s because Keynesians never figure opportunity cost. Opportunity cost is what you lost by doing something else with your money.  A Keynesian figures that government can simply print money or print bonds and hand out the (almost cost free) dough—and those handouts will stimulate a sluggish economy.   But what if the stimulus lost more economic growth with the right hand while handing out goodies with the left hand of government.  A quick example to illustrate. Suppose there exists a rich Republican small businessman who sells his business and now has a nice little pile of cash. A recession has taken place.  Should he just leave it in cash or invest?  He comes up with one possibility. He will buy junk buildings for 10 cents on the dollar, adding another 20 cents of fixup and in the end have a good building to rent.  If all goes according to his calculations he can make 30% return.  If not, he might get 5% return or even lose money.  While he is pondering what to do, the big government Democrats arrive.  “Well! We have a deal for you!  As we speak, we are printing some new government bonds.  They are tax free and yield 4% and are sure to be paid back.”  So the  Republican businessman buys the bonds (being nervous about the recession). “Gentlemen prefer bonds.”

The Dems snicker about how easy this was, like taking candy from a baby.  They gave him a promissary note and he gave them his life savings. Now they can give that money away as a stimulus, say, as a pork project for Representative Weiner, that wonderful responsible guy.  And they only have to pay it back in the far-off future.  Maybe then the future generation will tax themselves more or inflate the currency. 

Not so fast.  The businessman lender gave up on his entrepreneurial project of fixing an old building which would have employed plumbers, electricians, laborers, etc. (a true stimulus of the economy). That was the cost of opportunity which the government/country had to endure as he bought bonds.  Meanwhile the stimulus revenue garnered shrinks with 29% government overhead.  It is often dispersed to welfare recipients and the hope is that they will stimulate economic growth.  But they are the least likely to do it.  They might buy cigarettes and diapers and beer.  The worst case is where the money is given to a Museum of Senator Foghorn Leghorn Speeches.  To build a boondoggle which has no visitors and makes the effect of the expenditure die.  In either case the Stimulus actually un-stimulates the economy by drawing money from growth projects to non-growth ones. Opportunity Costs.

But you can’t tell the lib Keynesians anything.  They assume big government spending does good and won’t question that central assumption.  They insist that foreigners do a lot of the lending so our debt just works against foreigners. (Oh?  So they can’t afford our products? Explain that least-greater-fool stuff again?) Or they say that it simply wasn’t enough.  “Think how much worse it could have been had there been no Stimulus!”  And concerning the notion that we borrow from foreigners and live high on the hog?  Well you can borrow from a relative and spend like the prodigal son but eventually you’ll be eating hog slop. Tyrants just manipulate things so they won’t be in office when the slop diet begins. You see how this news article got written?