Sunday, February 08, 2009

$937 Billion?!

Wow, that's a lot of money. I wonder where it's going to come from. How about an example of what we should and shouldn't do?

They have been in a 20 year recession, with the decade of the 1990's being called a "lost" decade. They tried spending money on infrastructure, which obviously didn't work. They raised taxes, which deepened their recession. Remember when FDR raised taxes during the Great Depression? Corporate taxes were increased, raising the costs of production and other inputs. If corporations are paying more, they're going to have to decrease other costs, ultimately leading to a decrease in unemployment. By the way, Nancy Pelosi wants to raise taxes too.

For years, Ireland was faced with high unemployment, budget deficits, and high taxes. In 1986, the Irish government decided to cut taxes across the board. From corporate taxes, to employee income taxes, to the capital gains tax, all were cut in an effort to help stimulate the Irish economy. Since then, Ireland has been extremely better off than most other European economies. When you think about the euro area, usually what comes to mind is high taxes, and high unemployment. They have stable economies, but do not experience the benefits of growing consumption, production, and an overall increase in the welfare of the people. Ireland was ahead of the curve. After the institution of these tax cuts, unemployment dropped, budget deficits cooled, and Ireland experienced the greatest years of economic prosperity in their history. Reagan did that when he became president, turning around the terrible state of our economy that Jimmy Carter left us in.

So now we are faced with the probability of this HUGE stimulus package. If the stimulus doesn't work, we will be faced with high debt, high inflation, and a weak economy.....stagflation anyone? Obama shouldn't, and wouldn't leave the "Jimmy Carter" stamp on our economy.....would he?

It's the "Golden Rule" people: "He who has the gold, sets the rule!" Which in our case is the government. America has prospered due to our basic free market principles. If you let the people spend how they want, they will be better off. The government can't spend our money in ways they "think" we would spend. It's inefficient and a waste of time. Like Adam Smith said, when we act in our own self-interest we increase the welfare of our overall economy.

We should decrease taxes, lower our tariffs and let the American people spend! Don't enhance government welfare programs, such as unemployment benefits, because it only creates the incentive to not find a job. We shouldn't let labor unions become so powerful that it ultimately hurts the American worker. If collective bargaining is going to raise wages and force corporations to provide more benefits this will hurt, not only, the employees (there will be layoffs due to the increase in cost of labor, as well as, production) but the consumers also (increase in the prices of goods produced). We have to be smart in how we handle this situation, and throwing money around is not the solution.

The Hypocrisy of Paul Krugman:
The man is a political economist, meaning he wants more government intervention in the running our our economy. However, in reading his textbook on International Economics: Theory and Policy, I see that he enjoys contradicting himself.
"We have seen that while free trade usually encourages efficient resource use, government intervention, or market failures can cause waste even when all factors of production are fully employed." Really Mr. Krugman?

1 comment:

The Rambler said...

Paul Krugman is an idiot...we read about his idiocy here every day! HAH. Also, more lessons from Japan can be found here...
but notice that new Sec. of Treasury Geithner comes to a different conclusion.