Obama to Call for Major Road, Rail and Runway Spending

[UnderseaLcpl]

Originally Posted by tater

Mookie, I have to say, of all the people who are usually on the opposite side, you're one of the few capable of changing my mind sometimes. I think I've posted to that effect before, but <S> anyway.

Isn't he great? I like getting his perspective, too.

Unfortunately, I have to disagree with him on his assessment of the New Deal and his apparent taste for the new stimulus.

Originally Posted by mookiemookie

Economic stimulus is not meant to alleviate budget deficits. It's meant to jump start an economy.

It's meant to, and sometimes it does, for a little while. I'd hope it would, given the vast sums of money spent. However, the idea of jump-starting an economy through cash infusions and government-directed spending fell out of the economic boat decades go, along with Keynesianism. It's still practiced, much to the chagrin of modern mainstream economists who advocate free trade.

The problem is that you can't just frak around with an economic system by arbitrarily dumping vast amounts of created or appropriated currency into certain sectors of it without negative consequences. Currency injections are like a drug for the economy. They seem to make the problem go away for a time, but unless the money keeps coming the market will eventually undergo a natural correction. The severity of it depends upon how much was spent without generating a significant ROI, and with government spending, that percentage tends to be high. Governments are inefficient and easily manipulated sources of power that are just asking for abuse by self-interested parties at every level. They work just like monopolies, except that the results are much more harmful and permanent.

Even worse, the time and money spent "under the influence" creates diminishing returns. Like a drug-addict's body, the market will alter its homeostasis to the point where more stimulus is required to achieve the desired effect. Sooner or later, the market will reconcile the disparity between the supply of goods and services and the supply of currency. We've learned this from those damned economic bubbles time and time again, why would a government-generated economic bubble be any different?

What we need now is an influx of new (viable, not fiat) economic activity to shore up our currency. We could easily do this by drastically cutting taxes, especially business taxes, redacting BS regulations and licensure fees, and otherwise making it easy for people to generate economic activity by producing and spending. This is doubly true now when Non-US are weak (read, ripe for the taking). Think of the industries we could absorb by effectively lowering our labor prices We could turn the US into a gigantic, more advanced version of Hong Kong, which rocks. The Mints and the Fed would have a field day just trying to stave off both long and short-term deflation.