Robert Samuelson is about the best economic writer out there. He not only has a knack for explaining things clearly but manages to avoid any partisan jabs when doing so. He just wrote a column called Three Economic Crises In One where he explains that this crisis is a combination of three things. First, the drop in US Consumer spending, which is 70 percent of our economy:
Traumatized by plunging home values and stock prices — which have shaved at least $7 trillion from personal wealth — they’ve curbed spending and increased saving. That’s led directly to layoffs. In December, vehicle sales were down 36 percent from year-earlier levels.
Second is the credit crisis:
Lower lending deprives the economy of the credit to finance businesses, homes and costly consumer purchases (cars, appliances). The deepest cuts involve “securitization” — the sale of bonds. Investors have gone on strike. In 2008, the issuance of bonds backing credit card loans fell 41 percent and those backing car loans 51 percent.
Third, Samuelson describes the continuing trade crisis:
Global spending and saving patterns are badly askew. High-saving Asian countries have relied on export-led growth that, in turn, has required American consumers to spend ever-larger shares of their income. Huge trade imbalances have resulted: U.S. deficits, Asian surpluses. As Americans cut spending, this pattern is no longer sustainable. Asia is tumbling into recession.
So the rocket scientists in D.C. want to stimulate the economy, right? From my perspective, looking at their stimulus package, they care very little about stimulating the economy and seem to view this “stimulus package” as just another way to spend money on their pet vote-buying projects. Samuelson is not impressed with the proposed stimulus package:
But in practice, the stimulus could disappoint. Parts of the House package look like a giant political slush fund, with money sprinkled to dozens of programs. There’s $50 million for the National Endowment for the Arts, $200 million for the Teacher Incentive Fund and $15.6 billion for increased Pell Grants to college students. Some of these proposals, whatever their other merits, won’t produce many new jobs.
Again, if the politicians wanted to stimulate the economy they would take Rep Louie Gohmert’s idea of a Tax Holiday where for a few months the federal government stops withholding taxes from our paychecks. The government reportedly takes in $160 billion per month in withholding taxes, so we could have a 5 month tax holiday for the price of the crap sandwich that is the partisan stimulus bill.
Call your representatives and urge them to reject the pork-laden socialistic so-called stimulus plan in favor of the Tax Holiday. You will get to spend your money on the things that matter to you. You can pay off debt, increase your savings, whatever, but likely a ton of money would be injected into the economy. Even David Brooks, the closest thing to a conservative at the NYT, has written a column that is highly critical of this proposed stimulus pork package.
The Left hates this idea because it will work, and when it works it will show that their high taxes are a huge drag on the economy. They also hate it because they simply want to continue their socialistic spending patterns, taking money from the productive members of our society to give to the least productive among us. They also hate it because their core constituents, the losers who pay no income taxes (40 something percent of America) will not get as much under this plan because they are only paying the payroll tax and not income tax. I would strongly argue that those people are not the people whose spending helps the economy (unless scratch off Lotto tickets, beer, and cigarrettes are the industries that you want to stimulate) and are far more likely to have been the people who bought houses that they couldn’t afford, largely starting this crisis in the first place.
In summary, this so-called stimulus package is a pork-laden, socialistic, and ultimately ineffective crap sandwich. Please call your congressman and senators and urge them to reject this spending spree (how is contraception spending going to help the economy right now?) and instead let hard working Americans get us out of this by letting us keep our taxes for a few months. I cannot believe that anyone outside of DC is choosing that stimulus package over the tax holiday idea.
Remember, that is your money, not Nancy Pelosi’s.