Government stimulus requires borrowing money. So it can do more harm than good unless spent carefully, focused on two goals:
- Mitigate the suffering caused by the downturn (e.g., Medicaid, unemployment insurnance, food stamps).
- Investment in infrastructure projects that generate tangible future returns. Classic examples are transportation, utilities (water purification, sewage treatment), telecommunications.
(For more about this see Everything you need to know about government stimulus programs (read this – it’s about your money), and in other posts listed below.)
The danger is that every day in the recession becomes Christmas, an opportunity for Congress to borrow and shower money on political powerful groups. The cash for clunkers program offers a sterling example of this madness. Imagine the result if we billed every American household $30 to cover the cost of this program!
On the other hand, perhaps Cash for Clunkers is an act of genius. If so, why stop with cars? Dennis Gartman has a modest proposal to expand this program, published in the 4 August issue of The Gartman Letter.
We are here this morning to propose the newest stimulus program: Dollars for Dry Cleaning; Looking in our closet over the weekend we noticed that several of our white shirts were a bit tatty, and that several of our suits were well worn, and that a number of favourite trousers were frayed at the cuffs.
Noting further that the nation’s textile industry is having a bit of a tough time of it, we are this morning proposing Dollars for Dry Cleaning: a stimulus program that would allow the nation’s men and women to turn in old clothes that are not longer serviceable — a decision which shall be administered by the newly constituted Clothes Destruction Czar — and for those clothes to be given a rebate from Washington that can then be used to buy new suits, new shirts and new trousers. Presto, the nation’s clothing and textile’s industries are restored to health; unemployment is reduced; good and wonderfully serviceable headlines for the Administration are produced Prêt-à-Porter.
But why stop there? What about Dollars for Drivers?
Our old Taylor Made driver is behind the times. It’s getting a bit old; the face is a bit worn; it needs a new grip. And we are certain that the golf industry is suffering a setback in the current economic environment and could use a bit of stimulus. So why can’t we all turn in our old drivers for shiny new ones, be given a rebate for the old, size challenged one to be used to buy the newest of golf technology, with faroff Washington paying for it? Come’on; we really, really, really want a new driver, and shouldn’t Washington shoulder some of the money for it? Ain’t it reasonable? Ain’t it economic wisdom?
And what about our collection of old vinyl records? Aren’t they out of date and shouldn’t we be allowed to replace them with a new IPod. Shouldn’t tax payers be willing and ready to grant us a stimulus program to replace our old records with new technology, and wouldn’t Apple do well with this sort of new program, and wouldn’t the new age musicians fare better. So, sure, shouldn’t we be allowed to turn in our records for new technology under the Money for Music stimulus program? Makes sense, right?
And why stop there? Why should the nation’s policemen and women suffer the indignity of eating day-old donuts? Let’s have a bakery stimulus program to turn in day-old donuts for nice, fresh ones: Dollars for Donuts. That would stimulate the baking industry; it would increase the off-take of wheat and cooking oil helping the farm community along the way. The nation’s police forces would be well served. Where’s the downside? We see none. Dollars for Donuts it is then.
How about Gold for Grass? Shouldn’t the government want us all to have nice lawns? Wouldn’t the lawn care industry do well if Washington gave us money to tear out our poor, crabgrass laden lawns and replant them with new genetically engineered seeds, requiring new equipment, and putting legal and illegal labour back to work in the process?
We heard that things are so bad that even the legalized prostitution industry in Las Vegas is under pressure. So why don’t the Ladies of the Evening demand a “stimulus” program of their own: Pennies for… Well, ya’ll get the idea, right?.
And what about our old car? Shouldn’t the government be willing to pay us to bring in some old junker, give us taxpayer money to do so and then give us a tax incentive to buy a new car in order to help Detroit escape from the myriad errors of its own ways? Wouldn’t that make economic sense? Oh, wait, they’ve already done that! Golly, these guys are good, ain’t they?
Afterword
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For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp interest these days:
Posts about the recession:
- The most important story in this week’s newspapers, 22 May 2008 — GAO estimates the government’s liabilitis: $57 trillion.
- Essential steps to surviving the current crisis, 23 September 2008 — analysis
- The coming collapse in business spending – made visible today, 15 October 2008
- Miscelaneous news and thoughts about the financial crisis, 16 October 2008
- More reasons why the government will be taking over allocation of America’s capital, 27 October 2008
- The US economy must go to Defcon 1, 13 November 2008
- A certain casualty of the recession: the US Government’s solvency, 25 November 2008
- Why has the worst recession since the 1930’s had such a mild effect on America?, 14 July 2009
Posts about stimulus programs:
- A happy ending to the current economic recession, 12 February 2008 – The political actions which might end this downturn, and their long-term implications.
- A solution to our financial crisis, 25 September 2008
- The last opportunity for effective action before disaster strikes, 3 October 2008 — How to stabilize the financial system.
- Effective treatment for this crisis will come with “The Master Settlement of 2009″, 5 October 2008
- Dr. Bush, stabilize the economy – stat!, 7 October 2008
- New recommendations to solve our financial crisis (and I admit that I was wrong), 23 October 2008
- Everything you need to know about government stimulus programs (read this – it’s about your money), 30 January 2009
- Bush’s bailout plan is now Obama’s. His quiet eloquence guides the sheep into the pen, 30 March 2009