Townhall.com, Where Your Opinion Counts
Talk Radio:   Bill Bennett   Mike Gallagher   Dennis Prager   Michael Medved   Hugh Hewitt   
BREAKING NEWS  LeftArrow - Townhall.com : Conservative, Political, Republican   RightArrow - Townhall.com : Conservative, Political, Republican  
Columns, funnies & more in your inbox!
  • Check the boxes and send us your email address to receveive your free newsletter
  • Your daily must-read of conservative columns, cartoons and news. Coulter, Sowell, Krauthammer and more.
  • Townhall.com’s weekly inside scoop on what’s happening behind the scenes in the world of politics. When news breaks, we report.
  • Signup to receive the latest daily Townhall cartoons
Thursday, January 24, 2008
Jon Sanders :: Townhall.com Columnist
Oo Ee Oo Ah Ah, Ting Tang, Walla Walla Stimulus Plan
by Jon Sanders
Vote on It:
Average Vote:
[+] Text [-]
 
Poll
Will the Dems' health care Christmas Present to America be an improvement or detriment to our health care system?


At long last we see bipartisan agreement in Washington, with no rancor or wrangling. Catching our breath, we all look toward D.C. and hail the politicians on both sides of the aisle joining together for the working people of this great nation, for preserving the hopes and dreams of the children of America, for ... whatever other excessive rhetorical flourishes a politician might add. It is a moment that dewy-eyed commentators, professors, activists, community leaders, and talk-show callers have long dreamed of.

A starker object lesson in being careful what you wish for is hard to imagine.

What great consensus have they all reached — President George Bush, the Democratic leaders in Congress, and the Republicans in the minority? Essentially, that it really is their business to muck around in the economy, that they are the ones who control the economy and can be trusted to do so wisely.

The Democrats have been there all along, of course. The Republicans are late to the table, but pragmatically, the Democrats have made room. After all, this new consensus empowers them all at the expense of the governed, and elected officials cherish such power. Giving a man political power is like giving a one-year-old crayons; don't be surprised to find him using it in all the wrong places, making a totally unintelligible mess of things and being quite pleased with himself despite it all. (And when you see that smile, chances are he needs to be changed.)

To be sure, some debate between the parties still exists ... over which groups to give government goodies to.

Not only do politicians crave more power, but they recoil at admitting that some things are beyond their purview, Ninth and Tenth Amendments be torched. This year, for instance: What business was it of Congress what football games were exclusive to the NFL Network? Why were they hauling professional baseball players before them? What are they doing fooling with people's choices in light bulbs?

And it must be admitted, a general lack of economics education being operative, that many people expect politicians to have a plan for government intervening in the economy to ward off a slowdown. They would reject the man who said the best thing we in Washington could do is to stay out of it, because we'll only make things worse. Just so, some pagan societies turned to mystics to entice the gods to return Spring. Those ignorant of the greater cycles will always go with the guy with the best-sounding booga-booga. Continued...

1 2
| Full Article & Comments | Next >
Share:
Vote on It:
Average Vote:
 
About The Author
Jon Sanders is a policy analyst and research editor at the John Locke Foundation in Raleigh, N.C.

Be the first to read Jon Sanders' column. Sign up today and receive Townhall.com delivered each morning to your inbox.

iandelor
I think most readers here are familiar with Keynesian economic theory, but thank you for the concise explanation.

Does the word "stagflation" ring a bell? Simply increasing the money supply does not translate into real economic stimulus. This can cause inflationary pressure without job creation, and poof, you have a 70's economy.

The fundamentals of the US economy are solid. Some people made bad lending and borrowing decisions, and need to pay the piper. Oil costs are staggeringly high, but not overpriced, since demand has not diminished. This is no reason to have a huge cash give-away.

The combination of massive government spending programs and high oil costs cause stagflation (which Keynes did not foresee), which drives up interest rates, which will make the current debt crisis even worse.

Sometimes "nothing" is the best of all available actions.

The mechanics of a "Rebate"
No one really talks about the mechanics of HOW this stimulus plan is supposed to work, so here's a quick (very simplified) explanation:

GDP = Jobs; generally speaking rising GDP means increased employment, which is why we have similar unemployment today as we had 40 years go, with a much higher population in the U.S. Our GDP generally increases faster than our population growth, allowing new employees to be hired.

In Keynesian economics: GDP = consumer spending (CS) + Business Investment (I) + Government Spending on goods (G) + the balance of exports minus imports.

Cutting taxes on businesses to increase investment will help in the long run, but that takes time before it translates into increased production capacity and jobs.

Not a whole lot can be done to change the balance of trade today, without repercussions from our trading partners. Solutions there are very time consuming, too.

The government can effect the GDP equation immediately in basically two ways. (1) give money to consumers to spend, which essentially increases consumer spending assuming consumers spend the money they are given. Or (2) the government can spend money itself on goods, preferably with companies that will have to hire workers to meet the new demand, thereby creating new jobs. The problem with option 2 is that you are back to the longer time needed to effect the GDP. So the government likes option 1, because of the quick effect it has on GDP. This is why we've gotten "rebates" three times (including this time) since 9/11.

I'm not defending the conclusions of the politicians, I'm just telling you that is the mechanics of why they're doing what they're doing. That and their desire to appear to be "doing something" so you'll keep them in office. As I said, this explanation is highly simplified for easy digestion.
Sign Up to Post Your CommentsSign Up to Post Your Comments
If you are already registered, click here to login. Otherwise, please take a few seconds to register with Townhall.com. Once you sign up, you’ll be able to post your comments immediately, use the action center, get podcasts, and more!
Note: Fields marked with a red asterisk (*) are required.
Salutation:
First Name:
*
Last Name:
*
Email:
*
Nickname:
*
Note: Nick name will be shown when you post comments.
Address 1:
*
Address 2:
City:
*
State:
*
Zip:
*
Phone:
      
Your daily must-read of conservative columns, cartoons and news. Coulter, Sowell, Krauthammer and more.
(Bi-Weekly) We highlight the best opportunities from our partners for surveys, action items and more.