Lost for what to do, there appears to be only one cure-all the government will consider for the current economic crisis: spend, spend, spend. First, there was an initial stimulus package pushed by the Bush Administration for $150 billion. The corporate rescues – AIG, Fannie & Freddie and other “deal making” programs – have cost us $363.1 billion thus far. The $700 billion TARP bill was originally designed to purchase toxic assets from the banks, but has been used for everything but purchasing these assets, including throwing more money at GM and Chrysler.
Next the Obama Administration “quintupled down” on the first stimulus creating a whopping $787 billion package. Adding up the costs, through February 2009 the government has spent or committed over $2 trillion to fighting the recession. On top of these expenditures, President Obama has just signed a $410 billion spending bill for FY2009, which happens to contain all the pork and inefficiencies the current Administration was supposed to reject.
If government spending was going to solve the crisis, then it would seem that $2.0 trillion to $2.5 trillion (14% of the value of our entire economy) would be enough; but then again, perhaps not. Now, it appears as if another stimulus package may be on its way. Speaker Pelosi has said that Democrats are open to another spending package if necessary, that proponent’s claim should be $500 billion. A third fiscal package would be another panicked response; and, as Arthur Laffer has been saying as of late, “decisions made while panicked, or drunk, rarely have desirable consequences.”
Government spending, by definition, does not stimulate. Every dollar that the government spends must be taken from someone else. In order to spend a dollar the government must either increase taxes on someone (as President Obama wants to do ostensibly on the top 2% of earners) or borrow the money from someone and thereby increase the national debt. Either way, all the government has done is take money from one person and give it to another. This exercise is akin to rearranging the chairs on the Titanic. Who has what chair may have changed, but the ship is still heading in the wrong direction.