The Root of All Evil, Now More Than Ever
And here we go with another entry about money... although this may be an even bigger issue than my last money-related entry about funding the troops in Iraq and campaign finance reform. Because we are all just about OUT of money in this country, not only the people but the government itself.
I'm not going to go into denial mode like President Bush has... we ARE in a recession. The writing on the wall is pretty clear on that one. However, we need to have recessions every once in a while; this is what is known as a "market correction." It happened after the dot-com bubble burst in 2000, which led to the last recession we had. George Will wrote recently that we've had it pretty good in this country since Reagan took office in 1981. Compared to the pre-WWII days when boom and bust cycles were pretty common and pretty severe at that, we've been in recession for a GRAND TOTAL of 14 months over the last 25 years. We had 1991 and 2001, and that was it. It just goes against common sense that an economy will grow forever, however we seem to have forgotten that in this country, particularly in government.
At the state level, we used to be pretty good at it. States would put aside "rainy day funds" during boom cycles and be prepared for any kind of economic shocks that may come. Now, states spend money like water during the good times and complain when recessions hit... and then they raise your taxes. The federal government is just as guilty. Now I've heard all the people who think that the simplest way to solve the federal government's money issues is to pull out of Iraq. My answer to that is: when turmoil breaks out in the Middle East again because of our leaving (and it will), THEN where will the money to fix that come from? The Bush tax cuts pumped more money into government coffers and caused the deficit to slowly come down to around $200 billion last year... now it is due to explode back to $400 billion this year. Not quite sure how that happened, but I'm pretty sure it's more than just Iraq that is responsible.
Meanwhile, people are starting to feel the error of their personal spending ways. They thought they could afford living on borrowed time (literally) by charging credit cards to their limits, taking out second mortgages, spending all their home equity... and now they've run out of borrowed time. The banks were told to start lending money to "high-risk" customers in order to be fair and equal, and when the "high-risk" customers couldn't pay their sub-prime mortgages, we were supposed to be SURPRISED about this? Unfortunately, the banks have chosen to get out of the red by putting average people further into it... raising their credit card interest payments even if they've never missed a payment and had good credit. People have had just as little fiscal discipline as their government, and now it is coming back to bite everyone in the ass.
So what has the federal government decided to do about it? They passed a stimulus package. When a government that is already $400 billion in the red passes a stimulus package, you know something is REALLY wrong.
But they went ahead and did it, because after all, it IS an election year and they all want to get re-elected. The initial deal was going to give people $300-$600 and couples up to $1200 (plus $300 per child) in the form of a rebate check, if they paid taxes and made less than $75,000 individually or $150,000 as a couple. Then, the Democrats in the House managed to finagle it so the rebates would go to people who don't pay taxes (after all, those people are used to handouts and therefore love Democrats). Then, the Senate Democrats said no, not good enough. They insisted on giving rebate checks to fixed-income senior citizens and increasing the handouts by extending food stamps and unemployment benefits. Then my favorite liberal wackjob, Paul Krugman, actually had the nerve to say that the middle-class families (less than $150,000) should not get a rebate check because they MAKE TOO MUCH MONEY. But then, what would you expect from the people who gave you Bill Clinton, author of the 1992 pledge to cut middle class taxes which turned into the 1993 increase in middle class taxes?
If Krugman would look down from his ivory tower every once in a while, he would see that these people who he described as "in good financial shape" are actually the people who have spent beyond their means on things they don't need... so they ARE NOT in good financial shape. Regardless, the problem at the personal level with these rebate checks is that the ideal thing to do with these checks would be to pay down personal debt, which doesn't help the economy. No, we're getting these checks with the expectation that we will spend them. Yes, they want us to spend our way out of debt... which is like helping someone kick heroin by giving them free needles.
So what happens? Say, you're a middle-class person with a big credit card balance... but you've just been handed a $1200 check and told to go spend it. Conscience (that little angel on your shoulder) tells you that you really could use a lower credit card balance (by, oh, about $1200 would be nice), but you REALLY want that new flat-screen plasma HDTV. So you listen to the little devil on the other shoulder (otherwise known as the government), and you spend the check... on a $1500 plasma HDTV. After all, you wouldn't (or couldn't) charge $1500, but you could eke out another $300 on the old plastic thanks to this wonderful rebate check. End result: YOU'RE DEEPER IN DEBT NOW!
And that's a middle-class family (you know, the one Paul Krugman said was "in good financial shape")... what happens when the poor family gets their check and uses it to overspend? Three months later, they're probably on food stamps because they've defaulted on everything... which is probably why Krugman felt that increasing the handouts was ultimately the best way to fix the economy... because he can see the increasing number of people who will need those handouts and the increase in government power that will come with it.
And as for the government? Well, I'm no math major, but $400 billion deficit plus $150 billion stimulus package equals... AN EVEN BIGGER DEFICIT. And an EVEN BIGGER DEBT. Ya know, the one that is over $9 TRILLION, the one that keeps bumping up against the default ceiling? The $9 trillion that is mostly in the form of markers held by China? Forget going to war with us or turning Taiwan into a green, glowing parking lot... China knows that they hold a much more powerful weapon should we ever royally piss them off. They can call in our debt to them, and bang, Great Depression redux. Our economy is a house of cards right now because of what we've done to ourselves, and it wouldn't take much to send it all tumbling down.
So what do we do? I guess at this point, with the rebate checks on their way, it's what should we have done? Nothing. That's what should have been done. Let the markets do their thing. Yes, people have to suffer and it sucks, but that's not what government is supposed to fix and I don't care what liberals say about it. Suffer a little now or suffer a lot later? Apparently, we're choosing to suffer a lot later... but we don't even know it.
I'm not going to go into denial mode like President Bush has... we ARE in a recession. The writing on the wall is pretty clear on that one. However, we need to have recessions every once in a while; this is what is known as a "market correction." It happened after the dot-com bubble burst in 2000, which led to the last recession we had. George Will wrote recently that we've had it pretty good in this country since Reagan took office in 1981. Compared to the pre-WWII days when boom and bust cycles were pretty common and pretty severe at that, we've been in recession for a GRAND TOTAL of 14 months over the last 25 years. We had 1991 and 2001, and that was it. It just goes against common sense that an economy will grow forever, however we seem to have forgotten that in this country, particularly in government.
At the state level, we used to be pretty good at it. States would put aside "rainy day funds" during boom cycles and be prepared for any kind of economic shocks that may come. Now, states spend money like water during the good times and complain when recessions hit... and then they raise your taxes. The federal government is just as guilty. Now I've heard all the people who think that the simplest way to solve the federal government's money issues is to pull out of Iraq. My answer to that is: when turmoil breaks out in the Middle East again because of our leaving (and it will), THEN where will the money to fix that come from? The Bush tax cuts pumped more money into government coffers and caused the deficit to slowly come down to around $200 billion last year... now it is due to explode back to $400 billion this year. Not quite sure how that happened, but I'm pretty sure it's more than just Iraq that is responsible.
Meanwhile, people are starting to feel the error of their personal spending ways. They thought they could afford living on borrowed time (literally) by charging credit cards to their limits, taking out second mortgages, spending all their home equity... and now they've run out of borrowed time. The banks were told to start lending money to "high-risk" customers in order to be fair and equal, and when the "high-risk" customers couldn't pay their sub-prime mortgages, we were supposed to be SURPRISED about this? Unfortunately, the banks have chosen to get out of the red by putting average people further into it... raising their credit card interest payments even if they've never missed a payment and had good credit. People have had just as little fiscal discipline as their government, and now it is coming back to bite everyone in the ass.
So what has the federal government decided to do about it? They passed a stimulus package. When a government that is already $400 billion in the red passes a stimulus package, you know something is REALLY wrong.
But they went ahead and did it, because after all, it IS an election year and they all want to get re-elected. The initial deal was going to give people $300-$600 and couples up to $1200 (plus $300 per child) in the form of a rebate check, if they paid taxes and made less than $75,000 individually or $150,000 as a couple. Then, the Democrats in the House managed to finagle it so the rebates would go to people who don't pay taxes (after all, those people are used to handouts and therefore love Democrats). Then, the Senate Democrats said no, not good enough. They insisted on giving rebate checks to fixed-income senior citizens and increasing the handouts by extending food stamps and unemployment benefits. Then my favorite liberal wackjob, Paul Krugman, actually had the nerve to say that the middle-class families (less than $150,000) should not get a rebate check because they MAKE TOO MUCH MONEY. But then, what would you expect from the people who gave you Bill Clinton, author of the 1992 pledge to cut middle class taxes which turned into the 1993 increase in middle class taxes?
If Krugman would look down from his ivory tower every once in a while, he would see that these people who he described as "in good financial shape" are actually the people who have spent beyond their means on things they don't need... so they ARE NOT in good financial shape. Regardless, the problem at the personal level with these rebate checks is that the ideal thing to do with these checks would be to pay down personal debt, which doesn't help the economy. No, we're getting these checks with the expectation that we will spend them. Yes, they want us to spend our way out of debt... which is like helping someone kick heroin by giving them free needles.
So what happens? Say, you're a middle-class person with a big credit card balance... but you've just been handed a $1200 check and told to go spend it. Conscience (that little angel on your shoulder) tells you that you really could use a lower credit card balance (by, oh, about $1200 would be nice), but you REALLY want that new flat-screen plasma HDTV. So you listen to the little devil on the other shoulder (otherwise known as the government), and you spend the check... on a $1500 plasma HDTV. After all, you wouldn't (or couldn't) charge $1500, but you could eke out another $300 on the old plastic thanks to this wonderful rebate check. End result: YOU'RE DEEPER IN DEBT NOW!
And that's a middle-class family (you know, the one Paul Krugman said was "in good financial shape")... what happens when the poor family gets their check and uses it to overspend? Three months later, they're probably on food stamps because they've defaulted on everything... which is probably why Krugman felt that increasing the handouts was ultimately the best way to fix the economy... because he can see the increasing number of people who will need those handouts and the increase in government power that will come with it.
And as for the government? Well, I'm no math major, but $400 billion deficit plus $150 billion stimulus package equals... AN EVEN BIGGER DEFICIT. And an EVEN BIGGER DEBT. Ya know, the one that is over $9 TRILLION, the one that keeps bumping up against the default ceiling? The $9 trillion that is mostly in the form of markers held by China? Forget going to war with us or turning Taiwan into a green, glowing parking lot... China knows that they hold a much more powerful weapon should we ever royally piss them off. They can call in our debt to them, and bang, Great Depression redux. Our economy is a house of cards right now because of what we've done to ourselves, and it wouldn't take much to send it all tumbling down.
So what do we do? I guess at this point, with the rebate checks on their way, it's what should we have done? Nothing. That's what should have been done. Let the markets do their thing. Yes, people have to suffer and it sucks, but that's not what government is supposed to fix and I don't care what liberals say about it. Suffer a little now or suffer a lot later? Apparently, we're choosing to suffer a lot later... but we don't even know it.
Labels: debt, money, stimulus package
posted by Dave | 10:51 PM
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