Thursday, January 29, 2009

Cost-Free Money Courtesy of Obama

Yesterday I spoke with an otherwise intelligent friend of mine about the so-called "Economic Stimulus" bill currently passing through the US Congress with the support and praise of President Obama.

My friend said that when the Federal government needs more money they can always print more of it. Even if it means printing $1,000,000,000,000 (that's $1 trillion give or take).

I said, "But printing more money devalues the dollar, makes it worth less and fuels inflation."

"Not necessarily," my friend replied. "Obama has a plan . . . he has it all figured out."

I replied, "The only way that Obama could do this is if he either has a direct connection to God or has a wizard in his back pocket who can work magic."

My friend effectively ended the conversation with this reply, "Obama can do it. He will make it work. Just wait and see."

I can remember when Reagan's tax cuts were called "Voodoo Economics." But there was at least some measure of economic theory to support it. As a bonus, it worked well enough for the Bush administration to feel confident to try it again . . . albeit with mixed results. But at least there was some sense to the plan that was able to generate some reasonable debate.

The present economic "package" rolling through the Congress has little if any economic theory to support it. Even those economists who said the national economy needed a large infusion of government infusion of capital investment have now said that the about-to-be-enacted bill is a sham, putting virtually all of the money in the wrong places and at the wrong time (80% of it to be spent in 2010 and later) to be of any help to the current economy.

With my friend I witnessed an almost religious-like faith in our new President to perform miracles. Our Senators and Representatives in Congress know better, of course. But they are hoping that we don't. So far it looks like they are getting away with it.