Sunday, January 18, 2009

Get Out of My Wallet

$825 billion.

It’s staggering to imagine a number that high. The value is so large, that typing it out as $825,000,000,000 is too long for most printed articles, so we see it shortened into words. What other kind of everyday number creates that necessity? Think about “four”. Think about “twenty-two”. Nope – it’s far easier to type “4” or “22” than to write out the words – at least for numbers that have some meaning to the average person.

$825 billion is the amount the government is proposing for the next wave of bailout money. Add this to the $700 billion that seems to have been wasted in the first round. And add it, also, to the $1.2 trillion budget deficit that is forecast to occur this coming year. I’m going to ignore for the moment my revulsion for the leaders in Congress who truly think I will believe the idea that more government intervention is the answer to our economic woes. And I’ll set aside any arguments that I’m tempted to make about government waste and worthless spending programs – dropping billions on programs that not only are unconstitutional, but to which I am morally opposed. No, instead I want to think about one question – where does the government get $825 billion, anyway?

Three ideas come to mind. The first is that they got it from you and me, the American taxpayers. Governments are funded primarily by taxes, so to some degree, the source of this money came out of the pockets of every working American. Indeed, $275 billion of the total program is supposed to take the form of “temporary tax benefits” over the next two years. To me, this seems the same as if the government said, “Oops, we might have been taking too much money from you in taxes previously and it’s stifled your spending, so here – have some of it back.” And I have no illusions that the $275 billion that comes back started out as significantly more than that amount. The federal government isn’t known for being terribly efficient with our money.

The second place they could get such a staggering amount of money is that the government can borrow it from foreign nations. And they do. And it furthers a mounting debt obligation to those nations, putting the United States into a worsening position of weakness on the foreign markets. Will moves like this put the Chinese yuan into the position once enjoyed by the US dollar? However you view it, a foreign debt of this size weakens America in the long-term, regardless of the importance of fixing the problem right away.

The third place that our government could obtain this money is to get it the old-fashioned way – they print it. Our currency is no longer pegged to a gold standard, so the feds could print $825 billion in a matter of days if they wanted to. They could return some of those green bills to the taxpayer, and still go out and commission the construction of some new roads and bridges. But inflation would be the result – meaning that the money they send back to us would be worth significantly less than when they took it from us in the first place. Hey, government, what did you do with my money?

It’s time to stand up and say, “No more”. Government intervention has repeatedly caused economic downturns in the past. It’s the problem, not the solution. Let’s face it – would you trust the federal government to step in and run a private business more efficiently than the entrepreneurs who started it? Would Washington make a better (and less expensive) iPod every two years? Do we really think the feds will do a better job of overseeing innovations in automobiles than the free market can do?

A fourth source of the $825 billion just occurred to me – the government could steal it. But on second thought, that’s really not any different than the first source…


Joshua said...

It always astounds me that people are looking back at the Great Depression and pointing at the New Deal as justification for the Government going crazy with the spending and bailouts. "FDR did it, and we got out of the Great Depression!" is a summary of the argument used.

Unfortunately, those armchair historians fail to realize that what really pulled the nation out of the Great Depression was the advent of World War II, and the subsequent manufacturing boom it created, both to sell tanks, combat vessels and equipment to Britain, and then to sell them to the U.S. Army and Navy to fight the Nazis. The New Deal didn't accomplish much except bloating the federal bureaucracy, particularly the executive.

Alan Metzger said...

I couldn't agree more, Joshua. There is quite a bit of evidence that FDR's policies actually prolonged The Great Depression. And is it a coincidence that The Great Depression occurred only a few years after the bloating of the federal government by enacting a federal income tax (Sixteenth Amendment - 1913)?

A great read on the subject is Thomas DiLorenzo's "Hamilton's Curse". It may give us a clue about what is ahead if we continue to look to government for the answers.