I don't know about you, but I'm finding the series of bailouts, real and proposed, somewhat bewildering at this point. It appears the trough is open, and the hogs are coming to partake, and there is no limit. We hear about the auto companies and the airlines sneaking in to scoop up some public money while the vault is ripe for the plunder.
It all has the feel of those ads we hear for debt consolidation companies, the places that promise to help you work out your debt and let you make just one easy payment. The government seems to be trying to take all the bad debt out of the system, but not in a way where anyone actually loses anything. Took out a mortgage that you can only afford if you win the lottery? Don't worry about it, Uncle Sam is here to shoulder that burden for you. Invested in mortgage-backed securities that won't pay off for a while, if ever? Let Hank Paulson take them off your hands.
But here's the kicker, if you listen to the learned people and the politicians telling us what we need. Not only are they promising to help us work out our debt, they're vowing that we will have extra money in our pockets (as that's needed to "stimulate" the economy).
And it goes still further. Not only will we only have one low monthly payment, but, in a John McCain world, it will be even lower than it is today, because we need tax cuts. And we'll get that extra stimulus money. And we're going to rebuild our infrastructure, and create new forms of energy, and fix health care.
Whew! Not even the most aggressive debt consolidator promises to combine our debt, give us more spending money, and come over to fix our deck and gas up our cars and give us an aspirin, but that's what we're hearing from Washington.
Look, I understand the Keynesian idea that governments should run deficits in a falling economy to maintain things while we wait for the underlying growth to emerge. But I don't think Keynesian stimulus applies at the levels we're currently talking about, and I doubt that we will be able to sustain our post-downturn growth at a level that will pay this back. I could certainly be wrong, but I wonder what kind of legacy we're handing to future generations.
It all has the feel of those ads we hear for debt consolidation companies, the places that promise to help you work out your debt and let you make just one easy payment. The government seems to be trying to take all the bad debt out of the system, but not in a way where anyone actually loses anything. Took out a mortgage that you can only afford if you win the lottery? Don't worry about it, Uncle Sam is here to shoulder that burden for you. Invested in mortgage-backed securities that won't pay off for a while, if ever? Let Hank Paulson take them off your hands.
But here's the kicker, if you listen to the learned people and the politicians telling us what we need. Not only are they promising to help us work out our debt, they're vowing that we will have extra money in our pockets (as that's needed to "stimulate" the economy).
And it goes still further. Not only will we only have one low monthly payment, but, in a John McCain world, it will be even lower than it is today, because we need tax cuts. And we'll get that extra stimulus money. And we're going to rebuild our infrastructure, and create new forms of energy, and fix health care.
Whew! Not even the most aggressive debt consolidator promises to combine our debt, give us more spending money, and come over to fix our deck and gas up our cars and give us an aspirin, but that's what we're hearing from Washington.
Look, I understand the Keynesian idea that governments should run deficits in a falling economy to maintain things while we wait for the underlying growth to emerge. But I don't think Keynesian stimulus applies at the levels we're currently talking about, and I doubt that we will be able to sustain our post-downturn growth at a level that will pay this back. I could certainly be wrong, but I wonder what kind of legacy we're handing to future generations.
1 comment:
The keynesian idea only works if the issue is due to a weak aggregated demand. it won't work if the economic environment is experiencing infationary price increases and surplus :-)
The world that we are living in is so complex that there is really no one silver bullet.
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