Tuesday, February 10, 2009

More coal full steam ahead

I am still holding out judgement on this but I am leaning more toward a belief that he is naive and not a liar.

A small group of folks that I work with are vocal supporters of Obama. One of those supporters likes to try to debate me. He is more modearte than most and his comments of late have indicated a growing concern about the stimulus package and actually how successful it will be in turning the country around. However about a week ago he was much more enthusiatic about it and praised the "Buy American" slogans and themes Obama has been clamoring about. My first reactionwas to point out that the World may not be so supportive of such a obvious policy. Now do not misunderstand I believe at all times we, the USSA should do what is in our best interest. Our President should exercise care in his words for such a position is liken to cause a Worldwide system of tariffs and embargoes. History has shown such a course only slows economic growth.

There are a myriad of reasons why this stimulus package will do nothing except place a burden at the feet of our grand children.

The first reason resides in a fundamentally misunderstanding of today's economy and the economy in the USA at the time of the New Deal. During that time, Americans borrowed primarily from Americans. Therefore the debt of the nation was held in the hands of the people of the nation sort of like owning preferred stock in a company. Today this is not as true as much of the USA debt is held by foreigners. Therefore Obama has eseentially 2 sources of funding. The first is to print the money that means more dollars for the same amount of goods. The result is always inflation. The second is foeign investors which lowers the credit worthiness of the USA if lenders can even be found and ultimately a weaker dollar.

The second reason resides in another myth. The New Deal did have some successes in creating roads and power plants to be sure but merely building a road does nothing to increase the productivity of an area. If this worked everyone would do this. The new roads did have a positive effect after and during WWII. The roads reduced the costs of getting goods to market ie made it cheaper for businesses to operate. This stimulus package contains more money for special projects than new roads to lower the costs to industries.

So far I have tried to show why this is destined to fail but let me go a bit further to illustrate a point.

Several States have shortfalls. Several Car manufacturers have short falls.

Someone please explain why the Federal Government is giving money to either of these entities. Also explain why the profit driven businesses have to give a full accounting and are expected to change their policies but the government agencies are getting a blank check. Finally please explain how getting a blank check is going to get the States to operate more efficiently.

To me this is like an engine leaking oil but instead of fixing the engine the conductor says give it more coal.


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