Why the Stimulus Failed
Don Surber had a post that reminded me of something I had recognized before.
There’s a new park down the street on the corner of Midland and Woodson. I suspect it is a product of the Democrat’s much ballyhooed stimulus.
Here’s how “stimulus” is supposed to work Keynsean style. The government pays for some totally useless appendage, like a park, or flower pots on the side of the road, or a Lawrence Welk Birthplace museum in some remote corner of North Dakota. The companies that build the useless appendages buy equipment, increasing production in manufacturing plants across the land. The companies hire employees who get paid to build the useless appendage. The go home and buy new cars, new TVs, new everything…all made in the US…thereby stimulating even more manufacturing…in the US. And services. This trickle out economics becomes the multiplier as the original federal stimulus dollar gets counted every time it changes hands.
Here’s how the Obama stimulus worked. The government borrowed Chinese Yuan to pay for totally useless appendages. The companies that built the park already had equipment. The equipment was idled by the recession so the company really had no need to go out and buy more. The company had idle employees and so avoided layoffs until after the useless appendage was complete. The employees then went home and bought stuff made in China. So the US acquires lots of useless appendages, still has large numbers of unemployed, and now owes a mountain of debt to China. China loaned money to the US and which turned paid for increased manufacturing in China when the money turned around and made a beeline straight back.
Porkulus did nothing to stimulate the multiplier in the US. It failed because it didn’t do what entrepreneurs do. Entrepreneurs put money in places where it will make more money. Companies don’t (shouldn’t) start spending on fancy do nothing decorations around the property until they are solidly in the black. Decorations and appendages are paid for with profits. If the Democrats wanted to stimulate the economy, they needed to be putting money into things that would result in the making of more money. Instead, they are still hell bent on destroying the last vestiges of manufacturing in the US with their inconceivably stupid energy taxation and the business environment as a whole with their confiscatory taxation and regulation.