"Stimulus" can take many forms. Las Vegas is the consummate student of the subject and has applied its knowledge to great effect. Every year, millions are stimulated to excitedly empty their wallets and purses to benefit "the house." In the American Recovery and Reinvestment Act of 2009 (ARRA's snazzy new logo above), the US Government has attempted to use its own special blend of stimulus to address the economic crisis.
Congress brewed up a mighty big batch of the stuff, $787 billion's worth! But it's for a noble cause, as the "full title" makes very clear: An act making supplemental appropriations for job preservation and
creation, infrastructure investment, energy efficiency and science,
assistance to the unemployed, and State and local fiscal stabilization,
for the fiscal year ending September 30, 2009, and for other purposes. Obviously, this is a very noble cause, indeed! The specific provisions of the bill have been much debated. So I thought it might be helpful, instead, to deconstruct the concept of "stimulus." Let's ask the simple question, "What is it about this bill that renders it into 'stimulus?'"
A good place to begin is in the retelling of a common story used to illustrate the "two sides" of stimulus. Once upon a time, a vandal named Rufio threw a brick through a shop-keeper's storefront window. Geppetto came outside to examine the damage where he was met by some of his fellow townsfolk. Wanting to help Geppetto "look on the bright side," they encouraged him in the knowledge that this unfortunate event would have positive consequences. They first observed how the town glazier would have the benefit of gainful employment. He, in turn, would be able to use what he earned replacing Geppetto's window to pay for food for his family. This act would put money in the pocket of the grocer who would spend it for clothing, thereby aiding the local tailor. As their creativity waxed on, the original scofflaw seemed the perfect hero of economic recovery.
But, there is another side to what happened. Rufio's actions stole a choice from Geppetto. Before his window was broken, the money that it would cost to replace the glass was his to use as he chose. He could have saved it, if he wanted, or spent it for whatever purpose he deemed most desirable. But when Rufio did his work of "stimulating" the local economy, he imposed upon the shop-keeper's liberty. He compelled Geppetto to use his own money to pay for something that Rufio determined should be purchased.
Without Rufio's vandalism, Geppetto's decisions about how to spend his money would have had no less stimulatory effect on the local economy. The same domino effect would have occurred, albeit without its necessary starting point at the glazier's shop. Rufio stole from Geppetto the right to choose how he would use his own money. Rufio's brick was simply about control.
Is this not the heart of what is euphemistically being called "economic stimulus?" Our government (the Rufio counterpart) is collecting money from us, the Gepettos of America, and thereby curtailing our liberty. Instead of allowing us the freedom to decide for ourselves how best to use our money, Rufio / Uncle Sam is compelling it to be spent as he sees fit. Some might object, "Isn't this what government does, take our money to buy what it decides to?" Precisely! This is just bloated government doing what bloated government does, but with a new label intended to dress up the whole business as something noble.
Alas, what Uncle Sam is doing is actually even more egregious than Rufio. The ARRA bill spends almost a trillion dollars that the government does not have in its possession. So where does the money come from? Ultimately, from "future Geppetto." Uncle Sam takes out a loan to get his hands on the dollars to fund his bill. He is able to secure this loan from creditor nations on the promise to pay it back (with interest) from future tax revenue. Uncle Sam has limited the freedom of "future Geppetto" by saddling him with a debt obligation for the things that Uncle Sam has determined should be purchased right now.
The Cash for Clunkers program which "ran out of cash" yesterday (thankfully) took "stimulus" to new heights: It incentivized Geppetto to voluntarily smash his own window. He would be given a cash incentive to buy a new "energy efficient" window, which Uncle Sam would partially pay for by taking money from "future Geppetto."
So tell me, Geppetto, what does this "stimulus" stimulate in you?
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