Stimulatin', ain't it?

English 1120
10 February 2009

Stimulating, Isn’t it?

The most recent large bill going through Washington is the proposed economic stimulus package backed by President Obama entitled H.R.1, The American Recovery and Reinvestment Act of 2009. The bill has passed through the House of Representatives, and has just today passed in the Senate. It will certainly be hacked away at by politicians and economists to resolve differences between the House of Representative and the Senate versions of the bill. Once that is done, the final version will be voted upon and, if it hasn’t lost the majority, it will become law. Obama has said that if it does indeed pass through both houses, he will most certainly sign it.
The proposed bill would authorize the government to spend approximately 838 billion dollars of government money to create jobs and help stimulate the economy to rise back out of its recession. Whether or not that is the best course, or even if the government should even be given that much power is a matter of controversy. In the Christian Science Monitor, Robert Higgs asks the question, “Should the federal government be doing any of this?” It is an astute question, and a hot topic among consumers and economists alike. Higgs argues that historically, the government has been restricted in its power to spend large sums of money till the 1930-40’s with the employment act of 1946 (Ibid).
An unnamed CNN writer, in the article Obama pushes stimulus plan in hard-hit Fort Myers said of Obama during his speech in Ft. Myers, Fl. On Feb 9th that “He argued that only the federal government has the power to break the "vicious cycle" gripping the U.S. economy, and said the package would create up to 4 million new jobs.”
Rush Limbaugh made a good point in the Wall Street Journal when he said, “There's a serious debate in this country as to how best to end the recession. The average recession will last five to 11 months; the average recovery will last six years. Recessions will end on their own if they're left alone. What can make the recession worse is the wrong kind of government intervention.”
CNN authors Brianna Keilar and Dana Bash quoted Obama’s speech at Ft. Myers, “’We can't wait and see and hope for the best," he said. "I believe in hope, but I also believe in action. We can't afford to posture and bicker and resort to the same failed ideas that got us into this mess in the first place.’”
The spending of that large of a sum of money violates basic principles of economics. An unnamed author writes about these principles in the Wall Street Journal, saying,
"A dollar doled out in jobless benefits may well be spent by the worker who receives
it…But that same dollar can't be conjured out of thin air. The government has to take that dollar away from someone else -- either in higher taxes, or by issuing new debt in the form of a bond. The person who is taxed or buys the bond will have $1 less to spend. If the beneficiary of that $1 spends it on something less productive than the taxed American or the lender would have, then the net impact on growth will be negative." (The Stimulus Tragedy)
If that dollar is pulled from thin air, then a dollar that represents goods produced or work done is then only worth half of what it was worth, resulting in inflation. The way the government makes “fast cash” is to sell bonds; loans with interest to be paid back at a later date. Bonds are sold to foreign countries, corporations, and individuals who invest in our economy, creating a national debt. The US will have to pay back that money with interest in the future. As of January 27th, the estimated amount to be spent from 2009-2019 would be 815.9 billion dollars, with the debt service (interest) at 347.1 billion dollars, totaling 1.163 trillion dollars. (Elmendorf, 2). That figure has increased over the past two weeks, after going through the House and the Senate. The debt service is a figure that hasn’t been very widely reported. Think of a car salesman who tells a customer that he needn’t pay any money for four years. At the end of those four years, the customer will have to pay interest on top of the price of the car. Like this example, the debt service seems to have fallen under the radar of most people, but it is a significant amount of debt. This money will ultimately come from the taxpayers’ pockets when the government has to pay it back.
According to data from the World Bank (US Report, GDP: 2007) and my own calculations, using the figure of 1.163 trillion dollars (economic stimulus package with interest added), the net spending proposed by The American Recovery and Reinvestment Act of 2009 totals to 8.4 percent of the US national economy. That is a strikingly high percentage, especially coming after the 700 billion dollar bailout in October, which totaled 5 percent of the economy. Conn Carroll notes in her February third article on the Heritage Foundation blog that “The deficit-spending package passed by House Democrats already is bigger than 168 of the 180 national economies measured by the World Bank.” It is staggering to think; with the amount they propose to spend, they could buy Australia. (Australia Report, GDP: 2007).
To add some perspective to conceptualize the amount, Carroll quotes Jim Geraghty, who astutely points out that if you spent one million dollars a day since “Christ’s birth in year zero one, times 365, times 2009, gets you 733,285,000,000, or a bit over $733 billion. (Yes, I’m leaving out leap years.) You’re not even three-quarters of the way there” (‘More Than a Million’). Even that doesn’t get us beyond inconceivability. If you represented that in pennies and melted that down into a solid block, the block would be approximately 10.7 million solid cubic feet of copper.
This is all ultimately taxpayers money that is being spent. “The government does not bail out anyone. Taxpayers do. The government just decides to which corporations they want to redistribute our money” (Bouman). Bouman goes on to say that the taxpayer is the one who best knows how his own money should be spent, and he ought to be the one to spend it, not the government. (par. 2). My eight year old brother, Stephen, when the stimulus bill was explained to him, said he thought it was a “goof-ball idea.” He explained, “They’re taking all our money and then we’ll go bankrupt.” Stephen seems to have a better grasp of basic economics than the majority of politicians in Washington.

Works Cited
“Australia Report.” World Bank. Sept. 2008. 10 Feb. 2009. http://ddp- ext.worldbank.org/ext/ddpreports/ViewSharedReport?&CF=1&REPORT_ID=9147&RE QUEST_TYPE=VIEWADVANCED&HF=N&WSP=N
Bauman, Michael. “The Case Against Government Bailouts” Christian Anti-Communism Crusade. Jan. 2009. Feb.10 2009. http://www.schwarzreport.org/SchwarzReport/2009/0109.pdf
Carroll, Conn. “If the Pelosi-Obama-Reid Trillion Dollar Dept Plan Were a Country” The Heritage Foundation. 3 Feb. 2009. 9 Feb. 2009 http://blog.heritage.org/2009/02/03/if- the-pelosi-obama-reid-trillion-dollar-debt-plan-were-a-country/
--- “More Than a Million a Day Since Jesus Christ’s Birth” The Heritage Foundation. 5 Feb. 2009. 9 Feb. 2009 http://blog.heritage.org/2009/02/05/more-than-a-million-a-day- since-jesus-christs-birth/
Elmendorf, Douglas W. Letter to Paul Ryan. Congressional Budget Office 27 Jan. 2009. 10 Feb 2009. http://www.cbo.gov/ftpdocs/99xx/doc9970/1-27-RyanLetter-09stimulus.pdfHiggs, Robert. “Instead of stimulus, do nothing – seriously.” The Christian Science Monitor. 9 Feb. 2009. 9 Feb. 2009. http://www.csmonitor.com/2009/0209/p09s01-coop.html
Keilar, Brianna, Dana Bash. “For House and Senate, it's time to compromise.” CNN. 10 Feb. 2009. 10 Feb. 2009. http://www.cnn.com/2009/POLITICS/02/10/stimulus.next/index.html#cnnSTCText
Limbaugh, Rush. “My Bipartisan Stimulus” The Wall Street Journal. 29 Jan. 2009. 9 Feb. 2009. http://online.wsj.com/article/SB123318906638926749.html
“Obama pushes stimulus plan in hard-hit Fort Myers” CNN. 10 Feb. 2009. 10 Feb. 2009 http://www.cnn.com/2009/POLITICS/02/10/obama.florida/index.html
“The Stimulus Tragedy.” The Wall Street Journal. 6 Feb. 2009 9 Feb 2009 http://online.wsj.com/article/SB123396623933859023.html
“United States Report.” World Bank. Sept. 2008. 10 Feb. 2009. http://ddp- ext.worldbank.org/ext/ddpreports/ViewSharedReport?&CF=1&REPORT_ID=9147&RE QUEST_TYPE=VIEWADVANCED&HF=N&WSP=N