Stimulus spending: Putting the cart before the horse
President Obama’s enormous $787 billion economic stimulus plan passed through the Senate last week, on Friday the thirteenth no less. I have my own misgivings about the plan itself, but the passing of it on a Friday the thirteenth adds a particularly foreboding feel to the mix. I think this bill, and Obama’s massive government spending strategy in general, could very well be an instance where the cure is far worse than the disease.
The plan is mostly about spending money, pure and simple. As Republican Representative John A. Boehner of Ohio said of the bill, “The president made clear when we started this process that this was about jobs. Jobs. Jobs. Jobs. And what it’s turned into is nothing more than spending, spending and more spending.”
This emphasis on increased spending is supposed to be happening during a time when money is tight and many people are out of work. It is therefore odd to think that the U.S. is in a position to increase spending on the whole. Spending implies the possession of money; however the government’s plan is to spend when there is a lack of money. This is like putting the proverbial cart before the horse. With this stimulus bill, and the rest of the government’s overall spending strategies, the government in effect plans to continue to “deficit spend” the country out of an economic crisis which is itself defined by deficits of money. And it plans to do this with such an inordinately large sum of money that should the stimulus fail to initiate the productivity required to repay the debt, the country will be crippled by far more debt than it was before the stimulus money was spent. Even if it does work as planned, the size of the debt would still require years and years of taxpayer’s money to offset it. As The New York Times reported in a February 13 article, “If nothing else, the plan is a striking return of big government…Whatever the result, future generations will get the bill.”
Perhaps what is most odd to me about this whole idea of stimulus spending is the extent to which saving and paying off debts is supposed to be discouraged. The government’s plan seeks to encourage individual beneficiaries of stimulus benefits (e.g. tax credits, unemployment compensation, infrastructure-related job opportunities) to spend rather than save their new money. The government wants people to go out and buy new houses and cars as if everything is just fine. I don’t know if it was the way I was raised or what, but I was always of the opinion that it was wise for a person to save money until they could afford something, not before. The age of credit cards and such have changed all that, obviously, but isn’t that largely the reason why we are in this so-called crisis in the first place? Didn’t a bunch of these banks fail because their loans were not repaid? Aren’t people perhaps not buying new cars and houses because they cannot afford the cars and houses they already have?
Many college students, and to a greater extent college graduates, know the burden tremendous financial debt can weigh on a person. How convenient would it be to have your college tuition paid for before you graduate? To do so, though, would require strict financial discipline—that is, it would require one to save money rather than spend it recklessly and frivolously. Why then would the government want us to assume more debt by spending rather than saving?
Well, one reason might be that the more debt one accrues, the more that person is forced to work harder and longer in the future. When one has the luxury of being debt-free, he or she has more discretion over where to work and for how many hours. However, when there is a debt to repay, the owner of that debt must force him or herself to continue working as long as that debt exists—while continuing to pay interest. This eliminates the option of quitting an unpleasant job where a more pleasant job is not yet found or desired. Of course, the economy as a whole will benefit more when as many people who are able to work are working. More workers equals more productivity, and more productivity equals more goods and services available for consumption. And businesses and business owners thrive when goods and services are exchanged—not to mention the government that taxes all of these transactions. Therefore, according to one perspective on this issue, the economy can thrive through increased consumer spending, but, if spending is done before the money is earned, it is at the expense of the consumer’s ability to enjoy debt-free living. The fact that this stimulus bill will force taxpayers into repaying an enormous government debt, while also discouraging stimulus money recipients from saving or paying off their debts, suggests to me that the government has little concern for the individual’s desires to live a debt-free life. What is even more disturbing is that all of this seeks to include the future generations who don’t even have the chance to oppose it.
I therefore encourage everyone to resist the government’s pressure to spend rather than save their money. Pay off your debts and wait until you have enough money to make a large down payment on a major purchase like a car or house. Quit relying on credit cards and buy what you can afford to pay right now. Humans are not to supposed to live in service of unneeded debt. Even though we cannot stop the government from spending these hundreds of billions of dollars, at least we can decide what to do with it if it trickles down into our hands.