We Need More Stimulus and More Government Borrowing
Well, at least according to at least one economist, Robert Shiller.
Never mind that our national debt burden continues to grow. Never mind, I suppose, that Uncle Sam now owns huge stakes in giants like General Motors and AIG -- and we are not even close to understanding the long-term ramifications of this unprecedented governmental intervention in the U.S. economy.
Now, I suppose Mr. Shiller has reasons for his position, and I'm sure he's not alone, but I'm personally quite wary of such arguments. "It's broken, the government should fix it!" is certainly sometimes a rather popular rallying cry, but I am not sure this is always the best solition.
Perhaps I'm oversimplifying (and I likely am), but when we're calling for government borrowing and stimulus, what are we really doing? Well, the stimulus part is readily understood I think -- we pump money into the economy in order to help prime the pump and get the ball rolling again. Okay, fair enough, but where's that money coming from?
Oh yeah, we're borrowing it.
Okay, but from whom?
From ourselves, from the taxpayers, as we're the ones that will ultimately have to pay the loan back (or, in the case of ever revolving debt, keep paying the interest in perpetuity).
So, that means that the money that we're borrowing and spending today in order to save/create jobs (and everything else we're trying to do) comes at the expense of tomorrow -- so we're sacrificing jobs tomorrow for the sake of jobs today. Fair enough. I mean, a lot of people are out of work, unemployment is particularly high, so it makes sense, right?
Yeah, but how many jobs are we sacrificing tomorrow in order to save/create jobs today?
The truth is that we're sacrificing more of tomorrow's jobs than we're getting in terms of saving/creating today's jobs. Why? Well, interest on the debt if for no other reason. We're pulling more money out of the economy later (in terms of interest and debt repayment) than we're pumping into it today as a result of the stimulus spending.
And this doesn't yet consider how smart or foolish the capital allocation decisions are. Now, while not always true, I believe that much if not most of the time the private free market does a better job of allocating capital than government can (again, there are exceptions to the rule). So not only are we paying more in terms of dollars (and economic prosperity) tomorrow, the money we're getting isn't as 'smart' as the money we're losing.
Yes, indeed, this is overly simplified.... and I'm sure there are real economists out there who can make very good, sound arguments as to why more borrowing and stimulus may be a good thing. I, for one, will remain unconvinced.
My fear is that in the long run we will discover that the costs were simply too high... by then, I suppose it'll be too late -- besides, it will be a different set of politicians who is stuck dealing with it.
Russell (a.k.a. TMFEldrehad)