Posted by
Rich from Paso on Monday, January 21, 2008 8:21:46 AM
Democrats never miss an opportunity to expand the Welfare State and to broaden the reach of Socialism. The economic stimulus plan talked about by the Democrats is another opportunity.
To explain the sluggish economy, allow me to summarize: what we are experiencing is a lack of credit and a tightening of capital in the economy. The sub-prime mortgage 'crisis' has exposed this lack of credit because lending institutions were forced to sell the marginal loans they sold as a means of freeing up more capital. This overextended many organizations and when the Adjustable Rate Mortgages (ARMs) began adjusting, those folks that took the ARMs were not able to make payments forcing a lot of people to default and go into foreclosure. These foreclosures left lending institutions with properties they couldn't move. So they sell at a loss, when they can. The glut of houses in most of the high foreclosure area exacerbates the discount and the losses. The mortgage "crisis" has caused a weakening in the confidence in the economy, making investors weary of investing in the Unites States. This has weakened the dollar versus foreign currencies, namely the Euro. Thus we have a slow down in the economy.
So what to do about it?
President Bush offered on Friday a stimulus plan that will run about $145 billion and is mostly in the form of rebates to tax payers of $800 per individual and some business incentives, namely accelerating depreciation for businesses. Think Bush Tax Cut 2002 Lite.
What do the Democrats want to do? They are discussing, because they haven't really spelled out their plan -- it's mostly trial balloons, is to a) extend unemployment benefits, b) increase the amount of the benefits, c) giving everyone, even if they had no tax liability last year a rebate similar to the one Bush proposed and d) increases in Food Stamp benefits. Truth is no one really knows what the Democrats want because they are allowing President Bush to come out first so they can pick his plan apart and not the other way around.
So what to make of the two plans? President Bush's plan and the Democrat Trial balloons do inject money for consumer spending at the lowest levels of the economy, but what kind of consuming would they be doing? $800 to $1600 of cold cash may make people more inclined to buy that thing that there were not buying because of gas prices or whatnot. That is good, assuming that is the choice they will make. My guess is that people will use that money to get ahead on some of the credit card debt that most Americans have. Our friends at the Center for American Progress, hardly Conservative, state that the average credit card debt for Americans in 2004 was $2150. If that is in fact the case, then $800 -$1600 worth of extra money would go along way to getting rid of some, if not all, of that debt. With credit card debt down, people would have extra cash to consume with.Right? The Democrat plan, however, does nothing to increase consumption, it actually will turn the slow down into a full fledged recession. Extended unemployment benefits and the amounts they receive only helps those folks (and there really isn't that many of them when you have a full employment economy, which we have right now) pay basic subsistence bills like gas, power, fuel and food. Food Stamps only pay for food. Furthermore, as economist Martin Feldstein, a former Reagan administration official, recently stated on the subject that extending these benefits as a "stimulus" would do exactly the opposite. It would slow the economy further because they would actually be encouraging people to stay unemployed. Additionally, isn't giving taxpayer dollars to people who did not earn welfare? Well, that is what the Democrats want to do.
I think that President Bush stimulus plan actually has the benefit of having been tried successfully before, so I support it more than anything the Democrats want to do. The Democrats want to give our money to people who didn't earn it which will encourage them to stay poor and unemployed, which will necessitate them needing more of the money you and I as taxpayers earned. The Democrats just want more welfare and more socialism and more dependance on government. That is the only page in their playbook for such events and it has continues to fail to solve the problems that got us here in the first place.
Another issue that Democrats don't want to discuss is making the Bush Tax Cuts permanent. Why? Because the Democrats want them to expire so Bush will be responsible for raising your taxes, not the Democrats. Don't misunderstand: the Democrats really want to raise your taxes, that much is certain. They just don't want their names on it when they do go up. In terms of economic stimulus, there is much to be said for making the tax rates stable for the foreseeable future by making them permanent, especially on the corporate side. If businesses could budget, three years down the road for a projected tax liability with some certainty, then those businesses would be able to budget more money for capital improvements, thus stimulating the economy now. Granted, most people on the individual level don't know how much they pay in taxes, much less worry about what happens if the Bush cuts are allowed to expire. All they know is that they will get a smaller return the following year.
Bottom line is that the mortgage crisis is one that needs to run its course. People that did not have the means to buy a home without a subprime mortgage are being "adjusted" back to the standard of living they can sustain. While it is the American Dream for the house with the white picket fence, taking a mortgage that you can only afford for three to five years does not help you achieve it; it only makes the Dream that much more elusive when reality sets in and you lose your home. Giving more government handouts will not ease the pain of transition, but it will make people more despondent and more dependant on government. The economic package as proposed by the president does more to ease that transition and therefore is the better of the two plans. The Democrat plan only ensures more people are more dependant on the government and will ensure that the economy is good and sluggish going into the '08 election. After all, for Democrat candidates for president, it has always been about the economy, stupid. And the worse the economy is, the better it is for Democrats, especially ones name Hillary.