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Why Doing Nothing Would Have Been Better Than The $787 Billion Stimulus Package

By: Steve Johnson

8/4/2009 - 58 Comments

By now it's pretty clear that the "doing something is better than doing nothing" mantra of government intervention was and still is a lie.

Time and time again, I hear people responding to the recession by saying, “doing something is better than doing nothing” – but that is simply not true. 

Steering the economy out of a recession is not like throwing darts.  This is a serious situation that demands politicians to make the correct decision despite their political careers for the better of the national economy. 

Who are we kidding, more spending cannot be the answer when too much credit was the problem?

Stimulus Programs Will Work When Pigs Can Fly

The government stimulus programs will not succeed in restoring consumer credit and therefore will not succeed in restoring the economy that is 72% driven by consumer spending.

At best the stimulus is providing a few short term jobs, but they are not productive and therefore not wealth producing.  Instead many of the short term jobs created by the stimulus will further reduce the productivity and wealth of everyone else. 

Government intervention in the job market cannot create something out of nothing. Government intervention can only redistribute wealth. Of course, everyone thinks that are in the group of beneficiaries and no one thinks they are going to be in the group of ‘rich’ people that money is taken away from.

I’ve got news for you; we are all in the group that money is being taken away from.  Indeed, government redistribution of wealth is nothing more than systematic theft, whereby the politicians steal from the masses and give to their supporters – while telling everyone including the poor that they will benefit. 

The truth is that the poor are the easiest to fool and the largest target of the theft.  Most of the money is taken from the poor, through loss of jobs, higher taxes and higher prices of goods, while the wealthy supporters are rewarded.

Propping up failing companies holds labor costs higher than the market can pay.  Bailing out companies saves a few jobs by destroying many other jobs, further reducing the amount of wealth of the entire nation. The burden of the stimulus on the economy is preventing new businesses from getting started, expanding and creating new jobs.

If and when the economy recovery starts, it will be in spite of the burden of the government stimulus package.

Capitalism Is Fair, Socialism Is Stealing From the Blind - Which Do You Support?

Many leading politicians and economists are very much against free market capitalism, despite what they say because they don’t like the results of failed businesses and misguided investors losing money. 

Most of the leading economists today are actually anti-capitalist.

They believe that capitalism is not fair and would rather support a government in control of who fails and who succeeds.  But as cruel as it is, capitalism is the fairest economic system in the world and putting the government in control is much crueler than the free market that rewards good investments based on real consumer demands.

Capitalism rewards hard working businesses that save their money and invest wisely. Socialism rewards friends in high places by protecting their assets by taking money from the poor. How fair is that?

By our own laws, stealing is illegal – yet that is exactly what the government is doing under the direction of the Federal Reserve to inflation the currency and use printed money to bail out failing banks and businesses.

Bailouts Result In Fewer Jobs

Take the auto industry for example. The auto industry bailout is guaranteed to result in fewer jobs.  The bailout allows failing auto manufactures to remain in business producing vehicles that are too expensive, causing the government to continue to finance their losses indefinitely.  This will cause their labor and equipment not to be freed up to be used by other auto manufactures that are able to product vehicles at lower prices to meet real customer demand.

In the end, new jobs cannot be created elsewhere in the economy and the jobs that are supported will eventually come to an end or the government will continue funding the losses by taking jobs from other small businesses through higher taxes.

The alternative is to save our tax dollars (and the jobs they represent) and allow the most efficient manufacturers to gain market share and hire more workers.  If it takes fewer workers to produce the cars that U.S. consumers can afford to buy, so be it.  Bailing out the auto industry cannot save these jobs and will only further inhibit other businesses from creating new jobs.

Capitalism and competition are the forces that have made the U.S. the most successful economy for many decades. Granted it can be a harsh reality when you have made a bad investment decision, but no other system comes even close to creating as much wealth.

The choice is clear: Either the politicians continue on the path of nationalizing entire segments of our economy (banking, insurance, auto - next, health, airlines...) or they can let poorly managed companies fail, thereby making it easier for successful businesses and new entrepreneurs to buy the assets of these organizations.

The net result of government bailouts are always less jobs, as money is taken away from profitable businesses and given to less profitable businesses that are likely to continue losing more money and cutting jobs.

If the government would have done nothing, the economy may have already started recovering by reducing the  unemployment rate as new businesses attach real consumer demand with new workers and credit. Instead, the unemployment rate is climbing and projected to stay close to 10% for the next several years.

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