Obama is hurting young Americans by pushing economic stimulus plan
President Obama’s economic “stimulus” plan is one of the first chances young Obama supporters get the opportunity to prove they are not just jaded with the romance of his rhetoric and personality, but instead are able to stand up and question critical, long-term policies that we think he might not have right.
Team Obama has entered White House and brought with them a massive economic stimulus plan (some estimate a plan including up to $800 billion). As young voters who will eventually be handed the bills for what politicians do today, instead of robotically jumping head over heels for a stimulus plan, asking the same question we are hearing today, “how much money should the stimulus package include?”, they should backup and discuss whether or not stimulus package is the right action to take in the first place.
Much of the media, and many politicians and Americans seem to be in complete agreement with Team Obama’s stimulus plan ideas. They argue we need a stimulus plan that will pump a large amount of dollars in the economy so that spending will increase; more jobs will become available and therefore will enable the economy to get out of the rut it is in and back on track to economic prosperity. But not everyone agrees.
They are not well known amidst all the ‘stimulus salvation’ hype, but a growing number of economists and financial experts believe that any economic stimulus package will only worsen our economic situation. These select few stand squarely against the group-think mentality of the media, and jaded Obama supporters. Some students are taking notice.
Richard W. Rahn from the Cato Institute is one of those leaders who firsts looks at the necessary question, “‘where would the government get the stimulus money from?”
“It must either tax someone else now or borrow more money, which diverts productive saving to current consumption,” Rhan says. “Either way, it is less than a zero-sum game.”
Rhan looks to history as evidence to why direct government payments (i.e. a stimulus package) will face.
“During the Great Depression, government spending soared as a percentage of gross domestic products, but full employment did not return until World War II. During the last eight years, U.S. government spending has greatly increased in both absolute terms and as a percentage of GDP, yet the economy now performs worse than it did a decade ago.”
And he’s right. The productive American tax-payer (a future student in the work force) is the one who will pay for any sort of government stimulus package. Similar to the infrastructure overhaul that came with the New Deal by FDR during the Great Depression, every dollar spent by the federal government (such as Obama’s huge infrastructure project) is a dollar taken away from the tax-payer.
The infrastructure project President-elect Obama is proposing will only take jobs away from the productive private sector and give it to a usually unproductive public-sector job (recent data by the Bureau of Economic Analysis shows the average federal public-sector employee gets nearly paid double what a productive private employee earns).
This could potentially be good for small amount of students planning to work for the federal government, but not for the majority of us.
While an obvious way for the government to get stimulus money is by increasing taxes, that isn’t easy during hard economic times (even for a liberal Democrat like Obama). However, this will hardly prevent the government from spending lavishly. Thanks to our Fiat money supply, the government can use another trick called money creation to receive more spending money. By printing new money it can spend more.
But even the most unschooled economic student knows that printing excessive money, which the stimulus would require, creates massive inflation. This again punishes the tax-payer when he comes to find out the dollars he has earned and saved is worth a lot less now than before. The U.S is currently $10.7 trillion in debt and plans on printing more money and creating more inflation to combat a recession? Too bad dollars are not as soft as toilet paper.
Peter Schiff, President of the Euro Pacific Capital (which many students may remember as Ron Paul’s economic adviser), predicted the housing bubble back in 2006-2007 and is another minority financial expert who says a stimulus package will be bad news for the U.S economy.
In a recent editorial in the Wall Street Journal, Schiff argued a recession is actually the cure to the current economic crisis and isn’t supposed to be pain-free times. The transition from borrowing and spending to saving and producing cannot be accomplished without a severe recession, given the current imbalances of the US economy, he argued. Biting the bullet and dealing with these issues should be a priority.
Schiff must have students in mind. Introducing a stimulus package instead of allowing for a natural recession to occur would be equivalent to attempting to heal a broken leg by taking massive amounts of painkillers and continuing to walk on the broken leg. Just because we can’t feel the pain doesn’t mean it’s fixed. Instead, we should allow the painful recession to occur by staying off the broken leg until it heals properly. If not students will be in hot water by graduation time.
It is understandable that young voters feel a great urgency for the government to take some action in hopes of repairing the economy before we enter in the job market. But this urgency is no doubt a reason we are forgetting to discuss vital issues such as if a stimulus plan is the right thing to do in the first place for our future.
In the end, any stimulus plan will negatively affect young Americans and ultimately the future tax-payers—the very entity we are trying to help. The best plan of action is this: Obama should take a step back. He should allow a healthy, yet painful recession to occur that will eventually heal the market from the economic crisis in time for graduation job hunting season. Otherwise we as students will be left paying the bill and likely without employment.