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How to Reckon With Obama’s “American Recovery and Reinvestment Plan” January 6, 2009

Posted by Daniel Downs in Barak Obama, Congress, economy, free market, monetary policy, news, politics.

President-elect Obama offers a new financial bail-out plan that must be reckoned with, and the following is how Bill Bonner of the financial investment newsletter Daily Reckoning reckons with it:

President-elect Obama is talking about relief on a Rooseveltian scale. He wants to spread unemployment and Medicare benefits around more freely, for example. But he knows he can’t just toss out a few dimes to bums on the street corners; he needs a stimulus plan that knocks peoples’ socks off.

“Economists from all across the political spectrum agree that if you don’t act swiftly and boldly we could see a deepening economic downturn,” he said recently.

We must be somewhere on the political spectrum. But he didn’t ask us. If he had, we would have explained that every penny spent on a bailout has to be taken out of the spending of the person who earned it. We’d add that there is no economic problem at all. The markets are doing what they’re supposed to do…clearing away the mistakes of the Bubble Epoch.

It’s a political problem, not an economic one. People don’t like to have to pay for their mistakes. So, they whine to politicians. And then the politicians make things worse…by trying to prevent the correction from taking place.

But, our “Head of State Hotline” has been silent, here at The Daily Reckoning headquarters. So we have to assume it was Barack Obama who was not calling – along with every other government leader on planet earth.

Mr. Obama figures he needs to do something spectacular … something that will give the impression of really turning things around. He calls his project the ‘American Recovery and Reinvestment Plan.’

Ahh…here are some question marks: What is it meant to recover? We don’t know…maybe the glory days of the Bubble Epoch. What is being reinvested? We can’t figure that out either. Typically, you reinvest a profit. But you have to have a profit to reinvest it. As near as we can tell, 2008 was a year of losses. You can’t reinvest losses.

Nevertheless, we know what American Recovery and Reinvestment Plan is…political claptrap. And now it’s expected to cost as much as $1 trillion. At least, that is what state governors are calling for. Congressional leaders say they want to stay below the “politically charged” one trillion dollar level. But they also say the bill won’t be ready for Obama’s signature until February. Congress needs time to pry open the pork barrel and spread it around – no question about that, either. By the time they’re finished, there’s almost sure to be $1 trillion work of grease in the package.

“US Debt Expected to Soar,” says the Washington Post, stating the obvious.

All this extra debt will do no good for the economy, but investors will probably feel like the good old days are back. And for a while, they will be…

The Rooseveltian-like plan mentioned by Bonner is described by others as mere socialism. In an article published by Redstate.com, Texas Congressman Louie Gohmert wrote:

When the country is facing dire economic straits, those who believe in free market principles must stand together behind proposals that steer us toward enabling the private sector to work as intended and away from socialism.

This is how Congressman Gohmert’s view of recent bail-outs as well as Obama’s Rooseveltian plan of socialism extraordinaire. He has presented an alternative solution. His bill, HR 7309, proposes to give each worker the first two months of 2009 federal tax free, which amounts to a 2/12 or nearly 17% reduction in income tax for 2009. he figures this would cover the $350 billion King Paulson should not be allowed to spend. Gohmert’s plan just might give workers and employers some money to spend. Gohmert went on to say in his article:

Our country needs help right now and we have to deal with Demo- cratic Congressional majorities and either a lame-duck GOP admin- istration advocating socialism or a new Democrat administration. The American people and the market are ready for an alternative to bailouts that just aren’t working.

He is right. As Bonner pointed out, if politicians and their whining constituents (I feel like whining too) would leave the market alone, the painful correction would take place, things would return to way it should be, and life would go on. The endless efforts of politicians to prop up the economy with their pop-sickle sticks to make the economy perceived as stable only prolongs the inevitable.

It seems to me that it is the secularist liberals that should grow up and stop trying to create a make-believe world that satisfying their perverse fantasies–uhhh, I mean utopia.

Sources: The Daily Reckoning and Rep. Louie Gohmert’s website.



1. Auto Industry Bailout » Blog Archive » How To Reckon with Obama’S “American Recovery and Reinvestment … - January 8, 2009

[…] If he had, we would have explained that every penny spent on a bailout has to be taken out of the spending of the person who earned it. We’d add that there is no economic problem at all. The markets are doing what they’re supposed to …[Continue Reading] […]

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