gsvol
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- Aug 22, 2008
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Just how much expansion can the US Treasury stand??
* $300 billion has been spent on Fannie Mae, Freddie Mac (FRE), American International Group Inc. (AIG) and Bear Stearns Cos. (now part of JP Morgan Chase & Co. (JPM).
* $300 billion on Citigroup.
* $700 billion on TARP - though not on what TARP was intended for.
* $800 billion on Fed-directed asset-backed debt-purchase programs.
* $1.4 trillion on FDIC bank guarantees.
* $2.3 trillion on Fed commercial paper programs.
* And $2.2 trillion on other Fed lending and government commitments.
That totals a little bit more than $8.5 trillion.
In something like a cruel joke, because all the banks are still holding the bad assets that the original $700 billion Troubled Assets Relief Program was supposed to buy, the new Plan B may include going back to Plan A, this time around forcing the government to actually buy those bad assets.
Can you say 'mobious loop'???
If it appears as if were in a vicious cycle thats spinning out of control, its because we are.
Americans are increasingly being caught between two irreconcilable schools of economics.
The Keynesian-European Socialist school of thought that believes in government regulation, massive transfers of wealth via burdensome taxation, and a command-and-control economy dictated by politicians and bureaucrats; and the Friedrich Hayek-Capitalist school, which favors decreased regulation and taxation, incentives for markets and businesses, and leaving consumers to choose how they will spend (or save) their hard-earned money.
The recent election of Barack Obama and large congressional majorities of Democrats has ushered in a new, and we hope short-lived, era of Keynesian thought whereby the government should stimulate economic growth and improve stability in the private sector (that was originally built through capitalism) by increasing government spending.
Britain, a follower of the Keynesian school of economics, experienced its first-ever economic contraction in 2008 (even considering the Great Depression) despite massive public spending.
Indeed, in a thorough repudiation of Keynesian economics, the British government has outspent that of the United States and yet Britain still faces national bankruptcy, roiling unemployment and devastated commercial industries.
Is it surprising, then, that no country has ever, in more than a century, successfully followed the Keynesian model and remained solvent?
Former British Prime Minister Margaret Thatcher once pithily noted that the primary problem with Keynesian Socialism is that eventually you run out of other people's money.
The Keynesian Socialism that American Democrats are so eager to bring to our shores only hastens the depletion of funds and brings us closer to national bankruptcy.
More telling still, when Thatcher came to power in 1979, she employed the Hayek model and dragged Britain out of an extended economic malaise that the Keynesians were unable to stop.
What the Bush tax cuts really did
Chalk it up to another history lesson ignored -- House Democrats on Wednesday passed an $819 billion rebate-centric stimulus package consisting of the same government expenditures which history has shown actually stimulate little.
The bill's supporters argued that rebates, by injecting money into the economy, will catalyze consumer spending and, hence, economic growth. History, however, has proved otherwise.
In a report titled "Why Tax Rate Reductions Are More Stimulative Than Rebates: Lessons from 2001 and 2003," the Heritage Foundation analyzes the numbers.
The 2001 tax "cuts," for example, centered on rebates. Yet, despite Washington's sending billions to Americans via $600 rebate checks, consumer spending grew only artificially, reaching seven percent in the fourth quarter of that year before dropping to 1.4 percent the following quarter. Meanwhile, fourth-quarter investment spending plummeted 23 percent, and economic growth measured just 1.6 percent.
The 2003 tax cuts, conversely, focused on structural cuts by reducing income, capital gains and dividend tax rates. In the six quarters following the cuts, GDP grew at an annual rate of 4.1 percent while the S&P 500 shot up 32 percent. Additionally, in the 13 post-cut quarters, non-residential fixed investment grew each quarter, and the economy added 5.3 million jobs.
Real tax cuts, not rebate-branded wealth distribution, stimulate economic growth and recovery.
History is clearly the teacher, but most of the class isn't paying attention.
* $300 billion has been spent on Fannie Mae, Freddie Mac (FRE), American International Group Inc. (AIG) and Bear Stearns Cos. (now part of JP Morgan Chase & Co. (JPM).
* $300 billion on Citigroup.
* $700 billion on TARP - though not on what TARP was intended for.
* $800 billion on Fed-directed asset-backed debt-purchase programs.
* $1.4 trillion on FDIC bank guarantees.
* $2.3 trillion on Fed commercial paper programs.
* And $2.2 trillion on other Fed lending and government commitments.
That totals a little bit more than $8.5 trillion.
In something like a cruel joke, because all the banks are still holding the bad assets that the original $700 billion Troubled Assets Relief Program was supposed to buy, the new Plan B may include going back to Plan A, this time around forcing the government to actually buy those bad assets.
Can you say 'mobious loop'???
If it appears as if were in a vicious cycle thats spinning out of control, its because we are.
Americans are increasingly being caught between two irreconcilable schools of economics.
The Keynesian-European Socialist school of thought that believes in government regulation, massive transfers of wealth via burdensome taxation, and a command-and-control economy dictated by politicians and bureaucrats; and the Friedrich Hayek-Capitalist school, which favors decreased regulation and taxation, incentives for markets and businesses, and leaving consumers to choose how they will spend (or save) their hard-earned money.
The recent election of Barack Obama and large congressional majorities of Democrats has ushered in a new, and we hope short-lived, era of Keynesian thought whereby the government should stimulate economic growth and improve stability in the private sector (that was originally built through capitalism) by increasing government spending.
Britain, a follower of the Keynesian school of economics, experienced its first-ever economic contraction in 2008 (even considering the Great Depression) despite massive public spending.
Indeed, in a thorough repudiation of Keynesian economics, the British government has outspent that of the United States and yet Britain still faces national bankruptcy, roiling unemployment and devastated commercial industries.
Is it surprising, then, that no country has ever, in more than a century, successfully followed the Keynesian model and remained solvent?
Former British Prime Minister Margaret Thatcher once pithily noted that the primary problem with Keynesian Socialism is that eventually you run out of other people's money.
The Keynesian Socialism that American Democrats are so eager to bring to our shores only hastens the depletion of funds and brings us closer to national bankruptcy.
More telling still, when Thatcher came to power in 1979, she employed the Hayek model and dragged Britain out of an extended economic malaise that the Keynesians were unable to stop.
What the Bush tax cuts really did
Chalk it up to another history lesson ignored -- House Democrats on Wednesday passed an $819 billion rebate-centric stimulus package consisting of the same government expenditures which history has shown actually stimulate little.
The bill's supporters argued that rebates, by injecting money into the economy, will catalyze consumer spending and, hence, economic growth. History, however, has proved otherwise.
In a report titled "Why Tax Rate Reductions Are More Stimulative Than Rebates: Lessons from 2001 and 2003," the Heritage Foundation analyzes the numbers.
The 2001 tax "cuts," for example, centered on rebates. Yet, despite Washington's sending billions to Americans via $600 rebate checks, consumer spending grew only artificially, reaching seven percent in the fourth quarter of that year before dropping to 1.4 percent the following quarter. Meanwhile, fourth-quarter investment spending plummeted 23 percent, and economic growth measured just 1.6 percent.
The 2003 tax cuts, conversely, focused on structural cuts by reducing income, capital gains and dividend tax rates. In the six quarters following the cuts, GDP grew at an annual rate of 4.1 percent while the S&P 500 shot up 32 percent. Additionally, in the 13 post-cut quarters, non-residential fixed investment grew each quarter, and the economy added 5.3 million jobs.
Real tax cuts, not rebate-branded wealth distribution, stimulate economic growth and recovery.
History is clearly the teacher, but most of the class isn't paying attention.
