Economic Stimulus Plan - what is it, and how does it work?

An economic stimulus plan from the federal government sure sounds great, especially if it means I'll be getting a check. I could sure use it, but will it really help the economy? I don't think so.

From what I've heard, it doesn't appear to be sound economic policy. It's really just a bunch of money sent to people in the hopes of getting the economy back on it's feet.

It's a shotgun approach and they're hoping to hit something with your money.

If the government really knew how to stimulate the economy, you would think they'd also know how to keep it from falling apart. But they didn't, so I don't have any confidence that they'll know how to pull it back out of the crater it's in.

At least I don't think it can be done simply by handing out a bunch of money. It's been tried before, many times, and it's failed many times.

As a libertarian minded individual, I have serious doubts that many folks in Washington D.C. have a clue as to what will stimulate the economy.

The Plan

We're going to hand out money to people in the hopes that they will spend it in the proper sector of the economy to stimulate it back to its former healthy self.

Okay, it seems the idea is that if we all get $300, $600 or however many hundreds of dollars, we'll know just what to do with it to stimulate the economy. Well, I won't know what to do with it, so how do others know?

It doesn't sound like much of a plan to me. It sounds like a shotgun approach. One that Bush tried a couple times before with no apparent success.

Who gets the Money?

Remember, this type of tax rebate won't be for the rich or wealthy or others that are high income earners in America. Sadly, these are the very people who start small businesses and employ others, so it makes sense to give it to them.

Moreover, the top 5% of taxpayers pay more than half the income taxes in this country, so why not give it back to the people in proportion to what they paid in? That makes a lot of sense to me.

If I'm working for a boss who makes a lot more money than me, yet he keeps me employed, I think I'd like to have him get plenty of money so he can continue to invest in the enterprise that keeps me employed. Call it self-interest if you will, but again, it makes sense to me.

Instead, we are proposing to give the money to the average person who will spend it rather than invest it. This seems to be a mistake. Strategic investments make a lot more sense to me than simply a shotgun approach.

The key to success is often thought to be jobs. Well, yes, but jobs just don't suddenly appear. They are created by people who invest in creation of wealth. Through jobs, employees get a share of the wealth that they help create. In other words, they earn it.

The Problem

The whole economic stimulus plan appears to reward being a participant in our economy, instead of rewarding being a leader in our economy. It also punishes those that have been successful.

Any manager worth his salary knows that "what gets rewarded gets repeated". What is our shotgun approach really rewarding? It's rewarding being a worker bee, not an entrepreneur, yet the enterpreneur is the one that makes things happen in our economy.

Handing out money, as the economic stimulus plan proposes, isn't earning it - it's simply a handout. How does something like that encourage us to be productive and employed? Haven't we learned anything from the welfare state that we've created?

Issuing "sittin' at home checks" doesn't motivate anyone to do anything other than sit at home and wait for the mail carrier. If we are wanting to continue the illusion that government can take care of everything, this is one more action that will help solidify that idea.

Getting a check from the government is popular with the crowd, so it's no wonder that politicians support the idea. Again, "what gets rewarded gets repeated".

The whole thing is completely upside down. The private sector creates wealth, so why don't we unleash that force to deal with the economic turmoil? The government consumes wealth, and therefore is dependent upon the private sector for income. It makes perfect sense that the government would get off the backs of the private sector to help them rev up the economy.

What are Others Saying?

Well, I'm not the only one with a thumbs down on this economic stimulus plan that has failed so many times in the past, and most recently under Bush. There are others, many others, and all of them with lots of experience as well respected economists. Take a look at what the CATO Institute is trying to tell us about how to jumpstart the economy.

Okay, I know that's just a newspaper ad with a lot of signatures from people you don't know. And, the whole Keynesian thing is a bit foreign to those of us who aren't scholars in the area of economics.

In the following video, the CATO Institute is arguing against the Keynesian approach to economic stimulation. I trust the men and women at CATO, as they are a great bunch of bright individuals who promote freedom, free enterprise, limited government, individual rights, and justice for all.

Here is a followup video from CATO that speaks in more detail about the economic stimulus plan that Obama is proposing and trying to push through Congress. I'm glad we're seeing resistance to this, but it's likely that all the finger waving won't stop until we've gone down this path of failure yet again.

It's clear that our economy and government funding rides on the back of the private sector, so let's ditch this economic stimulus plan and cut taxes that will encourage investment in wealth building enterprises. It's the only clear way to create wealth - unless you just want to print off more money and call it good.

The realist in me says that my tax dollars haven't been invested so well to date, so I'm not expecting anything better from Washington than this economic stimulus plan. The libertarian in me remains ever hopeful.

Done with Economic Stimulus Plan, take me back to Market Economy