April 14, 2009
Pulling Our Tail
Drawing on an excellent quotation from Abraham Lincoln, Thomas Sowell makes a point that has been increasingly relevant, although it could be and has been made for decades — centuries, even:
Abraham Lincoln once asked an audience how many legs a dog has if you count the tail as a leg. When they answered "five," Lincoln told them that the answer was four. The fact that you called the tail a leg did not make it a leg.It is too bad that Lincoln is not still around today. He might emancipate us all from our enslavement to magic words.
When you call something a “stimulus” package, that does not mean that it actually stimulates. The way individuals, banks, and businesses in general are hanging onto their money suggests that "sedative" package might be more accurate.
This is not a new phenomenon, peculiar to this administration. President Bush's "stimulus" package did not stimulate either. The same was true back in the days of Franklin D. Roosevelt's "pump-priming" by spending government money to get private money flowing.
The circulation of money slowed down then the same way it has slowed down today.
Some of our biggest political fallacies come from accepting words as evidence of realities.
Buy American
Do any cities, towns, or state agencies have a purchase policy that favors locally manufactured products or is it simply least cost bidding?
If our goal is to have tax dollars stimulate the economy, it seems like the multiplier effect would be greatly enhanced by not sending all of those dollars to China.
Au contraire mon frere.
Free trade give us the liberty to chose what products we want to buy cheaper, thereby keeping more of our hard earned money in our pockets, bank accounts and under our mattresses - which we are free to keep or spend on more stuff.
What we can save on ordinary easy-to-make items can be put towards the purchase of higher quality luxuries, more of which are made here at home.
Posted by: George at April 14, 2009 5:01 PMBut to the original point... it is mind boggling to me, how politicians on both sides have a cyclical amnesia with regard to what has proven to stimulate and prolong growth in economies all over the world - low taxes and reduced government spending and regulation.
Kennedy's tax cuts stimulated the economy. Reagan's tax cuts and government reforms started the largest economic expansion in the history of the world. Clinton's move to the center after the 1994 mid-terms, with welfare reform, NAFTA and backing off on regulation and capital gains helped extend the expansion into the Bush years where the initial tax cuts kept the expansion going, albeit tempered by excessive government spending, into 2007. All periods of tax, spend and regulate, before and in between, led to bear markets and sluggish economic growth.
We're in another amnesia cycle. May enough of us come to our senses before too much damage is done.
Posted by: George at April 14, 2009 5:12 PMGeorge, I think you are confusing liberty with economic suicide. Everyone saves a little bit by going to Walmart and buying Chinese products - often knock offs of American innovations dumped in the marketplace that put American companies out of business. Then they pay a little interest on their credit cards to the bank owners. Who might that be now?
So, the tax base generated by local manufacturing erodes more and more as everyone saves a little bit. Then they go to low paying service jobs and need to save a little bit more, so they can pay their interest.
Other than yachts and high end items that people who save a little bit will never afford, what other high end products are people consuming that are made here?