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Government Stimulus

Government Stimulus:

The Economic Leech

  The federal government has one answer to an economic crisis. They create a stimulus to give the economy a boost. The “multiplier effect” should cause this money to at least double, according to government specialists. However, a study of the multiplier effect by noted Harvard economist Robert Barro during the last four American wars found that for every dollar in government spending, eighty cents of private sector growth occurred. Seeing as production is significantly increased by war, the effect in time of peace is probably much smaller. Thus, the intended effect of government stimulus fails.
Now let’s examine the other effects of government spending. Where does the government get its money? Taxes (Don’t say Amtrak. It hasn’t made a cent since it was created). The source of all government income is taxes on the private sector. Even if the government borrows money from a foreign nation, the debt must be paid by private sector taxes.
To see the full implications of this information, let’s imagine that the government has just passed a $1 billion dollar stimulus package for the entire economy. Just to be optimistic, we’ll say it’s wartime, so the multiplier effect is 80%. $1 billion multiplied by 0.8 is $800 million. $800 million in private sector growth will occur. Seeing as the original funds came from the private sector ($1 billion), and the growth goes to the private sector ($800 million), we can subtract the starting funds from the growth to find the net benefit. $800 million minus $1 billion equals -$200 million. This means that, in the best case scenario, the private sector loses twenty cents for every dollar of government stimulus. This stimulus shrinks the economy in the name of saving it. If those in charge haven’t figured this out yet, it means that they are inadvertently sucking the nation dry. If the government is aware of this phenomenon, they are deliberately destroying the economy. Either reality could be disastrous, and either way they must be stopped.

That’s the John Galt line.

Post Script

Now that we’ve established that government stimulus in the private sector does absolutely no good for the private sector, it’s time to inspect the constitutional authority behind the stimulus. The only constitutional justification given for government stimulus is in Section 8 of Article I, which says:

   “The Congress shall have Power To … provide for the common Defence and general Welfare of the United States;”

Even by the most twisted and deformed interpretation of this article, no one could argue that the Constitution sanctions the destruction of wealth by government stimulus. Thus, the only constitutional support for government “redistribution of wealth” on the corporate level goes down the drain.

Sources: The Constitution of the United States of America, Arguing With Idiots by Glenn Beck, 2009