Wednesday, February 11, 2009

How Many Capitalists Does It Take?

Obama, the Democrats, and the Republicans have the entire idea of how a capitalist economy works backward. The mortgage melt-down was because government promoted unethical and unhealthy capitalist processes.
Q: How many people does it take to "stimulate" the economy?

A: Only as many capitalists as have the money to do it.

I ask and answer this question, because of several things that have come to the attention of the public:

  • 200+ economists publicly declared the President is wrong;
  • President Obama goads legislators on both sides of the isle to forget that wealth is created by capital investments, and to forget that
  • [A]spending money without
  • [B] thinking about where it is going,
  • [C] where it is coming from,
  • [D] how long this spending spree will take to work,
  • [E] how long it will take to pay itself off, or even
  • [F] whether our grandchildren will be illegally indentured servants to the spending whimsies of Obama and the 111th United States Congress--is not capitalism;
  • In order to spend more money on projects than would be necessary under a fair-bidding policy, President Obama signed an Executive Order that stating that "it is the policy of the Federal Government to encourage executive agencies to consider requiring the use of project labor agreements in connection with large-scale construction projects in order to promote economy and efficiency in Federal procurement," where "project labor agreements" mean the exclusive use of union labor, as described elsewhere in the Order. A "large-scale" project is one over $25 million;
  • The spending of public monies by Wall Street capitalists and others on projects that put people to work is strictly forbidden, as in the example of the corporate jets that are no longer acceptable to purchase or use, and the junkets that are no longer acceptable that would have put hundreds of hotel and restaurant workers to work, which puts hotel and restaurant suppliers to work, which puts the manufacturers to the suppliers to work, which puts farmers, textile workers, commercial laundries, garbage removal companies, cab drivers, truck drivers, and gasoline suppliers, and others to work.

In other words, Obama and the Democrats and the Republicans who agree we must spend, have the entire idea of how a capitalist economy works backward. The mortgage melt-down was not because of capitalism; it was because government promoted unethical and unhealthy capitalist processes.

It has been argued by many that if the government wants to put people to work and create or save jobs, it should give the money directly to those who will spend it immediately. Brookings senior fellow in governance studies Pietro Nivola suggested that Congress "proceed in two tranches. The first would pump money directly into the hands of consumers and businesses through a combination of judicious tax relief and quick-hitting expenditures (including, as one example, ramping up military equipment procurement and recruitment of personnel). Subsequent legislation could take up the long-term infrastructure spending and more exotic projects..."

But it would seem President Obama would rather injudiciously scold Congress for their attempt at being responsible with the people's money. "I’ve heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis," he said.

Would these be the theories of Congressman Barney Frank, who encouraged the sub-prime lending that got us into this crisis? "These two entities—Fannie Mae and Freddie Mac—" said Frank, "are not facing any kind of financial crisis." Frank was (and remains) the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Would these be the theories of President Bush who as early as 2003 sent out the distress calls that the mortage crisis was on the way? Would these be the theories--[1][2][3]--never listened to, that statistically demonstrated how government spending, when used as stimulus, never works?

No. Instead, the President said, "Let’s not make the perfect the enemy of the essential. Let’s show people all over our country who are looking for leadership in this difficult time that we are equal to the task."

What he means is that what is "essential" is the profligate spending that Vice President Joe Biden publicly declared had only a 70% chance of success. "If we do everything right, if we do it with absolute certainty, there's still a 30 percent chance we're going to get it wrong," Biden said.

"Some critics, said the President, contend the bill 'is full of pet projects. When was the last time that we saw a bill of this magnitude move out with no earmarks in it? Not one.'
"Ratcheting up the sarcasm, the president said: 'So then you get the argument, "well, this is not a stimulus bill, this is a spending bill." What do you think a stimulus is?'
"'That's the whole point,' he said, as the audience hooted and applauded."

From Wall Street to Main Street, every business owner and capitalist knows you don't throw money at debt hoping for a 70% success rate at getting out of debt.

The Democrats and Republicans both should leave it to the free market to solve the problems. Their success will come faster than anything government can do, but 21st century government doesn't want to ever have to admit that capitalism is better than socialism. Biden warned that the consequences of failing were too great for the country, to allow it to allow politics to prevent action.

What Washington can't see is how greatly they have prevented the free market from acting, by promising free money that generations of Americans will discover is not free at all.

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