“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."
Friday, January 11, 2008
It Is Fiscal Stimulus Time
$50 billion, $75 billion, and now Treasury Secretary Robert Rubin is calling for $100 billion in increased government spending or transfer payments, to stimulate the economy.
The economy is clearly slowing rapidly. The consumer seems fatigued and cautious, business will soon follow the consumer, but the government can still print money and it will. The economy is so large that it will take $75 billion in extra government spending over a period of one to two quarters to increase the economy by just 1%. Therein lies the problem.
First it is an election year. Any thoughtful deliberation will therefore be unthinkable. The Democrats will demand more money for unemployment compensation, more food stamps, and more spending or give-aways to those that will be the most likely to spend it. Given the recent congressional habit of using earmarks, any stimulus bill will be larded with superfluous spending as everyone in Congress is up for re-election and a third of the Senate is as well.
Secondly, the Republicans will be no better. The only difference will be the constituency for the giveaways. It would be far wiser to pursue public works, infrastructure and domestic energy projects that would create additional domestic jobs and have a lasting positive economic effect. (A border fence could suck up a few billion.) However this would take thought and planning and would not be half as much fun. So it will be business as usual with politicians casting caution aside and we will make another run at government trying to spend us into prosperity, and no one will be able to stop it.