Saturday, February 14, 2009

My thoughts on this whole stimulus deal and the future

I don't know with whom I'm most angry: the Democrats for doing something that is dead-certain to destabilize the economy in the long run (no one ever follows through on Keynes's corollary: when times are good, cut spending and raise taxes); or the Republicans, for doing such a terrible job with PR and commitment (whatever happened to small government, GW?) that they've convinced Americans they'd be better off with the Democrats.

This is starting to look like the Seventies again. In time, government borrowing will crowd out other borrowers from the market, leading to higher interest rates and even further reductions in available liquidity (which will hurt small businesses and homebuyers the most). The Philips Curve will shift away from the axes again, just as it did during the Seventies. And that's not even taking into account the big What-If: a major Middle Eastern war that, despite the worldwide downturn in consumption, would cause fuel prices to eclipse even the gory peaks of 2008.

Worse, the Thirties: other countries turn to authoritarian command economics, which involve rearmament and eventual aggression. The United States lags behind and is caught unprepared for the grand conflict. Millions die needlessly.

It's the largest gamble in American history, and I'm not sure the implied-odds calculations justify the risk.

No comments: