South Dakota lawmakers are in agreement that some sort of "stimulus package" is desirable to help the economy avoid recession. There seems to be consensus that the government should inject money into the system through some combination of tax rebates, interest rate cuts, and government spending. I guess we are all Keynesians now.
These policy prescriptions, in my opinion, are folly. First, they ignore the surge in inflation. Every policy suggested above has the result of increasing inflation. Second, all these policies are predicated on false assumptions about the cause of the economic downturn. Like good Keynesians, they assume that the problem is lack of consumer spending thus we need to "prime the pump" by putting more money into consumer pockets and encouraging them to spend it.
As Dr. Pat notes, heaven forbid we should actually encourage people to save money. It's always spend, spend, spend. We are so concerned about short term recession that we perpetuate bad habits that got us in this position in the first place. We should be encouraging people to save and invest, not spend more money on things they don't need. This means reducing or removing taxation on savings. This means at least holding interest rates where they are. If we really want to stimulate the economy we should be cutting back on corporate tax rates to encourage business creation and expansion, not simply asking people to buy more stuff with their increasingly worthless dollars. We can also expand incentives for business to invest in expansion. I fear the policies coming out of Washington will not only fail to curb a recession but will exacerbate the problem by further devaluing our currency. They are, at best, stopgap measures.
I don't share Dr. Pat's gloomy view of the US economy (or his protectionism), but the American people must learn some lesson in austerity. It is clear that we can no longer satiate ourselves with massive consumer spending predicated on cheap energy and funded by debt.
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