January 30, 2009
How to Beat the Stimulus
The same way Republicans beat it when Bill Clinton proposed a modest $35 billion stimulus in the teeth of the 1992-1993 recession. The GOP nitpicked each spending item and highlighted midnight basketball courts and swimming pools that were funded in the package. Clinton, for his part, didn't really care what the money was being spent on, he wanted to be sure it was spent to give the economy a boost before he cut spending and raised taxes to balance the budget. So, the president accommodated all of the pet projects of Democratic lawmakers. The resulting publicity made the package radioactive.Republicans should feature each element of the package -- just as they have highlighted the contraception and global warming research -- to show it for the boondoggle that it is.The package is losing support almost daily. According to Rasmussen, only 42% of Americans now support it. The key is for the Republicans to attack its specific line items to show how overblown it really is.And it is terribly important to beat, or at least cut back the stimulus legislation. What we allocate in deficit spending and "refundable" tax cuts (i.e. welfare) today we will pay for in inflation tomorrow.In the seven years between 2000 and 2007, the money supply rose from $600 billion to $800 billion. In 2008, alone, it more than doubled from $800 billion to $1.7 trillion! We cannot sustain this level of increase in the money supply without having way too much money chasing way too few goods and services, sending prices up into double digit inflation. While the economy is in shell shock, at the moment, we face deflation. But once it begins to come back and the dollars come out of hiding, we will find the resulting inflation intractable and very difficult to cure.