On the Stimulus

I will probably write more on the proposed Stimulus Bill (full text of the bill passed by the House) but for now I came across this excellent article that said the following:

You do not become more prosperous by writing yourself a check. Economic growth is the result of creating new wealth, not redistributing existing wealth. The federal government cannot conjure prosperity out of thin air. Any money it spends - whether on highways or Pell grants, Medicaid or tax rebates - it must first tax or borrow from somewhere else. A trillion dollars pumped into the economy tomorrow is a trillion dollars siphoned out of the economy today - a trillion dollars no longer available to the private sector for investment or consumption. Enlarging Washington's spending power will not enlarge the economy.

This simple point is lost in the all the debates about The New Deal and FDR, Keynesian Economics, tax cuts and rebates versus direct government spending, etc. People want a simple fix, they want the government to just solve the problem. Alas, nothing is so simple. As the article mentions, if government spending is the solution why do we have this problem to begin with when Bush increased government spending dramatically during his tenure?

Of course, supporters of the stimulus will say it's not any spending that matters, it's spending on the important stuff that counts. While spending the money wisely is no doubt important, the question I have is how can you identify $800 billion dollars worth of truly useful spending in such a short time? And Obama is talking about trillion dollar deficits for years to come.

This is a scary thought if history is any guide. FDR's Treasury Secretary said several years into FDR's administration:

"We have tried spending money; we are spending more than we have ever spent before and it does not work," he told two senior congressional Democrats. "I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . After eight years of this administration, we have just as much unemployment as when we started . . . and an enormous debt to boot!"

Maybe this recession is not like the Great Depression, but if it at all is, well I'm worried more about the cure than the disease...