The Wrong Prescription?

by Gordon Cooper

From Broader View Weekly, February 27, 2009

Thankfully, medical advances have been made in the years since our first president was treated by the physicians of his day. We no longer have to worry about receiving the prescribed treatment of “bloodletting” to relieve us of the ailments that are now treated with antibiotics and medications. Sadly, in the case of our ailing economy, it seems that today’s economic physicians are now prescribing the financial version of bloodletting to treat this patient.

The Economic Stimulus bill passed by Congress and signed by President Obama last week, instead of stimulating our economy and reviving consumer confidence, has had the effect of sending the economy further into a comatose condition. As investors saw these physicians head to the bedside with those large syringes aimed for the arteries of our economy, they immediately responded with deeper drops in stock indices and corporations responded with increased job cuts.

The mistaken idea that increased spending and the subsequent tax increases and increased Federal regulations – that accompany all Federal spending – will revive a failing economy is very similar to the mistaken idea that relieving a body of diseased blood will bring an ailing body to its feet. After the failure of the first stimulus package initiated in October of last year, the doctors decided that the reason it failed was not because it was the wrong prescription, but because the syringes were not large enough and not enough blood was removed.

Everyone – from the authors in the House and Senate and the president who signed it – admits that the bill is far from perfect, yet they determined that: “It is better than doing nothing”. However, I think that there may have been some merit to doing nothing when doing something may actually result in the sedation rather than the stimulation of the economy.

Let me explain.

As the details of the bill become public, and my brother is not the only one who has not read the whole bill – you can also include the overwhelming majority of those who signed it, the long-term effects became more evident to the market. The drops in the stock market seem to indicate a lack of confidence in the plan.

The life force of any economy is job production and private investment. This bill, while claiming to “save and create over 3.5 (or 4.5 depending on which week you listen to Obama) million jobs” and to initiate private and public investments, does neither. The shovel-ready projects hailed by these doctors will not see one shovel move without at least two years of environmental studies and impact statements. The jobs produced, even then, will be project-specific and not linked to long term economic health.

The key to job production has never been turned by the hand of the Federal government. Even in the example used by most of today’s doctors, which is the New Deal of FDR, many historians believe that his policies of spending actually lengthened the Depression.

The jobs produced by private industry spurred the recovery of Reagan in the early 80’s. Following the disastrous years of Jimmy “Who Needs the Panama Canal and Appease the Ayatollah” Carter, our economy was in the Intensive Care Unit. Unemployment was higher than now, interest rates and inflation were both in double digits; American pride was dragging in the dust as our image was held captive by Iran. The answer was not to increase Federal spending. It was to initiate American productivity by increasing military spending and innovation.

We now live in a safer, more technological world because that stimulus worked. This one will not.

My brother states that he was unable to find an alternative plan proposed by the opposition party. Well, I have heard several propositions, and the ones that make the most sense to me include a tax holiday that would immediately put dollars back into the hands of consumers. This is so obvious to me – it is like a nurse standing in the corner holding a dosage of antibiotics while all the “expert” doctors continue to suck blood from our dying economy.

As Obama saw the lack of confidence and heard the complaints from those who worried about the deficit, he made plans to deliver a plan of reducing the deficit. Good idea. I am all for a reduced deficit and a more balanced budget. However, the early headlines suggest that he will halve the deficit (in about 5 – 6 years) by reducing war spending and abolishing Bush’s tax cuts. Okay, let’s assume that North Korea and Iran will not make good on their promises to shake the world with a nuclear device, and let’s assume his surge in Afghanistan goes exactly as planned, we still need increased military spending to maintain superiority and assure our security. The tax cuts he plans to abolish are the very tool that brought us out of the malaise caused by 9/11.

Again, more blood from the arteries of a dying economy.