Today the U.S. Federal Government unveiled its "Economic Stimulus Plan", designed to stave off the pending recession. The plan is a fiscal stimulus program designed to inject up to $150 billion dollars into the U.S. economy. Bernanke gave testimony in front of Congress today to discuss the plan and to discuss the state of the U.S. economy. When asked what he thought of the plan, Bernanke thought it was a good idea and should be implemented sooner rather than later...
Unfortunately, the whole problem with this "fiscal stimulus plan" is that we already had a massive fiscal stimulus plan five years ago, known as the Bush tax cut. That tax cut substantially increased the U.S. deficit and has kept the country in deficit throughout the past five years of expansion. So here we are again five years later, facing yet another recession, but we still haven't dug ourselves out of the hole we dug from the last recession! Economics 101 prescribes that a country should run deficits in recession and SURPLUSES in expansion, to pay down the debt incurred during the prior recession. Now we just run deficits all the time, meaning we take new loans to pay off the old loans (i.e. Ponzi Borrowing). This "plan" is analogous to me losing my job and then going to the bank to cash out my home equity, so I can continue spending at my accustomed level. Likewise, this "stimulus" (as in short-term stimulus, long-term pain) package is a loan from both foreigners and our children, so that we as a nation can continue spending at the same profligate level.
By all accounts the vast majority of politicians and economists think this new plan is a good idea, which leads me to conclude that MASS INCOMPETENCE has pervaded all elements of the economic policy-making establishment.
