Déjà Vu Vu Vu

A bail-out of the auto companies (and who knows what other failing industries), plus a so-called stimulus package consisting largely of public works infrastructure projects. It sounds pretty familiar, and it didn't work last time:

Wikipedia:

The NIRA [National Industrial Recovery Act, passed in 1933] was strongly supported by many leading businessmen, some of whom had helped draft the legislation. Gerard Swope, head of General Electric, was one of the first champions of this legislation—which legalized cartels and funded massive government spending on public works through the PWA [Public Works Administration]. This increased spending was designed to restore prosperity and benefit General Electric and all businesses.

Jerry Z. Muller, The Mind and the Market, Capitalism in Western Thought, Anchor Books, 2002:

"The National Recovery Administration [an offshoot of the NIRA], initiated in 1933, reflected a government policy of deliberate cartelization... Here was a policy at odds with the very concept of a competitive economy, which created winners and losers; instead the NRA attempted to keep all players in the game."

(p. 303.)


The plan now on the table seems to me wrong-headed in the extreme. If we are going to add $850 billion to the deficit, we should do it with $850 billion in tax cuts. That money, since it would stay in people's pockets and business accounts, would be available quickly, and it would get allocated to consumption and rational investment uses. That's where the multiplier effect is to be found, and the economic growth required to erase the deficit being created.

But no. Instead, the idea is to prop up failing enterprises with part of the money, thus defeating creative destruction and the dynamism of the market, and to misallocate the rest. Whatever stimulus effect there might be from infrastructure spending will be minimized because that money will of necessity trickle out over a period of years. The portion that will disappear down rat holes like GM or, in the case of public projects simply evaporate in set-up expenses, administrative overhead, and wasteful cost overruns, is something you don't even want to think about.

What taxpayers will get for their money is an enormous federal deficit with no prospect of an early pay-back, a fat portfolio of flat-line businesses requiring endless transfusions of money to limp along, and a large number of inefficient public works and other government projects that will feast on the public purse like vampires who cannot die. Successful, creative, competitive enterprises, for their portion, will reap the hobbling effects of higher capital costs due to massive government borrowing, which will hamper their ability to expand and compete internationally.

I keep searching for the pony in this steaming pile of horse pucky, but I can't find it.

Byron