- The Washington Times - Sunday, December 2, 2001

Thank goodness that the economy waits for no government. If we really had to depend on Congress to stimulate the economy so that consumers and businesses could get the products and services we need, or make decisions about whether to save or spend, we would be in much deeper trouble than we already are.

To see the way in which the Republicans and Democrats have fought over other people's money (that's what the "stimulus" really amounts to), it's clear they believe the world economy rests on their shoulders. They should stop flattering themselves, because the truth is that it doesn't.

The best thing Congress can do to palliate the recession is to get out of the way, and let private enterprise do its work. That would require massive tax and spending cuts. But because that would also mean relinquishing power, such a plan isn't even on the table. So it's safe to assume that any stimulus plan that comes out of Washington is going to mean net harm.

The current divide is over the size (between $69 billion and $100 billion) and shape (what to repeal and what to expand). But the trick for taxpayers is discovering exactly how much of the package constitutes tax cuts (benefiting, mostly, Republican constituencies) as vs. spending increases (benefiting, mostly, Democratic constituencies). They do the accounting in a way that disguises this simple point: whether the bill grabs more money or takes less in the future, it is still called a "cost."

It's important to know this because whatever money Congress manages to allocate to spending, it takes out of the hide of the American taxpayer, in one form or another. Even tax cuts can be costly if new spending is paid for in other ways (debt accumulation or monetization). Congress can't create wealth; it can only shuffle it around and charge a large fee for its services in the form of graft and new inefficiencies.

As if to complicate matters further, the packages are phased in over years, so that you have to be something of a legislative scientist to follow the money around. You can't just read the AP wire to find out what's in the these bills. Even then, it's impossible to weigh the pluses and minuses (and every bill contains both).

One of the secret goals of fiscal "stimulation" is to uproot the money that people are currently saving and force it into circulation. But private saving serves a hugely important purpose, namely, to prepare the way for sound investment at a later date. Politicians are inclined to believe that the financial decisions of the citizenry are at odds with the general macroeconomy. That's the fundamental error made by the Keynes-ians in the 1930s. It is a dangerous error, too, because it implies the need for central planning.

Even when the appropriated money reaches its destination, it doesn't do any long-term good. Instead it only puts the operation of the market process on hold.

Consider the airline bailout, for example. In a $15 billion package, Congress gave direct cash, loan guarantees, and a range of special breaks to compensate and otherwise assist an industry devastated by the shutdown and the fall in traffic after September 11. All this "stimulus" did was permit money-losing companies to lose more money for a longer time.

In a very short period, the airlines burned through the subsidies and found themselves exactly where they started: cash strapped. This was an example of economic reality biting back. No matter how hard the politicians try, Congress is not some Rumpelstiltskin weaving gold out of straw. Eventually, what appears to be gold (industry doing well) turns back into straw (industry losing money).

We can't absolutely rule out that a $100 billion package would provide a short-term jolt, but it doesn't seem likely in a macroeconomic environment that is heavily overdue for correction. The war, which many people mistakenly believe is good for the economy, only makes matters worse by diverting resources from consumable goods and services into bombs and planes for which there is no consumer-driven market.

Neither is it a viable option to let the Federal Reserve do the heavy lifting. Alan Greenspan's monetary policy of driving interest rates lower and lower has begun looking like it was designed by the Taliban: permitting neither the paying nor the earning of interest (which Islam decries as usury).

All these attempts at "stimulus" have one assumption in common: the belief that a recession as inevitable as an ocean tide can be turned around by congressional Canutes. It is one more indication that government has come to believe in its own omnipotence, a tendency that has worsened severely in the last couple of months.

Llewellyn H. Rockwell is president of the Mises Institute in Auburn, Ala.

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