(From the Janesville Messenger, 2-17-08)
Now that Congress has passed the “economic stimulus package,” how are you planning to spend your federal rebate check and “stimulate the economy”? An HDTV, perhaps? Maybe a vacation?
In my case, it’s simply going to pay bills. Because unlike our federal government, I don’t like to be in debt.
Don’t get me wrong, I’ll be grateful to see the cash. It will help pay off the new trombone my daughter needs, as well as a new washer and dryer to replace the ones that have gone kaput after 16 years.
But officially mark me down as someone who is skeptical that this is less an economic fix than it is an election-year ploy. It will be interesting by year’s end to see how this “stimulus” actually shakes out.
We Wisconsinites have been down this rebate road before. Back in 1999, Gov. Tommy Thompson decided to play the role of benevolent king and sent us all “sales tax rebate checks.” Of course, legislators from both parties went along with the plan because, hey, who was going to vote against giving money back to the electorate? Unfortunately, the result is that the state budget has been a mess ever since. Not long after that, Tommy took off for George W. Bush’s cabinet and left unprepared Lt. Gov. Scott McCallum holding the bag. McCallum ended up losing the governorship to Jim Doyle, who has technically balanced the budget via all sorts of accounting tricks. However, if generally accepted accounting principles are used – as they are in private business – the state is over $2 billion in the hole. According to the Wisconsin Taxpayers Alliance, we’re one of only three states with a deficit and the one with the biggest per capita.
At least when Tommy sent out checks, the state had the money. The federal government right now is creating them out of thin air.
Rep. Jim Sensenbrenner of Menomonee Falls was one of the few brave Congressmen to vote against the stimulus package, saying that if the government really wanted to stimulate the economy right now, it could immediately stop federal tax withholding for a few months instead of mailing a check in June. Recently-deceased and much-beloved Gov. Lee Dreyfus did just that in Wisconsin in 1979.
Regardless of the method, the fact remains that by adding $168 billion to the deficit, we’re nearly doubling it. Including the stimulus package, the President’s budget calls for a $400 billion deficit. It’s like being maxed out on your credit card, but having your credit card company suddenly double your credit limit.
So how can we afford to keep spending what we don’t have? We borrow. And we borrow from interesting sources; like China, for example.
The Chinese government is a huge investor in US Treasury bills. In fact, foreign investment in our Treasury bills is in the trillions of dollars (yes, trillions with a “tr”). Is this cause for concern? Not as long as we keep buying products made in China. If we keep stimulating their economy, then they can keep supporting our spendthrift habits.
It’s hard to believe that less than a decade ago, the federal government had a budget surplus. Of course, you can probably pin a lot of the blame for the deficit on the funding of the Iraq War, which was not on our radar in 2000. Still, if I suddenly had catastrophic medical bills that I needed to pay, I wouldn’t be allowed to continue spending like a drunken sailor on other things. There would need to be sacrifice. Ask people who lived through World War II about sacrifices such as rationing.
If you really want to stimulate the economy with your rebate check, instead of spending it, perhaps you should invest it. Author Gregg Easterbrook writes that “It's impossible to be sure, but a rough guess might be that every dollar added to the deficit today represents two dollars subtracted from future economic growth -- which in turn means two dollars taken from the pockets of tomorrow's American adults. This is a cynical exercise, robbing future Americans in order to please voters today.”
He’s right. At some point, the bills are going to come due, and right now, it looks like we’re passing them to our children.
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