The Corner

Not Holding Back

Conrad Black writes: 

Until the risks of being awash in newly created money were finally recognized as the 800-pound self-inflating tiger in the room, the administration and congressional leadership were hinting at a new stimulus package. As was widely seen at the time, the $787 billion stimulus bill was a disaster, a riot of children left to ransack the candy store and gorge themselves. It stuffed money into the districts of prominent Democrats in Congress, on a delayed trip-wire to coincide with upcoming elections, as less than a quarter of the money has been spent; but it has been a very inefficient job-creator. The whole concept of stimulus is bogus, as the borrowing of the money consumes at least as much stimulus as it generates.

There was no excuse for such a bumbling program by this administration. The procedural playbook, if not all the substantive policy, was written by Franklin D. Roosevelt 75 years ago: Prepare a precise program, round up public support for it, send completed bills to Congress and ram them through, alleviate unemployment with low-paid conservation and infrastructure workfare, and solve banking problems with investments in the banks, not in their worst assets. Instead of that, we have witnessed a bunch of grumpy boy scouts trying to put up a pup tent in the dark.

With Social Security, Medicare, and the FDIC (totalling $125 trillion of obligations) as well as the Federal Reserve itself now confronting appalling debt scenarios (the Fed’s loans and other advances, some of them vulnerable, are backed by hard assets of only about one half of 1 percent of the obligations), the administration projects trillion-dollar annual deficits for ten years. Obviously, the Chinese and Japanese are not going to go on buying this debt, and have already moved much of what they hold to short-term Treasuries, to translate into U.S. assets at knock-down prices. To sell on any real market any serious amount of this debt in the next decade would require torqued-up interest rates, which would be steroids for bulging debt, while strangling economic growth. It would be the 30-year-old bugbear of stagflation. And most is already being bought by the Federal Reserve: a straight open-faucet addition to the money supply, future inflation, and the reduction of the dollar’s value.

The present health-care bills include large tax increases. The proposed cap-and-trade bill to reduce carbon emissions would pile increased heating and air-conditioning costs on homeowners and employers, but would neither reduce emissions nor raise government revenues. The whole program is based on the unproved eco-terror arguments that have made Al Gore a Nobel Prize laureate centimillionaire, and the bill is ill-conceived if not insane.

More here.

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