Friday, September 09, 2011

Can the US Borrow Its Way Into Prosperity?

I'm not a big believer in President Obama's new stimulus/jobs program. Obama proposed cuts in the payroll tax, extending unemployment benefits, and new infrastructure projects.

First, Social Security is projected to run dry in the not-so-distant future. While the system is a pay as you go system from the unified budget, excess money is spent on other stuff. A payroll tax cut leads to less excess money. So the other stuff that needs to be funded still needs to be funded. This just leads to more borrowing. Can we borrow our way into prosperity? That doesn't make too much sense to me.

Unemployment benefits have gone from covering the gap in-between jobs to just giving cash to people who don't work. We have a social program called "welfare" for that. If folks still can't find work after some period of time, it's time for them to move back in with mom and dad, the kids, a sibling, or get some roommates. Maybe the unemployed will have to take any job out there while going back to school to learn a new skill. It could be that the old job has moved to China or been made obsolete by productivity gains.

Infrastructure is one of those things that everyone believes we need more of, but then when it comes to actually identifying what it is, nobody wants it near their homes, schools, and cities. You have to fight the environmentalists to build new roads and bridges. The environmentalists don't like new power lines, either. Maybe these days, infrastructure means filling pot holes. Yet, any unemployed office jockeys ready to go back to work in lower-paying jobs filling pot holes? (Not while the unemployment checks keep coming in, right?)

That's what I think.


More on stocks later. It sure seems like the trading range is pulling the SP500 down to the August lows...

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