Well, writing every day didn't work out...

So I am back a few days later. Just a quick little blurb on the proposed budget. I am no fan of George W. Bush; some of his policies were okay, some were not, but he was what I like to call a "big government" conservative... to my mind that is not a conservative at all. But the proposed budgets by Obama dwarf the big government Republicanism of the Bush era.

And I can hear the hue-and-cry now: We inherited this mess, it takes time, etc, etc, etc. The plain fact is that Keynesian economics does not work. It did not work to get us out of the Great Depression; it did not work in the seventies for Nixon, Ford, or Carter; it did not work for Japan in the nineties; it does not work in a boat; it does not work with a goat... it does not work, Sam-I-Am.

Whether or not the mess was inherited (and I can point out, and have in previous blogs that both the Dems and Repubs in congress are really to blame by setting up Fannie and Freddie the way they did, and I laid all that out in a previous posting) the solutions being posited make things worse, not better. Bailing out companies that are "too big to fail" rather than letting them file for bankruptcy and renegotiate contractual obligations sets up scenarios like we have now with AIG. They paid out $100,000,000 in bonuses to about 200 people this year - which means the average bonus is $500,000 - and there is much uproar about the ridiculousness of this act when they are still on the hook for $182,000,000,000 of taxpayer money (incidentally, the bonuses amount to about 1/2 of a percent of the money the Fed gave them - apparently the "it is such a small fraction of the money in play" argument only works for bills and earmarks in Washington DC). Honestly, the bonuses are not really that big a deal, but if AIG had filed for bankruptcy, restructured, and renegotiated contracts, everything would likely have been sussed out by now. The same goes for GM, etc.

But because of the Keynesian ideology, that is that the government makes jobs, these idiotic moves were made, along with a number of other "stimulus" ideas, all of which were as dumb as mailing out $300 refund checks to everyone. At least the B.S. Bush "stimulus" treated everyone fairly... the Democrat stimulus paid off unions (if GM doesn't restructure, unions don't have to take a contract hit, though I don't know why AIG is being paid off). And, effectively, AIG is being paid off (I know I shouldn't refer to a parenthetical idea in a non-parenthetical follow up, but what the hell) - Obama wants to tax deposits in banks that have paid back all the TARP money, but doesn't want to hold AIG to any account, despite the fact that they are not even close to paying off their debts...

But back to the budget - this was supposed to be quick, but my fertile (or was that febrile) mind wandered off again - this budget is approximately 25% of GDP, and the future expenditures laid out in this budget are projected to be in the range of 23 to 25% for the following two years. At his most profligate, FDR never exceeded 12.5% of GDP. Expenditures this high are completely unsustainable, and this does not even include "Health Insurance Reform".

And the basis for this thought is ludicrous - the Keynesian economic theory is pure sophistry, even one of the key advocates in FDR's administration admitted it didn't work after seeing it in play for eight years (his name eludes me now, but I will find it, and the quote and put it up later). Government cannot create wealth or jobs - it can merely shift wealth. The only way that a government job is created is by taking the money from the private sector. This is not to say that we should have no government jobs - clearly many are necessary - but piecemeal public works projects do nothing to stimulate the economy long term, they simply take money from a nervous private sector, and shift it into temporary projects - the private sector does not want to invest when the outlook is risky and they face an increase burden of taxation, and the worker in the temporary government job does not want to spend money because s/he knows her job is temporary.

An what is worse, the Democrats have tacitly admitted that tax cuts work in stimulating the economy - why else would they have a tax credit for new homeowners. This is saying that they believe that a tax cut will stimulate activity in that market. If they believe that this is true in one case, why do they shy away from it elsewhere? The answer, of course, is simple. To do tax cuts right requires careful analysis (of which I am not sure that anyone in Washington is capable), and it does not seem to be the populist idea that sells easily to voters.

Oh, and BTW, that no tax increases on the middle class that Obama promised is B.S., too. By letting tax cuts lapse, you increase taxes, and all it will take is you doing your taxes to see that the hit goes to the middle class more than it goes to the rich. Also, the tax on deposits in banks - gee, who makes those deposits, and I wonder if the bank will just send in the money to Washington without increasing fees? That seems likely (note: HEAVY SARCASM). And, of course, if health care legislation passes, your health plan (if you have one, and you are not a member of the right union that can strong-arm the president) will be taxed, too. Yep, he's definitely looking out for the little guy.

Not to mention that mandating that people buy health insurance upon penalty of fine and eventually imprisonment for continued non-compliance is grossly unconstitutional, makes a crime out of simply being alive (if you choose not to buy insurance), and ... no, wait ... that topic is for another day, I've been sitting here way too long, but that stuff is in the Senate version of the bill.