The Economy, Part II: You Can't Get There From Here.

Right now, I want to make this abundantly clear: I am not an economist. Call me an economist, and I may very well punch you in the mouth.

I spend an inordinate amount of time listening to economists on the radio and TV. There are a few of I do respect, such as Fox Business Network’s Neil Cavuto, and Texas congressman Dr. Ron Paul (as a presidential candidate, Paul was an absolute charlatan, but his knowledge of economics and the history of the U.S. economy is first-rate). But all in all, most of them seem to be either political hacks spouting a party line, or dweebs who will simply say whatever to get a steady paying gig on a TV or radio show. Watch the weekend financial shows on Fox News, for instance. Invariably you’ll get a four person panel yelling at each other over what number 2+2 equals, and the only sum left unconsidered will be 4. I am thoroughly convinced that when forming their economic theories, economics and the economy are the furthest things from their minds.

Same goes for politicians. I seriously cannot fathom where they get their ideas about how to run the economy, or even the idea that they are capable of doing so at all. Precious few people on Capitol Hill have any real world, private sector business experience whatsoever. Of those who do, a curious amount seem to forget all of it when the cross inside the Beltway or land at Reagan National. Presidents? In the last twenty years, the only one who’s had any at all was W., and I have yet to find anything he touched that didn’t end in red ink.

As an aside, this is not some mystical effect that DC itself has on people, as some in the blogosphere like to claim. There are heroin dealers in the southeast quadrant who have mad business skills, and the bankrolls to prove it.

But here we are, in the middle of an economic clusterfuck, of which the feds were a principal catalyst, and these same bumbling boobs on the Hill are tripping over each other trying to figure out just how they’re going to charge in like white knights on their steeds and save us all. And as usual, their proposals all center around the absolute worst things they can: expanding the government, creating new bureaucracies, devaluing the dollar and taking on ever more debt. Not to mention aimlessly scattering shitloads of your money and mine all over the place.

The most obviously egregious example of this: bailouts. In the waning days of W., we saw the collapse of the housing market, Fannie and Freddie, the mortgage backed security, and all the Wall Street firms that were wrapped up in them. Now I don’t know what imbecile coined the phrase “too big to fail,” but the son of a bitch should be shot. Congress’s response to this mess, instead of letting companies who had made bad business decisions suffer the consequences and allowing the market to sort itself out (which it will anyway, one way or another), was to appropriate $750,000,000,000, turn it over to then Treasury Secretary Henry Paulson, to be dispensed pretty much at his discretion among the begging banks and companies. The result? Tens of billions of dollars are unaccounted for. Missing. See all of those zeroes, folks? That’s your money and mine, and we don’t even know where it went. The feds don’t know, and the recipients won’t open their books.

But the bigger scam here is that whether we have a full accounting of the money or not, the truth is all that was done here was the subsidization of failure. These companies screwed up, plain and simple. And instead of cutting their losses, you and I were just forced to cut the losses for them. Same thing with the infamous bailouts of the “big three” auto makers. They engaged in abysmal business practices, compounded further by the incessant back breaking meddling of the United Auto Workers. We just got handed the bill, so the execs could keep screwing up and the UAW could continue bilking the industry. This is of course the real reason that bailout happened at all: the UAW is a major cash cow for the Democrats, and if the big three go under, they go under with it. Pelosi and Ried and company simply can’t allow that to happen, no matter what.

Worse yet, much of this is coming as the purchase of majority shares of stock in these companies by the government. For example, the feds are loaning $150,000,000,000 to bail out American International Group (AIG). They will then own roughly 80% of AIG stock. AIG is one of the biggest insurers in the world, and the government will own its controlling interest. This, my friends, is what we call nationalization of industry, and we’ve seen it’s dire results all over the world.

Currently, the hot topic is President Obama’s stimulus plan, which carries with it the single biggest price tag in the history of humankind. To really call it a “stimulus” though, one must seriously stretch one’s definition of the word. What it really is is the throwing of roughly a trillion dollars into random infrastructure projects, thousands of new government jobs, and of course, a who’s who of the Democrat party’s favorite special interest groups. Needless to say, I have a few problems with this.

The first problem is the number itself. A trillion. One trillion. $1,000,000,000,000. The bill hasn’t gotten out of the Senate yet, and the final number could be a bit less (or more), but it will be in that ballpark.

Once you get into numbers this large, it is difficult for the mind to really grasp the enormity of them. So let me give you an illustration: let’s pretend that our current calendar has always been as it is now, and started on January 1st, 0001. If you opened a business on Jan. 1 0001, and made one million dollars every single day, seven days a week, without interruption, you would make your one-trillionth dollar on November 5th, 2738. That’s adjusting for leap years and everything.

The biggest problem with such a huge price tag is this: we don’t have it. There isn’t enough money in all of the U.S. government’s possession to pull this off. Drastic increases in tax rates will be an eventual necessity, but even that can’t be done to raise the money right now, as it would bankrupt most businesses and households. So how can they do it? There are only two ways.

One is to borrow it, which will be done mostly from foreign nations. Obviously, this will drastically increase the national debt. Personally, I find it amusing how the Dems railed and ranted about W.’s love affair with deficit spending (of which he was certainly guilty), but the moment they manage to get full control of both congress and the White House, the very first move they make is to take deficit spending into hyperdrive. This is, bear in mind, on top of all the runaway spending already going on in Washington.

The other way is to simply have the Federal Reserve print it up, and this is where we see the potential for true disaster. The value of the U.S. dollar is already in the tank, and the most surefire way to tank it further is a sudden infusion of an unthinkable amount of new bills. Remember, there is no real basis for the dollar. It is not backed by gold or any other precious metal, or any tangible commodity. It is simple fiat currency, mere paper, the illusion of its value maintained only by force of law.

So if you add a fresh trillion clams into circulation, the result will be massive inflation, quite possibly as bad or worse than what occurred during the Carter administration. Prices on everything will rise to compensate for the newly expanded pool of cash. Peoples’ money will go even less far than it does right now.

If all that’s not enough, there’s still the matter of exactly where this money is being slated to go. President Obama made a point of stressing how it will be used to fund massive infrastructure projects all over the country. Turns out this is actually only a small fraction of the total expenditure, the vast majority being straight up pork barrel giveaways. But even if these projects were the entire bill, they still miss the point. Yes, roads and bridges and electrical grids and shit need maintaining. But they do not in and of themselves generate wealth or income for anyone. These things are a means to an end only, and focusing on them as an end in and of themselves will not yield any form of long term benefit to the economy.

Of course the idea here, equally foolhardy, is that having all sorts of new construction projects of this type will create lots and lots of jobs in the form of hiring people to do them. Not really. The companies and contractors who will do this work are already out there, and most of them are hurting right now. These projects may provide revenue to these companies, but in large part they will have to address their bottom line first and foremost. This will mean doing as much work with as few expenditures as possible, which means they won’t be hiring any more new workers than they absolutely have to. Even then, who are they going to hire? I’ll wager that very few of the people who didn’t want to do these jobs in the boom times are going to jump at them now, especially when part of this same bill includes massive expansions of spending on welfare, food stamps, and Unemployment. So let me get this straight: our goal is to create new jobs while simultaneously expanding our subsidization of shiftlessness? Did I miss something here?

And let’s be serious people, we all know what happens when infrastructure projects become their own end: they never end. Once the work is finished, some reason will have to found to continue it anyway. Too many peoples’ livelihoods will have become dependent upon them to let them end. After this, these projects will become endlessly vacuous money pits. For examples, one need look no further than the Big Dig in Boston, or the infamous PA Turnpike.

At best, we’re talking about a band-aid on a shotgun wound. At worst, it’s the San Sebastian Mines writ Federal.

”But Whiskey!” you perhaps cry out in despair, ”If all of this stimulus, from the President who simply must be the single smartest, greatest champion of goodness and light ever sent down from On High to save us all from our flawed and incompetent selves, is doomed to failure, then what are we going to do? And just what the hell is a Sebastian Bach Mine anyway?

Well, for the answer to that second question, read Atlas Shrugged, by Ayn Rand.

For the first, read my next column, where while equipped with nothing more than standard household items- such as basic math and common sense- I will jerry-rig a foolproof plan for restoring the wealth of our great nation, like an economic MacGyver saving us all just in the nick of time.

Whether anyone will follow the plan however, is still up in the air.