Solving An Economic Mess With A Political Plan

Just one year ago, stimulus was also the solution to a failing economy. Indeed, those 2008 taxpayer stimulus checks provided little stimulus based on the dismal economic statistics of today.

In fact, the United States government first attempt to bailout the economy began on February 13, 2008. At a White House signing ceremony to sign the 2008 economic stimulus bill. President George Bush said: "We have come together on a single mission and that is to put the peoples' interests first." Bush said that the 2008 stimulus package is "a booster shot for our economy."

That economic booster shot failed. Next, major investment banks would fail and the original intent of the TARP program to get the banks to once again loan would be a failure. In fact, most everything the government has tried in the last twelve months has not achieved success and the economy continues to decline.

So, the new government solution to a failing economy is a much bigger booster shot. President Obama recently said that passage of the 2009 stimulus plan of more than 800 billion dollars is necessary to avoid economic "catastrophe".

The problem is that a much bigger booster shot of long term government spending contains little immediate medicine for the failing economy in 2009. The Congressional Budget Office indicates that only less than twenty cents of every dollar is actually stimulus and much of that will not be spent during 2009.

The TARP program created last September by Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson was originally designed to bailout the banks toxic assets in order to get them to again loan.

Henry Paulson, in an effort to reduce the Congressional resistance to using hundreds of billions of taxpayer dollars to bailout private investment banks, indicated that the program could be considered an investment and a possible government money maker.

In addition, he said that he would comply with congressional demands for transparency in the $700 billion bailout of the banking system. As a result, the United States Congress allowed Henry Paulson to control government assets equal to the 19th largest global economy. It apparently did not matter that Treasury Secretary Henry Paulson was not even an elected official.

Of course, the result of a lack of a coherent plant concerning the spending hundreds of billions of taxpayer dollars would have a dubious outcome. As three hundred and fifty billion dollars were spent, transparency was not forthcoming.

In December Paulson was asked to value taxpayers’ returns on their bank bailout "investments. Paulson said they were made “at or near par,” meaning they received about $1 for every $1 invested.

The first report of the Congressional Oversight Panel for the Troubled Asset Relief Program has recently been released. The Treasury received bank assets worth about $176 billion in exchange for capital purchases of $254 billion according to the Congressional Oversight Panel .The panel subsequently found the value to be about 66 cents on the dollar.

A shoot first and plan later crisis approach by government will not solve our economic problems. Long term spending is not short term stimulus despite the political spin from beltway politicians. Increased government spending with declining tax revenue receipts only increase already record high government deficits that will eventually slow economic growth.

The political solution to this economic mess looks like it will return the economy to the problems of the 1970's. The end of this recession will surely be followed by rising inflation, slow economic growth and increasing taxes and interest rates. These are the long term problems that result when government spends money it does not have and tries to solve an economic mess with a political plan.

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