Why Government Stimulus Doesn’t Work

Another old writing of mine brought to you unchanged:

Everybody is talking about the government stimulus plan. When asked about it, I normally respond “I hope it doesn’t do too much damage.” While the vast majority of people oppose the stimulus, they do so because they see the costs outweighing the benefits. On the other hand, I see no benefits and only costs.

In a private business transactions, both the buyer and seller benefit. If I go to the store and purchase a product, I the customer receive something I value more greatly than the money I spend, otherwise I would not enter the transaction. Even though I end up with no money, which really represents units of labor I have already performed, I actually profit from the transaction since, to me, the value of what I receive exceeds the value of what I give away. And the seller also books a profit, obviously, since that is a business’s purpose for existing and his revenue exceeds his expenses. With both the buyer and seller profiting from the transaction, wealth increases.

On the other hand, government transactions have no profit motive for either the buyer or the seller. The government stimulus plan is really a government spending plan with a very small amount of tax cuts. When the government spends money, neither the government nor the taxpayers profits. The government generally spends taxpayer money on projects that would not otherwise get done. But why wouldn’t these projects get done without the government? Because they are not profitable, of course! If the government does a project at a profit (where benefits outweigh costs), maybe a road or a stadium, that means that a project that would have been done privately has been usurped by the government, where the government will most likely execute the project much less profitably than private business. And to do these projects, the government amasses huge deficits each year, which a private business would call a loss. Without any motive for profits, which modern liberals claim to be a good thing, taxpayers lose money with each dollar they send to the government and the government makes losses on top of that instead of profits. With losses accrued by both the buyer (taxpayer) and seller (government), wealth is being destroyed.

As Winston Churchill said, “It is a socialist idea that making profits is a vice; I consider the real vice is making losses.” As this “stimulus” package takes hard earned money from taxpayers and government bureaucrats waste the money away on unprofitable projects, remember that any plan which destroys wealth, as this plan does, is full of costs and has no benefits.

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One response to “Why Government Stimulus Doesn’t Work

  1. It is not often that I find someone on the same road as I, especially considering the unfortunate circumstance that the road is so narrow based upon the mass of misinformation and confusion that is force-fed on us by politicians and the liberal media alike. Your evaluation of the “business” of running our government is sadly very sound. The sad fact is that this hell-hole abyss that the United States is free-falling into is an easily avoidable cataclysm that can be averted by the election of individuals whose goals are the prosperity of this nation and a yearning to address the ghouls so willing to stand in our way. The government is burning OUR money like cheap particle board gleaned from the waste pile of a construction site. My book will realistically adress the fact that we can sheepishly reduce income taxes to a flat base of 18%; a sad fact based on the reality that I strongly believe that we can eliminate income taxes altogether in the near future; but we are hampered by a need to address this calamity in a step-by-step process. Let us pray that the people of our proud nation will seek the knowledge to allow them to cast informed and intelligent votes in the next election. Let us pray that the elected officials; many of whom will sadly be burdened by limited awareness of the past and confusion regarding the future, will have the wherewithall to see the light and grasp the gold ring! I believe in the future and continue to pray for prosperity

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