Saturday, January 19, 2008

This will not work

Once again, for the 20 billionth time, the politicians in Washington show that they have no clue what they are doing. The President's stimulus plan is a joke. $800.00 will no NOTHING to undo the recession the US is in. The US Economy is in trouble for one reason - Energy prices are too high. And since this economy is underpinned by consumers spending their income on goods and services -multiple and varied goods and services, every dollar more that is spend on such basic necessities such as gasoline, food, and electricity, that are increasing in price due to high oil prices, is one dollar less that cannot be spent on other goods and services.

The Washington -NY elites - in both parties - do not feel the impact of higher energy prices to the extent that the average middle class American does, and conveniently the official statistics on inflation do not include food or fuel prices, so officially there is no inflation. In addition, food and gasoline purchases are included in the official retail sales statistics, so retail sales seem to be ok. Not great, but not dire either. But no statistic can show how increased spending on necessities have lowered spending on other consumer goods. It is spending on "luxury" items that is necessary for a healthy economy, the way our modern economy is structured. Increased spending on necessities will simply not cut it, and that is fundamentally the problem the US faces.

Congress has had ample opportunity to address energy prices, and as usual, they go looking for unworkable solutions, such as windfall profits taxes on oil companies, instead of policies that actually have a better chance to actually succeed at their intended purpose. Anyone with a rudimentary knowledge of economics should know that high energy prices are an result of energy supplies that are too low. So, rather than create policies that address the supply issue, such as drilling for oil domestically, and developing nuclear power plants (The French get 70% + of their energy from nuclear power), Congress wants to tax oil companies. That doing so will increase the costs of refined petroleum to the consumers apparently doesn't occur to them. And while the idea of Congress mandating the types of cars Detroit can make, rather than allowing the Auto Industry respond to what the American People actually want is arrogant and despotic (typical of Washington these days), perhaps it would be better to strongly encourage widespread use of flex fuel gasoline/ethanol/methanol engines, rather than Congress order another increase in CAFE standards. The likely result of CAFE increases will be nothing but a significant rise in the price of cars, while making them smaller and more unsafe in crashes. By the way the US Automakers have an significant advantage over foreign car makers in Flex fuel technology, so this could have the added effect of keeping Americans employed at GM, Ford and Chrysler.

I certainly am not going to refuse $800.00 But neither am I going to go out and spend it. It will sit in my savings account, since it is a one time shot, and I am not going to change my spending habits. Some people will spend it right away, but once they do, the economy will not be in any better shape. People spending this "stimulus" is precisely what the President is hoping will be done, but if so, spending will increase one time, then fall back after a few weeks. once again back to where we are now.

This is nothing but an election year gimmick, so the politicians can feel better about themselves, that they "did something about the economy". It is time that they are shown up for the idiots they are, and shown the door in November, so that real solutions can be enacted. And there will be a crippling blizzard in Dallas, and the Texas Rangers will win the World Series before that happens.