Why Spending Stimulus Plans Fail

16 Nov 2008 /

Congress doesn’t have its own stash [of money]. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It’s merely redistributed from one group of people to another.

— Brian Reidl, The Wall Street Journal

As you probably learned in school, we founded this country as a free-market economy and viewed government intervention in the market with the greatest skepticism.

Thomas Jefferson

The above article is the clearest explanation I’ve seen for why bailouts and “stimulus plans” involving government spending never work.

The latest failed companies hoping for a bailout are General Motors and Ford. I hope Henry Ford — a great American like myself, who is currently whirling like a lathe in his Detroit grave — will pardon me for saying so, but these companies are nothing but engines of mass financial destruction.

According to the WSJ, GM and Ford invested a combined $465 billion between 1998 and 2007.

As of last Friday’s market close, they had market caps of $4 billion (Ford) and $1.7 billion (GM).

They’ve wiped out almost $460 billion of American capital in the last 10 years and now they want more money.

Look — my friend Paul Epps has a sister who spent every dollar she ever had on booze, drugs and abortions. For a while, friends and family members tried to help her by giving her money when she didn’t have any.

Do I have to tell you how that turned out?

I’m not suggesting that executives at Ford and GM spent the $460 billion on booze, drugs and abortions — not all of it anyway — but I am saying that sometimes people who don’t have any money can’t be helped by giving them more money.


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