Stimulus #2: A Bailout for the Public Sector?

Date: 09/13/2010

On More Stimulus Spending

by Ron Paul

Faced with continuing economic decline and an impending election, the administration, predictably, is entertaining the idea of another stimulus package. To explain why the last one didn’t work, adherents to the Keynesian economic philosophy are claiming that they actually did work – it just looks like they didn’t because we don’t realize how much worse off we would be right now without trillions of dollars of public spending. The last administration bought into Keynesianism just as much as this one does, unfortunately. Until we have leaders who understand that debt is not the way to prosperity, there will be no stopping runaway government spending.

While it is nice to hear about business tax breaks, the positive results of these tax cuts will be dwarfed by its negative effects. First of all, $200 billion or so in temporary tax cuts and credits to businesses are nothing compared to the $3.8 trillion in tax hikes that will hit the economy like a ton of bricks on January 1, 2011 if the Bush tax cuts are not extended by Congress.

Second of all, businesses are reluctant to hire and invest, not because they are looking for temporary credits, but because of future uncertainty; they simply don’t know what the government is going to do next and how future government policies will affect decisions they make now. What new costs and regulations will be placed on them with healthcare reform and financial services reform? Will Congress convene a lame-duck session this winter to pass cap-and-trade and other destructive legislation? What will the cost of compliance be for hiring new employees, and will that force them to simply lay off anyone they hire now? Worse, will the government come up with fines or additional costs if businesses have to lay people off in the future? Right now, the safest thing for businesses to do is nothing. Until we regain respect for the rule of law and remove some of this uncertainty, I’m afraid none of these temporary promises, made right before an election, will do much towards any economic improvement.

The other glaring problem with this proposed stimulus package is that it couples tax cuts with spending increases, which makes no sense when we are already heavily indebted to foreign countries. We should be cutting taxes and slashing government spending dramatically. The private sector simply cannot bear the burden of our engorged public sector. In fact, one reason earlier stimulus programs did not result in any private sector growth is because large amounts went to the public sector. Indeed, the spending that the administration is now proposing arguably constitutes a bailout of the public sector and various union allies of the administration.

This administration is falling into the same dangerous trap we fell into during the Great Depression, as did the Germans leading into their hyperinflation of the 1920’s. The temptation is to do something, anything, proactive to attempt to stimulate the economy, but history has shown us that governments cannot spend their way into prosperity. The best thing government could do is get back to its Constitutional limitations and let the economy stabilize, heal and recover without the crushing burden of government holding it back.

  • GSNPFL

    Who wants to see President Obama debate Ron Paul for 2 hours?

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  • http://www.youtube.com/profile?user=MrDaleaaaa MrDaleaaaa

    the king doesn’t care if his people take drugs has long as he gets his taxes

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  • MrDaleaaaa

    they want 90% of your income germany only take half of their citizens income .hey their doing just great lets do what they do

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  • http://www.youtube.com/profile?user=MrDaleaaaa MrDaleaaaa

    thats why i’m afraid for ron paul he is doing good for the people the commies can’t let that go they have to put him in his place or he will continue to do his good work .without the athority of the jackbooted thug the commies have no power.without the interstate commerce clause they do not have the power of the jackbooted thug .it is said that oboma was on the board of the cpusa.org untill it was detrumentle to being persident..

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  • http://www.youtube.com/profile?user=MrDaleaaaa MrDaleaaaa

    its time the middle clase stopped being the puppets of( cpusa.org.)stop being sheeple get the iterstate commerce clause ( the one biggest tool of the communist party) removed. stop asking for government help the government failed at every thing it has been asked to help.and turned every thing they were supposed to help with into a communist organization .comunist make money from taxes .americans make money from doing buisness with ecth other who will pay if we are dependents .gov

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  • mongoose704

    I am tired of hearing about tax cuts for the rich. Those with 1% of the wealth pay 65% of all taxes. The rich who have 99% of this country’s wealth, pay only 35%. I am all for lower taxes but dammit it is about time the middle class gets a SIGNIFICANT TAX CUT. Theya re the consuming class! To believe that another tax cut for the rich will help our economy we have to believe that record foreclosures and depression level unemployment is the fault of taxing Tiger Woods too much.

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  • Alexiandria1990

    O.K. I’m just going to ask one question. Where does the HELL is all this money coming from? And can we really afford to live in America anymore if this keeps up?

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  • http://www.youtube.com/profile?user=relgstorm relgstorm

    it’s cool.. i’m about done with this movement, anyway. it seems like it’s a conservative christians only elite club anymore. i’m not religious nor conservative, yet, i’ve put my differences aside and agreed on key issues with most of this ‘truth’ movement but i’m not feeling any love. i’d posted on the alex jones channel many times in the past and then one night, feel’n froggy, posted a sarcastic comment that got me banned. yet again, hypocrisy ruins everything.

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  • chrystal larock

    I think to stimulate the economy, the President should bail out the dead beat fathers and mothers that don’t pay there support. With the economy being as bad as it is, some weeks struggling to buy groceries I have resorted to charging them to the charge card therefore paying interest and sometimes late fees up to 40.00 a month. If I had the 14,500.87 he is behind I would be able to go out and buy a home to stimulate the economy. Let these dead beat parents pay interest to the government and late fees when they don’t make their payment instead of the struggling custodial parent. Just think of all the custoidal parents if they had that one lump sum of money how many homes,clothing veichals etc. would be bought for them trying to better them selfs and their kids. how it would boost the housing market,and the interest and late fees would help in the debt of America and get us out of the devicet the we have put our self in with the stimulis bills and the government handing out money. They should get this back with the interest and pentatlys they charge for non payment instead of throwing them in jail on the cost of the state. We spent trillions bailing out the banks which did nothing to help out the little people that struggle everyday. The Mothers and Fathers trying there best to make ends meet. These are the people that will go out and spend the money in a way to make our economy grow and support the youth of America Thank you for your time….conserned mother.

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  • warsun99

    The facts are. There are 450 million Americans (500 million Illegal Immigrants). The idea that Package is suppose to help businesses is a joke. The thing is if you gave every American 1 million dollars you wouldnt brake a Billion. We could rebuild our ecomomy by starting new businesses and shipping products out of America. The problem is. Obama would most likely give you 350 dollars then jack up the price of living by 3 trillion dollars. Thats what hes planning. We already know.

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