Falsely Described 'Stimulus' Continues to Decline In Value
AP Photo/Karel Navarro, File
Falsely Described 'Stimulus' Continues to Decline In Value
AP Photo/Karel Navarro, File
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“Did you mention the ‘Paul Hollywood Handshake’, dad?”

“Actually, I don’t think I did.”

Mr. Hollywood is the long-standing judge on the “Great British Baking Show.”  The handshake is his signature commendation when he really likes a bake.

As seasons have progressed, he’s handed out more and more of them.  While it is no doubt still a thrill to receive such high praise, it’s entirely possible that they have diminished in value due to their increased offerings.

Curiously, this is an angle not often entertained when considering government spending.  It’s not clear that the other damaging effects are well-understood, either.

The bloat of the federal fisc has been swelling for decades now, but has seen an egregious uptick this century.  What makes it particularly obscene is when it comes cloaked in the deceptive guise of “stimulus.” 

Gone are the days of President Clinton’s miserly $16 billion proposal.  Since then we’ve regressed to President Obama knocking on the door of $1 trillion, to President Trump blasting through that threshold last spring.

Now comes President Biden with his own multi-trillion dollar offering.  If only the GOP could have maintainedcontrol of the senate, we could have had a bulwark against the ensuing tsunami of federal “assistance.”

I’m just kidding.  We all know better than that by now.  If there’s any area where a decent helping of republicans are indistinguishable from democrats, it’s raiding from the U.S. Treasury. 

Sarcasm aside, while taxing work effort, disciplined frugality, and rewards from risk-taking displays a misplaced contempt for some, government spending is one of condescension, passing judgment of inferiority onto others. 

Moreover, it’s counterproductive.

First, the funds have to be extracted from the private sector where firms are competing with each other to best serve consumers.  Profit results, with broad prosperity not far behind.

None of these phenomena occur in, or derive from government.  Rather, the poached resources are filtered through a parasitic bureaucracy, “wetting beaks” along the way, invariably ending up in wasteful sinkholes. 

Only after this does a paltry portion end up in citizens’ hands, sometimes simply redistributed from others.  In the cases where they return to the spot where they were originally earned, one questions the wisdom of them having been taxed away in the first place.

Furthermore, “stimulate” in politico parlance means increased consumption.  Public officials assume that since the biggest portion of the biggest GDP (gross domestic product) in the world is consumer expenditures, it necessarily translates into prosperity.

In fact, consumption destroys value.  It’s the very last step in the process.  It cannibalizes what we have now rather than being redirected to new ventures via investment.

Alas, this being a process kicked off by power-hungry politicians, logic is nonexistent in this calculus.  This is how you get something like unemployment insurance.

This “benefit” arguably erodes our potential earnings since it’s funded by our employer.  The subsequent payout on the other end completes the double-whammy; a disincentive to work.

If State A has an unemployment “benefit” of $500, and State B has one that’s twice that, which state would have the higher unemployment rate?  State B, because not working pays more.  Enter Uncle Sam to compound the issue by topping it off.

Incentives being a key to understanding economics, this question lands on two exams (including the final) in every one of my macro classes.  The same principle can be applied to a Universal Basic Income (UBI).

Support for this new bit of government welfare has gained currency in recent years, thanks primarily to misplaced fears that robots will soon take all our jobs. 

This reflects, as much as anything, a poor understanding of history.  Automation has been with us for ages and enhanced our standard of living throughout.  It allows us to turn our attention to new goods, services and processes that themselves will eventually be (BOO!) automated.  It’s a virtuous cycle. 

Contrary to the demagoguery, with the exception of routine cyclical downturns (and those instigated and/orprolonged by government intervention), unemployment has remained at a fairly constant level.

Nevertheless, not only did the UBI define the presidential campaign of democrat Andrew Yang (now running for New York City mayor), but certain elements in the GOP seem vulnerable to going along with such a scheme.

Activists here in the Alamo City pound away in support thanks to the fact that Mayor Ron Nirenberg is a signatory to Mayors for a Guaranteed Income.  The lack of substance behind the push for this new form of government dependency is matched only by the consequently eroding value of the dollar.

When government stacks another trillion onto the national debt and/or fires up the printing presses and calls it “money,” the dollars are not explicitly backed up by wealth-creating production.  Therefore, the process necessarily devalues the ones that are already in our pockets and bank accounts. 

This disruptive, many times unpredictable behavior deters investment in new innovations, and inventions.  It’s why those funds flow instead to safer, already-existing assets like gold, houses or oil.  This boomerangs back onto us when those bubbles subsequently burst.

Given the growth in popularity of cooking/baking shows like the GBBS, and the subsequent draw of better contestants, it’s eminently possible more praise is merited.  Paul Hollywood has said as much.

The inherent nature of government on the other hand, works in the opposite direction.  The “beneficial-” or “stimulative spending” snake oil that activists and politicians sell is more akin to the mythical pie-in-the-sky inspirations that inform bakers’ creations.

Christopher E. Baecker manages fixed assets at Pioneer Energy Services, teaches economics at Northwest Vista College, is a board member of the Institute of Objective Policy Assessment, and is a member of the San Antonio Business & Economics Society.  He can be reached via email or Facebook

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