What's wrong with socialism? Part I

I had the opportunity to see a detailed list of the spending items in the so-called "Stimulus Bill." I'd paste it in here, but it may be copyrighted and heaven knows, I don't want to get sued. Try this: http://coburn.senate.gov/public/index.cfm?fc_c=1364098x2834949x65837977&FuseAction=RightNow.Home&ContentRecord_id=712c5899-802a-23ad-46dc-3d0e032c78cc

Forget about pork for the moment, all the spending -- except for the tax cuts, which can be counted as "spending" -- goes to government and government-sponsored programs. Well. OK. Better that than the government seizing control of the banks, right? Or doing other things to fiddle with privately-owned companies.

The thing is, though... the government is not a cash-generating operation. That is, the government can and will hire private companies to help build roads (to nowhere?), a monorail between L.A. and Vegas -- as a matter of fact LOTS of stuff in Nevada, which just happens to be the home state of the Senate Majority Leader.

Anyway, as these government projects are implemented, they will provide jobs for private contractors and their employees, and no doubt federal, state and local governments will hire more people onto their payrolls to manage these projects. But when these projects are done, there's no more income from them, except perhaps usage fees that might fund their maintenance... or not.

How is this different from private enterprise? A private commercial company builds an operation that offers a product or service and generates sales, income, and profits. More often than not, a large percentage of the income and profits are re-invested in the company to fund its growth. Privately-owned companies are little profit- and job-creating engines. That's just how they behave all on their own, without any goading or direction from the feds or anyone else.

The government and government-owned operations consume money, but they don't make more of it, except via the printing press. Generating a profit is not what the government is supposed to do.

So, in regard to the "Stimulus" bill, looks like some people will have jobs for as long as that money lasts, then.... it's gone.

The money is also gone from the pockets of all US citizens, whose kids and grandkids eventually will have to fund "Stimulus" spending. This can take the form of tax increases, which are extremely unpopular and probably won't be done by a congress that hopes to be re-elected 18 months from now. So, the answer will more than likely be inflation.

But inflation is something your congressman can just shrug his shoulders and tell his constituents, "Heck I don't know where this is coming from. Perhaps we should spend more money to fix it." But you and me will pay for it.

I remember the "stagflation" of the 1970s.... Bacon was about $ .89 per lb. on one shopping trip. Got my next paycheck two weeks later, went to the store, and bacon was $1.69 per lb. Everything was like that -- prices up across the board and rising a lot faster than my salary was. The thing is, you didn't get any more value for the money you spent; you got a lot less. In Germany between the World Wars, people were wheeling paper currency around in wheelbarrows, and one whole load just might be enough to pay for a loaf of bread... today. Tomorrow, two wheelbarrows. The central bank had people working the printing presses 24/7 and couldn't keep up with demand. And the notes weren't worth anything.

This whole economic collapse is the result of government-inspired inflation in the housing and banking industries. After 9/11 and ever since then, the Federal Reserve steadily lowered prime interest lending rates to stimulate the economy. This actually works, if it's used wisely. However, it wasn't used wisely.

With interest rates lower than they had been in decades, housing developers and banks went beserk lending. They couldn't hand out the money fast enough. They made many high-risk loans that they wouldn't have made otherwise. A lot of these rather shaky-looking mortgages ended up in the Fannie Mae and Freddie Mac pools. These organizations bundle mortages into something like a mutual fund, then they sell shares of the fund to investors to spread the risk around. It's likely the loans will lose money, but if the risk is shared by thousands of investors, each individual only loses a little, and maybe they can use it as a tax write-off. And if more of the mortgages are paid than go into default, everyone wins.

Well, the housing bubble collapsed. Too much money chasing too few goods first inflated prices, and then money pumped into new construction generated much more supply than demand. Wanna buy a house? I hear you can get them for a song in Arizona and Nevada. Personal credit (charge cards) went out to people who really weren't very good risks and they defaulted, too, which was probably pretty predictable from the gitgo.

I find it funny when people claim it was private enterprise or capitalism that created this mess. It was private enterprise encouraged and underwritten by the federal government that created this mess. No capitalist in his right mind and using his own money would go so hog-wild, extending credit and mortages to the unemployed and unemployable unless Uncle Sam was behind him saying, "Go ahead. I've got your back. We want everyone to own their own home."

Here's a column from Thomas Sowell that explains this further:
http://www.creators.com/opinion/thomas-sowell/upside-down-economics.html

So now I'm sitting here watching my IRAs evaporate as the Dow drops like a rock -- or really, more like a feather, just sort of gently but steadily wafting ever-downward. Do I keep the money in the stock accounts -- even after they've lost something like 30% -- or do I cash out, take the penalties, and stuff all the cash into my mattress? And will cash be worth anything next year this time?

The "Stimulus" Bill is pumping more than $1 trillion into the economy, deliberately inflating it. Hey, isn't that exactly what they did with the housing market? And look at the results.

One thing's for sure: the federal government does not know its ass from its elbow in the field of economics. Do you really want the fed to "fix" things? Do you really believe they can?

Or are you just an average citizen, confused, worried, and ultimately screwed because you just don't have a handle on what's going on, and have bought the line that the federal government is all-seeing, all-powerful and is here to help you?

But my biggest question is: Why the hell would a politican or anyone else for that matter, support this stuff? It's charitable to say they're simply ignorant. Very charitable. Let's just say, they are not very Enlightened.