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Tuesday, August 24, 2010

More Unintended Consequences Of The Misguided Stimulus Spending

Gordon G. Chang of Forbes Magazine was on Dr. Bill Bennett's Morning In America radio program during my drive into work. Mr. Chang recently wrote an article that talks about how China is the real winner in the stimulus spending frenzy that started, under Bush's watch, in 2008. And that 0bama took to new heights in 2009.

Click here: U.S. Spends, China Benefits

In short, when the government disperses "stimulus" money, some of that money goes to contractors to do things like repair roads, or build a border fence, etc. The contractors, who are private firms, buy materials from the most economical place: China.

Sure some of the money is used to pay workers, but China, who is loaning us the stimulus money, then gets portions of those loans back in payments for goods used on the stimulus projects that their loans are funding! Genius on the Chinese's part.

Of course America invented this "loan them money so they will pay us" type of plan. We called it the Marshall Plan, and that is what grew our economy so fast in the aftermath of World War II as we loaned Europe money so they could pay us to rebuild Europe. Talk about taking our own medicine!

And the results of this action?

The result is that Western nations will be wracked by inflation, burdened by debt and laid low by another downturn.
 As Chang pointed out on Bennett's show, another result is the American worker starts clamoring for higher wages because of the increased inflation, which further fules inflation as companies raise prices to offset higher labor costs. Kind of a dog chasing its tail type of economy.

0bama will use all of this as an excuse to raise taxes, starting by letting the Bush tax cuts expire at the end of this year. Higher taxes, especially on businesses and the wealthy, will, you guessed it, cause more inflation. 2011 is shaping up to be a rough year: runaway inflation, higher taxes, higher unemployment. The only silver lining will be that it will the final nail in the 0bama, 2012 reelection coffin.

And good riddance to bad rubbish.

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