A Contrast...

I've been told that President Obama's plea to pass the stimulus package was a feat for the ages, explaining in plain-spoken terms the economic crisis and the proposed response by government.

If you haven't seen it, it's a brilliant sales pitch:

What I find interesting about this sales pitch is that is seems like President Obama is being forthright with us.  He outlines the difficulties ahead and notes just how terrible this recession will be.  In fact, from his portrayal, you wonder whether this is the same individual who one week ago was talking about "hope". He then states, quite simply, that we need people to consume for our economy to get back on track and that we have to fund that consumption with government debt.  So, while we're at it, we might as well just build some fancy things.

Note, that none of what President Obama said mentions the difficulties and potential repercussions with this plan. Just like buying a car from a used car salesman, it simply is too good be true.  So what will this plan cost us (other than the obvious $800,000,000,000 to $1,000,000,000,000)?

It may be helpful to have a plain spoken gentleman outline the difficulties:

"I say, I say..." Fred is right! (Sorry, I couldn't resist).  The bottom line is that if you think the Federal government can simply borrow $1 trillion and there will be no repercussions, you have been taking too many of your "hope" and "change" pills. The reality is there are severe economic problems with spending all this money through government (as noted by many, many economists):

1. It overlooks opportunity cost. Yes, it's true that federal programs will provide jobs for the construction worker. But that money has to come from somewhere, right? Could that money have been better spent on some other enterprise? Better spent on some other investment? We'll never know, because the market couldn't evaluate the expenditure. The problem of Opportunity Cost and the inability of Government to make wise choices is well documented in critiques of the New Deal. In fact, according to some scholars (and Congressman), the inability of government to identify worthwhile investments extended the Great Depression (other scholars simply say we didn't spend enough).  I think Fred correctly notes that substituting the wisdom of a Bureaucrat, whatever the intentions, for the multivariate perspectives of the market, simply makes no sense.
2. It overlooks inflation. Throwing this much money into the system devalues the dollar (more dollars means that the dollar means less). As such, the cost of bread skyrockets and though Joe the worker is gainfully employed at the construction firm, he is still only making $8 and hour. Too bad that a loaf of bread costs the same now. Deficit spending means creating money and creating money - though not always a bad thing - can, put bluntly, can alter the dynamics of the economy.
   
3. It substitutes precision for size. This is the biggest problem and it is why I am an advocate of taking some time on these measures. The stimulus package doesn't need to be huge. In fact, by keeping it smaller we avoid the imbalances in what we value (problem A) - particularly if we think about what we're spending - and massive devaluation of the dollar (problem B).

So, if you watched President Obama's speech and thought, "wow... this seems too good to be true". You were absolutely correct. The stimulus amounts to "generational theft".  If you thought, "wow... this is going to be tough", I would note two things: (1) You are likely the victim of a politician setting the bar extremely low for himself (it's in President Obama's best interest to portray this as the worst economic crisis we have ever faced. Ever. Seriously.) and (2) you are also absolutely correct, though it may be for different reasons then you initially thought.