The Unseen Costs of Easy Money

For several years now the Federal Reserve has been printing money (quantitative easing) and lowering interests (through the discount window) in attempt to improve the US economy . Here's why that's not that great of a great idea:

More than any other policy action, monetary policy suffers from the sense that there is a free lunch to be had. Yet the interest rate is a price for the savings that are transferred to spenders. To the extent that the Fed manages to push this price down (and some economists will dispute its ability to push any meaningful interest rate down), it taxes the producers of savings and subsidizes the spenders of savings. Clearly, no government considers pushing down the price of any real good an effective way to stimulate the economy – any gain to consumers is a loss to producers, and the loss typically will outweigh the gain if the market price is a fair one.

Do we really want to be discouraging saving and encouraging debt?

The Stimulus Package Didn't Work

I've have discussed the stimulus package a lot. Here's the closing data:

Our benchmark point estimates suggest the Act created/saved 450 thousand government-
sector jobs and destroyed/forestalled one million private sector jobs. The large majority of
destroyed/forestalled jobs are in a subset of the private service sector comprised of health,
(private) education, professional and business services, which we term HELP services.

Politics of the Stimulus Package

There are few issues I've given more blog time than the stimulus package, but I think a trillion dollars is worth my time. And yes, this is the fifth part of my series against self-verification, but no, I'm not a Keynesian now. It's not that I've been wrong about the stimulus, I've just been wrong in my discussion. My main argument has been that we can't know if it works, so why try. Economist Alex Tabarrok gives a much more rigorous argument. Even the most ardent stimulus package supporters agree that the recent package did not stimulate the economy becasue it wasn't big enough. It is very difficult for democratic governments to get the political support required to spend the money supposedly needed to stimulate the economy. Even in the Great Depression, where FDR spent more than 120% of GDP, Paul Krugman admits that wasn't enough. So here's Alex's argument:

Now I will take a large degree of laissez-faire and the chaos of democracy over authoritarian political and economic regimes any day. I assume most Keynesians would as well. Thus, if we can't count on massive increases in government spending during a recession to mop up problems ex-post shouldn't we all, Keynesians and otherwise, be spending more time thinking about ex-ante alternatives to Keynesian politics?

And here are his solutions:

Greater regulation to prevent crises from occurring is a legitimate response, although one that I wouldn't necessarily buy into in all particulars. Along the same lines, increasing wage, price and real flexibilities (e.g. relocation flexibility and public and private savings flexibility) would benefit us in future recessions. Automatic stabilizers such as unemployment insurance are one area that has worked quite well. What other areas can be automatized? Funding for states? How about an automatic payroll tax cut tied to the unemployment rate? (fyi, Keynes favored the latter).

Even if the economics of Keynesianism works, the politics of it doesn't.

Yet Another Look at Government Stimulus

I know I've belabored this issue to death, but with the costs so large I think it's worth at least one more look. Over two and a half years ago I first predicted that the stimulus packages would not work. Later I posted that the stimuluses probably didn't work in the past (especially the New Deal) and that at best we'll never know if the cost was worth it. I eventually concluded that stimulus as a temporal tax progressive tax is the best and least used argument in favor.

The most famous example of government stimulus is World War II. And it with Ben Bernanke's recent announcement to print an extra $600 billion in a process called quantitative easing (aka increase the money supply), it seems the Federal Reserve's faith in government stimulus has not waned. However, a recent paper published by David Henderson suggest that World War II is a great study on stimulus, except that it proves the opposite of what you might think. First, here's the traditional thought process:

We often hear that big cuts in government spending over a short time are a bad idea. The case against big cuts, typically made by Keynesian economists, is twofold. First, large cuts in government spending, with no offsetting tax cuts, would lead to a large drop in aggregate demand for goods and services, thus causing a recession or even a depression. Second, with a major shift in demand (fewer government goods and services and more private ones), the economy will experience a wrenching readjustment, during which people will be unemployed and the economy will slow.

Now's here's the reality:

Yet, this scenario has already occurred in the United States, and the result was an astonishing boom. In the four years from peak World War II spending in 1944 to 1948, the U.S. government cut spending by $72 billion—a 75-percent reduction. It brought federal spending down from a peak of 44 percent of gross national product (GNP) in 1944 to only 8.9 percent in 1948, a drop of over 35 percentage points of GNP.

While government spending fell like a stone, federal tax revenues fell only a little, from a peak of $44.4 billion in 1945 to $39.7 billion in 1947 and $41.4 billion in 1948. In other words, from peak to trough, tax revenues fell by only $4.7 billion, or 10.6 percent. Yet, the economy boomed. The unemployment rate, which was artificially low at the end of the war because many millions of workers had been drafted into the U.S. armed services, did increase. But during the years from 1945 to 1948, it reached its peak at only 3.9 percent in 1946, and, for the months from September 1945 to December 1948, the average unemployment rate was only 3.5 percent.

Selfish Reasons for Immigration

This may have replaced drug legalization as my issue of most interest. You've heard the moral, historic, and economic reasons for and the honest concerns against increasing US immigration. Now here are some selfish reasons for it:

Immigrants will solve our housing crisis. One major reason why housing prices remain in the doldrums and sales remain slack is that there are simply too many houses for sale. The National Association of Realtors reported that in July, there were 3.98 million existing homes on the market, representing a 12.5-month supply at the current pace of sales.

Here's another:

Immigrants are needed to replenish the American workforce. While the American labor force continues to grow, the rate at which it grows has been slowing down for decades. The Bureau of Labor Services projects that by 2020, the growth rate will be just 0.4 percent per year, and by 2030 just 0.3 percent per year. Some of this is attributable to baby boomers moving into retirement homes, and some is attributable to declining birth rates.

And one more:

Immigrants make the economy better. Not only does the San Francisco Fed paper—written, appropriately, by an Italian economist, Giovanni Peri—argue that immigrants don't hurt the economy, it actually makes the case that immigrants are putting money in the pockets of native-born workers. Specifically, it says that "total immigration to the United States from 1990 to 2007 was associated with a 6.6 percent to 9.9 percent increase in real income per worker."

All of those talking about the need for a second stimulus should take my intro economics class. The best way to increase demand is to increase the number of demanders.

Related: In France at least, an increase in immigrants does not mean an increase in crime.

Lessons from the German Economic Miracle

In a recent comment a reader proposed that the post-WWII Marshall Plan was a great example of government stimulus leading to national prosperity. Based on my previous posts on foreign aid, you might guess I don't agree with the common assumption. Economist David Henderson also disagrees and claims economic growth was mostly due to three other factors:

The two main factors were currency reform and the elimination of price controls, both of which happened over a period of weeks in 1948. A further factor was the reduction of marginal tax rates later in 1948 and in 1949.

The article goes into a lot more detail, but here's his specific response to the Marshall Plan story:

Marshall Plan aid to West Germany was not that large. Cumulative aid from the Marshall Plan and other aid programs totaled only $2 billion through October 1954. Even in 1948 and 1949, when aid was at its peak, Marshall Plan aid was less than 5 percent of German national income. Other countries that received substantial Marshall Plan aid exhibited lower growth than Germany.

The Economic Stimulus Package, Last Part

Two years ago I posted on why I didn't think the stimulus package would work, why I didn't think the very very first worked, and why I might consider it as a "temporal progressive tax". But since the Federal Reserve recently predicted the recovery is slowing down, it's worth one last look. In this NPR podcast (via Justin) one of my favorite economists Tyler Cowen puts it like this: there has never been a very good test of Keynesian stimulus and in fact, this last stimulus package has probably the best chance to test it. A year and half ago he predicted it wouldn't help, and that it wasn't worth the risk to spend a trillion dollars on an untested idea.

But here's the worst part, because the macro-economy is so large and so unwieldy, even though this stimulus hasn't ended the recession in the predicted amount of time, it proves nothing. Supporters can reasonably say it would have been worse without it. Although I can't say with completely certainty the stimulus package has done more harm than good, the opposite can't be proven either. And it seems the burden of proof should be on the party wanting to spend a billion dollars.

Only "Mostly Free"

According to the Heritage Foundation, the United States is no longer economically "free", but this year is only "mostly free". Before you cry Armageddon, we are still ranked #8 out of 179, though "socialist" Canada is ranked #7. Here's their reasoning for the drop in ranking:

Uncertainties caused by ongoing regulatory changes and politically influenced stimulus spending have discouraged entrepreneurship and job creation, slowing recovery. Leadership in free trade has been undercut by “Buy American” provisions in stimulus legislation and failure to pursue previously agreed free trade agreements with Panama, Colombia, and South Korea. Tax rates are increasingly uncompetitive, and massive stimulus spending is creating unprecedented deficits. Bailouts of financial and automotive firms have generated concerns about property rights.

Though I couldn't remember how to make a chart with the data in Excel to prove it, there is a strong correlation between economic freedom and GDP per capita. Luckily someone did it for me with the 2004 data:

Economics in Rap Music and Stand-up Comedy

Here's the Econ Rap Anthem:

And here's some comedy from the world's only Stand-up Economist:

Causes of and Responses to Recessions

In case you haven't heard the news, the "Great Recession" ended sometime over the summer. All that means is Gross Domestic Product (a sum of everything we produce) is no longer shrinking. That doesn't mean unemployment and company profits are back to normal. That's the good news, the bad news is that we, as in the general public, still don't fully understand what causes recessions. As a free marketeer that doesn't necessarily scare me (we don't need to understand it for it to work), but as a voter it worries me. There is historical trend that government power increases in times of uncertainty (Civil War, Great Depression, 9/11). The more we understand economic hardships, hopefully the less fear mongering.

The definition for a recession is when GDP decreases for at least two quarters. That means for 6 months we produced less stuff than we used to. But why? We have the same people, the same buildings, the same machines. The most simple explanation is that recessions aren't economic losses, because nothing is lost that can't be gained back, but are instead economic shifts. In this most recent example, we had a housing bubble. This is due to government subsidies (predicted in 2003) and a general lack of information in the housing market (or tulip market in the 1600's). After the boom busted, houses were plentiful, decreasing housing prices, sending a shock wave into investment and banking. All of a sudden construction workers, realtors, mortgage lenders, etc. are out of work, not buying as much as they would normally and now everyone is hurting. While the unemployed look for new jobs during that transitional period, production is lost. It's important to note, recessions start with loss of production (or mis-production), not loss of spending.

So if that's what causes recessions, how should nations respond to them? Bush and Obama both followed the ideas of John Maynard Keynes. Among other things, he proposed using government spending to counteract the loss in private spending. The idea seems logical, but ignores the fact that any government money comes from present (or future) taxes. Not to say that large government spending can't increase GDP, but that any increase it causes will have at least an equal decrease later. Also, public money is subject to the wills of political officials, with all the inefficiencies and special interest that come along with that. The main opponent of these ideas was Milton Friedman (here's a good rap about the debate). As an advocate for free markets, he proposed waiting through the transitional period and letting things get better on their own. Though he did support government lowering the interest rates to encourage scared investors to come back sooner.

But Keynes is not stupid. If he read this blog post he would agree that in the long run the market would self correct. But he famously said, "in the long run we are all dead". What he forgets is that our children are not. It seems very plausible that Bush's and Obama's stimulus packages increased production and helped some people, in the short run. But our children will be left to pay the bill (but maybe that's not all bad). Yet I must admit, even in a perfect market prices and wages are sticky, which means people don't like to see them change. Much like unemployment benefits, this only makes the transition period longer. Hopefully as time moves on, recession length should shrink due to ease of transportation and internet connections like Craigslist. I personally support allowing the billions of individual decisions of the market to eventually get us back on the road to more prosperity, but I also realize that a government stimulus out of fear is better than electing the next Hitler out of fear.

Who Benefits From Big Government?

Washington. And I don't mean some vague notion of Washington:

As the nation's most populous metro area feels Wall Street's pain, the fourth-largest—Washington—is barely sensing the recession. In fact, Moody's Economy.com estimates that metro Washington's economy will actually grow 2.5% from mid-2008 through mid-2010. New York's economy is expected to shrink 4.2%.

It wouldn't be the first time that Washington benefited from a national crisis. Back in 1930 the District of Columbia was a quiet Southern town, scoffed at by New York sophisticates. But as the federal government ramped up to fight first the Great Depression and then World War II, its population grew 65% in two decades, vs. just 14% for New York City.

This time Washington is getting a boost from government spending to fight the recession and fix the financial system, as well as the ongoing expenses of fighting wars in Iraq and Afghanistan and promoting homeland security. While President Barack Obama pointedly left Washington for Denver to sign the $787 billion stimulus package on Feb. 17, locals expect the metro area to garner a big share of the dollars.

Congratulations to those lucky enough to be moving to the Washington.

Emptying the Bottle: March '09 Links List

Here are some links listed in order of most to least interesting. If you find the first link worthwhile, then move to the next one (and so on).

1) Your family may once have been a different color (Text or Audio).

2) The perfect crime: identical twins with indistinguishable DNA and 1 good alibi.

3) How is the stimulus bill is like a big kegger.

4) 50 best stores with pun names.

5) How the free market pushes for racial equality.

6) Magician/Comedian/Libertarian Penn Jillette Q & A.

7) Internationally, rich people are happier than poor people.

8) Why politicians are more harmful than the rich.

9) It's like Craigslist, but for items confiscated by the government.

10) Stop motion animation: Bruce Lee vs Iron Man.

*Check my Bookmarks to see what I find interesting on a daily basis*

Emptying the Bottle: February '09 Links List

Here's another extra long list due to my furlough.

1) The economy according to Mint.com.

2) A great place for seemingly low budget but good political interviews.

3) Over a 1/3 of police shootings are suicide by cop.

4) Maybe commercials make TV more enjoyable (could explain why TV online feels less than ideal).

5) Where a "stimulus" has already been tried and failed.

6) Why you shouldn't touch when you shop.

7) If their too big to fail, make them too big to exist.

8) A menstrual reminder for husbands.

9) A list of good things Obama has done so far.

10) Q & A on "Who Survives a Plane Crash?"

11) 40% of Americans own guns! (Thanks Justin)

12) How free Monty Python can bring profits.

13) An index of Marginal Revolution's "Markets in Everything" series.

14) Interview with a shoplifter.

15) Yet another reason why profits are good.

16) Wingsuit Base Jumping!

17) Clemson economics department ranks in top half.

18) Shopkeeper keeps store open when he's gone.

19) Should you tell your kids about the financial crisis?

20) My two favorite media sources in one room!

*Check my Bookmarks to see what I find interesting on a daily basis*

Catching Up, The Stimulus Package

I'm back, refreshed, and ready to hit the ground running. After skimming 704 unread blog posts, I thought it would be best to summarize all we've missed. So here's the first part, the "cream of the cream" on the stimulus package.

The world is not ending. One of George Bush's final failures was his claim that he'd "abandoned free-market principles to save the free-market system." This is just foolish. By the most economic measures this is not even the worst economic crisis since the Great Depression. In fact, the panic of the 1980's was clearly worse than now (chart). Even on a global scale, the world is the best its ever been. For the first time in history, half the population of the world has reached the middle class. This is up from almost 2% 200 years ago. The idea that capitalism has failed us is simply not true. Llewellyn Rockwell, president of the Mises Institute, puts it this way:

To the free market, we owe all material prosperity, all our leisure time, our health and longevity, our huge and growing population, nearly everything we call life itself. Capitalism and capitalism alone has rescued the human race from degrading poverty, rampant sickness, and early death.

Below are a laundry list of problems I've accumulated with the stimulus package. Most of these ideas come from the 200 people smarter than me who signed the below statement:

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's "lost decade" in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

One of the points they mention is that Japan's recession, one similar to our current one, was not helped by increased government spending. In the 1980's Japan accumulated a debt twice the size of its economy only to remain stagnant. Many would claim that Japan built too many unneeded and slow spending projects, but that is unavoidable. As of January, in Obama's plan, only $4 of the $30 billion for roads and $3 of the $18 billion for renewable energy will be will be spent in the next two years. But speed is not the only problem. It is historically and geographically universal that governments are not very efficient at spending taxpayer money. Here are three recent examples:

Iraqi reconstruction: The Special Inspector General for Reconstruction, Stuart Bowen,...has found that the effort has been riddled with cost overruns, project delays, fraud, failed projects and wasteful expenditures...even though the first tranche of $19 billion in Iraqi reconstruction money became available in October 2003, the Defense Department did not issue the first requests for proposals for this money until 10 months later...

Hurricane Katrina: ...the US has appropriated, over $100 billion in short and long term reconstruction grants, loan subsidies [etc]...GAO found that FEMA made over $1 billion--or 16% of the total in this particular category--in fraudulent payments...items like professional football tickets and Caribbean vacations.

The Big Dig: ...the largest single infrastructure project in the US...many lessons on how not to run a project...officially launched in 1982, but it did not break ground until 1991, due to environmental impact statements, technical difficulties and jurisdictional squabbles...not "completed" until 2007.

The efficiency of this bill is similar. It will spend $214.5 billion to create/save 330,400 government jobs. This is $646,214 per job. So why is this even on the table? What are the political incentives that make government spending seem like the solution in nations all around the world? I believe its because of bad politicians and bad voters. Bad politicians see this as a chance to pass the pork they've been trying to pass all along. And bad voters refuse to allow for "don't just do something; stand there."

So if government spending isn't the solution (and it surely isn't) then what is? Believe it or not there are some government action I do support. However it's important to note I support these all the time, not just in a recession. Economist Greg Mankiw proposes "an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax." This would not only help strengthen US business (1 year of pay roll tax is roughly equal to the stimulus package), but it would also deal with road congestion, which I have discussed before. Best of all this isn't like "mailing a letter to the fire department to tell them that your house is on fire." This could happen tomorrow, not 2011. Speed aside, here's why tax cuts will always out perform government spending:

Tax cuts stimulate both aggregate demand and aggregate supply. If taxes are temporarily lower, they make working today more attractive than working tomorrow, and thus increase labor supply. This boost to the nation’s productive capacity means that a tax-cut-based stimulus doesn’t do as much to narrow the gap between output and what we can produce.

Finally, here's another unexpected solution that I would want even if our economy wasn't slumping: increased immigration. These immigrants would buy up the bubble homes, improve our savings rate, and work overtime increasing productivity. Although open borders will always help a country, the help is needed even more in a recession. This solution stands in stark contrast to the "buy American" death trap that has been floating as a part of the stimulus package. Although protectionism didn't cause the Great Depression, it did make it "Great" (can't claim credit that one). To put it bluntly, buying American will destroy jobs, not create them.

This whole post can be summed up like this: Many wonder how we can fix the economy, but we fail to notice that it is already fixing itself. There were too many houses, people are now building less houses. Banks lent money to risky borrowers, now they're not. Americans weren't saving enough, now people are spending less. I predict we have positive economic growth in 2010.

He Speaks My Language

I heard the tail end of this on NPR the other day and thought to myself, I really like what this guy has to say about the stimulus package. Then I realized, it's Tyler Cowen and I read his blog everyday. I guess I know who I like and I like who I know. Listen here, it's only about 2 minutes long.

The Economic Stimulus Package, Part III

You can go here and here for my first two arguments against any governmental transfers to "fix the economy." But I've been thinking, maybe a stimulus package isn't all bad. One assumption I have is that for the last 200 years (since the industrial revolution) life have been consistently getting better. So maybe politicians aren't stimulating votes, but are instead creating a "temporal progressive tax" (patent pending). Taxing the rich, future generations, to the benefit of the poor, us. It may not be a free lunch, but it is a borrowed one.

The Economic Stimulus Package, Part II

I discussed the follies of the first stimulus package earlier this year, but bad ideas die hard. Currently Japan, Germany, Spain, India, the United States and many other nations are planning some kind of fiscal stimulus. What these governments are not recognizing is that to put extra money into the market, you must first take it out, either taxes or debt (future taxes). There is no new wealth created, only an awkward redistribution of resources (here is a video from the Cato Institute that explains it in more detail). There are at least six reasons why governments rarely improve economic panics: information problems, unresponsiveness, bias against innovation, political bias for constituents, rent seeking, and corruption. The graph below shows just how helpful the first stimulus package was:

Disposable income went up, but actual purchases didn't. But wait, wasn't it FDR's progressive government action that pulled America out of the Great Depression? No, says two UCLA economists:

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

So if government transfers aren't the solution, what is? Let's again look backwards and see what has worked in the past:

When [Margaret Thatcher] came to power in May 1979, the British economy, by every measure, was in worse shape than the U.S. economy is today. Inflation was out of control. Unemployment was high and rising rapidly. Job creation had been at a total standstill for almost a decade and a half...

Yet by sticking to her policies of lightened regulation, reduced trade barriers, privatization of a raft of publicly owned companies, reduced taxation, and the adoption of laws to prevent abuses of union power, Mrs. Thatcher achieved something few if any of today's economists have begun to consider. She achieved a genuine, productivity-led recovery that transformed Britain from perennial basket case into the Europe's most improved and vibrant economy.

There is something the government can do, less.

Mark Sanford, a Republican Worth Reading

I mentioned earlier this year that my home states' governor Mark Sanford was proposed as a possible Veep pick for John McCain. Now The Economist has Sanford on their short list of suggestions for top dog in 2012. This especially excites me when he writes things like this:

Several questions led me to oppose bailing out the states. They are worth asking, even if you supported bailing out Wall Street.

Who bails out the "bail-outor"?

Washington is short on cash these days and will borrow every dime of the $150 billion to $300 billion for the "stimulus" bill now being worked on. Federal appetites may know no bounds. But the federal government's ability to borrow is not limitless. Already, our nation's unfunded liabilities total $52 trillion -- about $450,000 per household. There's something very strange about issuing debt to solve a problem caused by too much debt.

Do you now have to be a financial "bad boy" to win?

Community bankers tell me that they are now at a competitive disadvantage for being careful about who to lend to, because others that were less disciplined will get a federal bailout. This is also true for states. Those that have been fiscally responsible will pay for or lose out to the big spenders. California increased spending 95% over the past 10 years (federal spending went up 71% over the same period). To bail out California now seems unfair to fiscally prudent states.

The whole article is worth reading.

The Economic Stimulus Package

Some people have begun receiving their checks for the most recent attempt from our policy makers to curtail the recession, which interestingly hasn't begun yet (real GDP increased .6% in the last quarter). The first thing I want to mention is that this money is of course not free. It is not manna from heaven. I say this obvious fact to emphasize that anytime the government gives a tax cut it has four options: 1) cut spending, 2) raise taxes, 3) print money, or 4) borrow from lenders.

1. There have been no decreases in spending associated with the rebate.
2. There have been no increases in taxes associated with the rebate.
3. I am optimistic that we are not so foolish as to simply print extra money.
4. By default, the current plan is simply to add this new rebate to our current deficit.

Since the federal government plans on borrowing even more money, I think it’s important to discuss the repercussions of such an action. When a governmental body borrows large sums of money, it takes a portion of the borrowable money in the world. Instead of money being invested in Google or IBM, lenders invest in the United States government. This is called the crowding out effect. To put it bluntly, you cannot consume more today without hindering investment, thereby hurting consumption in the future.

The main thing to take away from this is you cannot "stimulate" spending without diminishing saving. Any money the government gives out to help the economy, must first be taken out of the economy. The idea that you can trick people into thinking they are richer so they will spend more now will not work, and may actually be harmful. If anything, this will encourage Americans to spend more and save less, which is how we got here in the first place. Many Americans are burdened by this momentary and minimal hardship because they didn’t plan for the future. Basically, the government cannot rescue us in the short-run; instead it should focus on long-run essentials (lower taxes, less regulation, less distortion of the market).

So how can we solve this problem? The short and simple answer is we can’t. When consumers over invest in some area, in this case houses, and businesses incorrectly assesses risk, in this case homeowners, then there will be consequences. But it’s not all gloom and doom. Remember, in real terms, adjusting for inflation, the average American is nine times richer than they were in 1840. This wealth is not a result of government intervention but is instead a result of the only real way to get rich, innovation. The average worker is richer because they are more productive.

Another problem that this package is supposed to help is unemployment. Which may I add is at a historic and geographic low. The reality is that this will probably hold back those who are unemployed and would be getting jobs. Giving someone an unexpected $1000 will be an encouragement not to work. As a result, this may actually prolong any recession we may have.

So how should we react to this stimulus package? What we should do with our package is simple: what ever we want! The money is ours and we should spend it like it is. You want to buy a stereo, buy a stereo. You want to invest in Dell, invest in Dell. You want to put it in your kid’s college fund, then for their sake do it. And please ignore the proposals that we all “Buy American.” We do no one a favor by supporting inefficient American businesses that cannot compete in the international market. And finally, what should my government do? Feel free to give my money back to me anytime, just cut spending along with it so you don’t have to tax my children.