Sunday, September 25, 2011

Peter Schiff's Testimony Before Congress on Jobs




"Government stimulus will never grow this economy. It will never create jobs. It is the equivalent of trying to put out a fire by pouring gasoline on it. We have to understand that the housing bubble, the financial crisis of 2008, were the consequences of government stimulus." - Peter Schiff

While I agree with most all of what Mr. Schiff says in the videos.  My only point of contention is the effect of stimulus.  The stimulus is put into effect to lessen the depth of the recession.  It does not take money from Peter to pay Paul because the government borrows the money and doesn't require taxes from anyone TODAY.  That said their is no free lunch so future generations will have to pay for it eventually. 
Of course the government could step back and let the market correct itself the from imbalance and over-investment in housing.  The recession would be far deeper and hurt far more people.  By "floating the boat" and keeping some marginal industries afloat during this time will allow more businesses to survive after the correction.  The stimulus does draw out the recession no doubt but it does buy time for this restructuring to occur.  The hope is that the eventual recover is greater as businesses don't have to start from scratch and the infrastructure investment will make the nation more productive.   

Now, it is immoral how many members of congress used the stimulus bill to fund pet projects and give tax breaks to select lobby groups and friends, especially in their jurisdictions.  I can provide examples if you would like. 

As for the comments by Mr. Cummings, I believe, that education needing more funding couldn't be further from the truth.  Young people believe that money grows on trees.  They believe hard work isn't required to get ahead.  They think that government can answer all of our economic problems and that the government can magically shower money from the heavens.  Young people need to be educated in how capitalism works, how to savings not consumption drive economic growth, and that you cannot legislate yourself to wealth. 

I encourage you to try this experiment if you wish.  Walk up to 10 random strangers and ask them why we live in a wealthy nation?  Nobody has a clue.  Perhaps "The Wealth of Nations" by Adam Smith (from 1776) should be mandatory reading for high school students...  And after they finish that one they should read "The Road to Serfdom" by FA Hayek. 

Don't get me wrong education is very important.  In our global economy, if you choose not to get an education that is your individual right.  You just need to be aware that you will be competing with uneducated labor all around the world.  The growing divide between the rich and the "relative" poor in the USA proves this point as the US workforce is among the most highly educated.  Nearly one in every three people in the USA have four or more years of college, compared to one in thirteen in 1960. 

Now I say "relatively" poor because I have heard people from India say they would love to come to the USA, why?  "Because even the poor people are fat in America."  Moreover, if you earn the average annual wage (~50k/yr) in the USA you are in the top 4.3% (for wealth) in the world.  Imagine a line of one hundred people who represent the worlds richest to the poorest... you would be standing right next to Bill Gates or Warren Buffett at the front of the line. 



Best Regards,

Kevin Graham



3 comments:

  1. "The stimulus is put into effect to lessen the depth of the recession. It does not take money from Peter to pay Paul because the government borrows the money and doesn't require taxes from anyone TODAY. That said their is no free lunch so future generations will have to pay for it eventually."

    In other words, stimulus robs Peter Jr. to pay Paul.

    Deficit spending on the scale we've seen in the last couple of years is nothing less than inter-generational theft.

    -Joel

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  2. "Young people need to be educated in how capitalism works"

    Theoretical capitalism or the distorted, bastardized version old people have so greedily bestowed upon us?

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  3. Before I answer your question please take inform me of what you believe capitalism to mean to yourself.

    If it is to long for a comment please email it to me. I will keep your answer confidential.

    Regards,
    Kevin

    ReplyDelete