Economics 101 Lesson For The Day

So, the Democrats have rammed their $840 billion "stimulus" package through Congress, and it sits on Barack Obama's desk even as I write this. The Econ 101 lesson for the day is: how will they pay for the $840 billion they are borrowing?

When the Federal government confiscates money from the Private Sector to fund anything - regardless of its merit - the math is real simple to do: simply compare that amount to the overall GDP, and calculate how much more the Private Sector will need to produce to pay for the amount that was confiscated.

The U.S. Government spent $3 Trillion in 2008 against a $14 Trillion dollar economy, so they confiscated 20% of GDP. At that rate of confiscation, the economy collapsed.

Right now Barack Obama and his pals are on track to spend $4 Trillion in a $13 Trillion dollar economy. We no longer have a $14 Trillion economy. That was last year, and we're in a deflationary mode. That means the Federal government will take 31% of GDP this year, at minimum.

So, the Feds in 2009 will have confiscated another $1.5 Trillion from the Private Sector that might otherwise have either been a) invested in businesses or b) in the hands of consumers to spend to allow those businesses to flourish. Had this money been left in the Private Sector, the economy might have grown, and the Federal government's revenues along with it.

Thus, the insanity of an $840 billion dollar "stimulus" package that is virtually 100% additional government spending. Not only will the economy not grow, it will contract, resulting in less government revenues, and require yet further borrowing to finance the additional debt. To make matters worse, that $840 billion is merely the down payment on a generational orgy of additional government spending. If you doubt this, read the budget and then get back to me.

Either a) Barack Obama believes that government spending stimulates the economy as much as Private Sector spending, in which case he is an economic moron, or b) he does not believe that, and is cynically enslaving America to government handouts by destroying the economy.

Either way, this is a textbook example of Friedrich Hayek's "Road To Serfdom". If Barack Obama and the Democrats have their way, we will all soon be serfs.

And let me finish this little riff with a question I perpetually ask of my Democrat friends, but for which they never provide an answer: At what point does the Socialist confiscation of wealth by government damage the economy? 10%? 20% 50%?

Government and Public Sector spending at all levels now consumes 60% of our GDP. Back when FDR managed to make the Depression last a decade, total government and Public Sector spending was only 20% of GDP.

You do the math.