Month: March 2009

Let’s look at what the U.S. government has been proposing to do in response to the collapse of 2008…

• extend unemployment benefits and other payments to people who don’t work
• expand government spending as a percentage of GDP
• increase taxes, starting with folks who have higher incomes
• offer universal government-paid health care
• make it easier for workers to unionize

Will this work? Let’s consider the Western European countries. They all have lavish unemployment benefits, high government spending, higher taxes on high earners, taxpayer-funded universal health care, and powerful trade unions. They long ago achieved everything that our current president and Congress are trying to achieve. How are the Europeans doing? The S&P 500 is down 48.76% from a year ago; the FTSE Eurofirst 300 is down 49.11% (source). Our unemployment rate is 8.1%; France and its overseas departments have an unemployment rate of 8.2% (source). France is supposedly the healthiest of the European economies.

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I was talking to one of my pilot friends yesterday. He was the CEO of a public company for 20 years and now serves on the Boards of several big firms. I asked him whether he thought there was any prospect of an economic recovery. “I think we’re more likely to see a Politburo down in Washington and all of those guys wearing fur hats.”

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This evening’s New York Times was worrisome. An inset box showed that the S&P 500 had fallen 4.25 percent for the day, wiping out roughly a year of investment returns. A few months ago this would have been the top story. Today, however, it did not even make the front page. There were no articles talking about the collapse of the stock market unless you clicked into the “business” section. Investors in the U.S. economy being destroyed isn’t news anymore.

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I thought it would be nice to take a moment to thank God and our government for spending nearly $2 trillion of our tax dollars on TARP, auto industry rescue, and stimulus. Imagine if our politicians had not acted decisively. We might have seen the following:

• stock market down 50 percent
• businesses terrified and firing 500,000 workers per month
• insolvent banks
• domestic car makers near bankruptcy and begging for loans

Whew!

[One could, of course, argue that without the expansion of Big Government, the stock market would have fallen 98 percent and one guy in Saudi Arabia plus the Chinese government could have scooped up 100 percent ownership of America’s 5000 publicly traded companies, but that doesn’t seem entirely plausible as most of these companies are still profitable.]

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