Stimulus did not work (Great advice from a letter to the editor series)

I read this letter below from the Arkansas Democrat Gazette on August 13,  2011:

Time to stop insanity

The president has told us for 2 1/2 years that he is focusing “like a laser” on jobs. Well, looks like it’s time to replace this “Jobs Guy” with someone who has actually had some experience running something. We have given him a chance. Yes, he reads a pretty mean TelePrompTer, but his cockamamie Keynesian economic theory that only works in the ivory towers of academia has proved itself wrong again. We have lost a net 2.5 million jobs since his inauguration, and the few jobs the Obama administration has created have cost the American taxpayer about $250,000 each, according to the Congressional Budget Office. And how about his explodingthe national debt? To all the happy parents who have just welcomed their new baby into our world, here is the bad news: Your baby’s share of the national debt is $46,156.05 as of August 2 and is still climbing. Both Republican and Democratic politicians are responsible for our national debt, which now tops $14.3 trillion.

In the recent debate regarding raising the debt ceiling, the only grownups in the room were the Tea Party congressmen who tried to force a vote on a constitutional amendment to require the federal government to balance its budget like every state and city in the land is required to do. In the 2012 election, I suspect the Tea Party of Republicans, independents and Democrats will finally demand that politicians stop this insanity. God help us if they don’t.

RALPH C. PATTERSON Bella Vista

Mark Pryor has supported about every bill that President Obama has pushed. The stimulus was probably the biggest budget busting bill so far. Did that help get our economy going? Not according to Kathy Fettke:

President Obama is urging Congress to raise the $14.3T debt ceiling or else, he warns, the U.S. would be forced to default. Perhaps our representatives need a little lesson on good debt vs. bad debt.

Good debt gives the borrower the potential to create more money. Bad debt gives the borrower something he can’t afford but wants anyway.

In real estate, for example, good debt might be a loan used to purchase an investment property. The borrower acquires an asset that creates income. That income is used to pay off the debt. The borrower then owns an asset free & clear that continues to produce income, long after the original debt is gone.

Bad debt serves a need for instant gratification by borrowing income from the future.

An example of bad debt is getting a loan to purchase a new car. The car is worth less the moment it’s driven off the lot. From day 1, the borrower owes more than the car is worth, and the “asset” doesn’t create monthly income. It becomes a liability, unless it is used as a rental, trucking or any other profitable business use.

Is Obama asking for more good debt or more bad debt?

Politicians are expert wordsmiths who can spin facts into a slick campaigns designed for getting what they want. That’s why President Obama and the money magicians at the Federal Reserve are preaching that more debt would help the economy.

Has their plan worked so far? Let’s take a look:

During the past 5 years, the federal government has borrowed 4.5 trillion dollars to stimulate the economy. That’s a 40% increase in government debt! 

Did the stimulus work?

Political spin doctors say it did, claiming that US GDP climbed 1.9% in Q1 of 2011. But how much did that increase cost us?

We spent $4.5 Trillion over 5 years to create $690 Billion in GDP growth.  Doing the math, that means the US will receive 14 cents for every dollar of debt incurred to stimulate the economy.

With losses like this, the “stimulus” plan is really a bad debt deal – one in which borrowing results in more liabilities, not assets. And now our leaders are trying to talk us into more of it.

Just say “NO!” to raising the debt ceiling! It’s not just bad debt, it’s ugly debt.

The cure for bad debt is pretty simple and boring: cut spending and increase income. If you can’t do either, you default.

Borrowing just to keep up with interest payments and avoid default is reckless and only exacerbates the problem. It does not fix it.

Politicians must agree to cut spending. And they must avoid increasing income through taxation. As much as the general population would love to rob the rich, that method doesn’t work. Business owners who get punished for making money will stop producing and hiring.

Instead of taxing productive businesses to extended ugly government debt, offer businesses good debt so they can continue to grow.

Members of our society with solid business plans should be the ones borrowing – not the government.

Kathy Fettke is CEO of www.RealWealthNetwork.com, an educational resource for new and experienced real estate investors.

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