An Old Joke

"All I ask for is a one-armed Economist," starts the old saw. "Then, at least he won't be able to say, 'on the other hand'" (rim shot, cymbal smash). Like so many tired jokes, however, it contains a kernel of veracity. The "dismal science" just doesn't have the specificity of the hard sciences, especially when it comes to forecasting. As a matter of fact, it's not too reliable when it comes to analyzing past economic performance. To wit: equally strong cases can be made, for an against, the effect of FDR's programs on the Great Depression. So when the new President cites the support of hundreds of economists for his stimulus package, it needs to be understood that there are just as many learned economists who can make the opposite case. In other words, it might work, but on the other hand......

Our country has prospered for centuries under a private sector system that rewards industry and hard work. Among the many benefits of this system is the where withal to care for those in society unable to provide for themselves. While it is difficult to accurately determine the optimum share of private wealth that should be taken in taxes to provide for society's unfortunates, but there clearly is a point where an increasing tax burden hinders private ambition. Why work for more income if the government is going to take most of it in taxes? Inversely, lowering the tax rate encourages production.

The new Administration, to make an understatement, has been busy. It has been cranking out major programs, any one of which could take years to plan and implement. Maybe the new Administration is just that much smarter and more efficient to crank these "solutions" out like loaves of bread. Or, maybe they are just winging it.

In addition to a massive bank bailout, it has passed a huge stimulus package that may or may not stimulate the economy, but sure will provide pork for the legislators. There is also a plan afoot to solve the housing crisis which may or may not be linked to the banking crisis and unsound lending policies. Then there is the auto industry which has been deemed too big to fail, especially if the UAW is to continue to collect over-the-top-salaries and benefits. Oh, and by he way, next week they are going to reorganize the American health Care System. Amid the euphoria of chanting "Yes, we can" can be heard a thin but clear wail of realism that asks, how are we going to pay for all this? The Administration is already admitting to $1.5 trillion, but I wouldn't take the under on this puppy.

So, here it comes. Once all these new spending plans are in place, there will be an epiphany in Washington that we will have accumulated massive deficits, which, of course, must be paid. Since the only way the government can acquire money is through taxes, major tax increases are guaranteed, so that the government can rake in more dough. Unfortunately, those higher taxes will be pushing the economy the other way, thus reducing tax revenues. This being the inverse side of supply-side economics, may not be popular, in some quarters, but the record can be ignored at our peril.

The stock market is down 2% today, on a course that will negate yesterday's dead cat bounce. In addition to providing an eerie forward economic indicator, the market is also marking down the private retirement accounts of those who have worked hard to provide for their future. I'm only guessing, but I suspect that this might be a bad time to approach these folks about chipping in big time to Obama's schemes to redistribute the wealth.