The Multi-Trillion-Dollar Free Lunch

The Multi-Trillion-Dollar Free Lunch
Why government stimulus will only lead to economic famine

Joel Bowman
Reporting from Taipei, Taiwan...

Milton Friedman got it wrong; there IS such a thing as a "free lunch." Just ask any mainstream economist.

These folks relish the opportunity to beguile anyone - whether or not they are possessed of the time and inclination to listen - with a litany of magic public programs, all designed to serve up the gratis grub. The unspoken dilemma, alas, is that "free" lunches are usually so expensive that neither nation nor individual can ever reasonably hope to afford them. Invariably, as those in the European welfare utopia are lately discovering, "free" lunches often end up costing unsuspecting diners their breakfast and dinner money, too...just as the free-market economist had warned.

Deficit spending...market meddling...price controls...subsidies...bailouts and boondoggles of every stripe... You name it; the teleconomist has an ill-conceived sermon for credulous acolytes everywhere. Let's start at the end of the beginning of the end...

Having totally misread the very real crisis of overconfidence that propelled the US economy headlong into the current and ongoing economic correction in the first instance, would-be do-gooders and vote-buying politicians have since wasted no time in treating what they then misdiagnosed as a "crisis of confidence" in the markets. Their first mistake in treating the patient, as usual, was to ignore the fundamental precept of medicine: Primum non nocere. (First, do no harm.)

More maniac with machete than surgeon with scalpel, Washington, DC has poured trillions of (taxpayer- and as-yet-unfunded) dollars worth of nonsense nostrum onto a wound that, for all intents and purposes, was self-inflicted. From the disastrous Troubled Asset Relief Program of the previous administration to the current administration's $862 billion stimulus package and beyond, it appears the spendthrifts on Capitol Hill know no bounds.

Depending on where you get your figures, the stimulus syringe has thus far pumped some $10 trillion of elixir into the veins of the United States economy. And for what? Let's start with Obama's Jobs Program. His Organizing for America website, claims that the American Recovery and Reinvestment Act will "save or create 3.5 million new jobs."

Even taking last month's goosed jobs report at face value (a generous concession given that, after accounting for birth/death "adjustments," temporary census jobs, "bad weather" and those magically disappearing "discouraged" workers, the economy actually LOST jobs), the unemployment rate is still officially hovering a shade below 10%. Unofficial figures - i.e., reliable ones, such as those from John Williams' Shadow Government Statistics - have it at more than twice that (21.7%).

The same administration gloats that its new housing program "has stabilized the market, preventing more foreclosures and helping millions more re-finance at historically low mortgage rates."

But data supplied by RealtyTrac shows that that foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on almost a million properties in the first quarter, a 7% increase from the previous quarter and a 16% increase from the first quarter of 2009. The Congressional Oversight Committee, charged with monitoring TARP activity, yesterday described the administration's Home Affordable Modification Program, which has a budget of $75 billion, as being totally ineffective.

Meanwhile, as "subsidy program this" and "stimulus measure that" have failed abominably, the nation has run up record debts and deficits. The national debt stands today at an unprecedented $12.8 trillion dollars. That's over $41,000 per person, or more than $116,000 per taxpayer. Total Debt (including that held by individual households, businesses, financial institutions and local, state and federal government) now exceeds $55 trillion, or just over 180,000 per person. Unfunded liabilities (as yet unallocated funds to pay for Medicare, Social Security, etc.) are fast approaching $110 trillion. With total national assets weighing in at just $72 trillion, one might fairly say the United States is "underwater" on its loan obligations.

Add in another 40 million Americans on food stamps and a debt-to-GDP ratio of 89% and the cost of a "free" lunch begins to look rather steep indeed.

A thoughtful person might be forgiven for asking the obvious question here: Why is the government - i.e. the least productive institution in any economy - charged with the duty of stimulating anything? Everyone knows DC is a veritable cash vortex. When it comes to vacuuming scarce resources from those most in need, nothing sucks quite like bureaucracy.

So how do they get away with it? Why are people sending in their tax dollars instead of rioting in the streets? Why do swindled citizens applaud trillions squandered on programs to buy small business cyanide and economy-sized nooses? The trick, as usual, lies in a carefully plotted economic public relations campaign. It's in the way these schemes are sold.

As George Orwell once noted, "Advertising is the rattling of a stick inside a swill bucket." People seldom riot while waiting in line for a free lunch. Recognizing this, politicians and their lackey economists go about convincing people that a nation really can spend its way to riches.

In this manner, the Keynesian economic theory of interventionalism enjoys a growing popularity among those it will eventually ravage. The hungry man will do well to remember, therefore, that the only thing a universal "free lunch" can reasonably guarantee is mass starvation.