Sunday, 5 July 2009

Stimulus Version 2.0

Another stimulus package? Well...around two weeks ago, there was a slight hint from the White House. I suspect today, from Sunday political chatter on TV, there will be another hint.

There are several problems converging right now. You have the carbon bill which is sitting in the Senate and simply being discussed. Obama wanted it passed quickly at first, but now admits that at least part of the original bill is a serious issue in trade relations. So this entire bill may sit around for a month.

Then you have the California "we-are-out-money" episode coming up shortly (maybe by the middle of July). How much is enough to get them by for six months? I'm guessing around thirty billion. Call it a loan or a doesn't matter....we will have to fund them.

Behind California....there are at least thirty states in various situations of jeopardy. I'm thinking at least forty additional billion will be added up on the plate for them to get by.

Then we've got the health care package that is starting to have a bad smell to it. The cost is in debate and this $1000 "tax" for those who don't want health care.....starts to make this effort a joke. Who pays the final bill?

Then we turn to the US economy in general. The $750-odd billion given in January....basically had no real effect. You can ask experts and senators....but frankly, no one is explaining why it hasn't worked.

Behind the scenes....I would take a guess that Pelosi has a dozen folks working quietly and secretly on this package already. Maybe they've been working on this since March, because they knew stimulus package version 1.0 would be a failure. Maybe they have another group working on stimulus package version 3.0 as well. Who knows....maybe there is even another group working on stimulus package version 4.0.

The curious thing is that this money came in a one-year period to be spent. You could have given every adult in America a check for $6,000 and likely had the same effect. Well....except we would have gone to Vegas for a week or bought a new fishing boat.

At some point, the amount of debt that the government will hav generated and the amount still left in the pipeline (like the carbon episode and the healthcare episode)....will be so much....that we may just destroy the banking system....without any help from the dimwit Harvard finance guys or Barney Frank.

So where should we put stimulus package version 2.0? A smart guy would simply turn it into a middle-class tax cut of several thousand dollars. But these folks with Pelosi won't be thinking that way. So I'm already guessing more bridges, more paint-shaking machines, more university projects, and more boating docks in Florida.

So its another day in America.