The "stimulus"

It defies logic to think that the government can stimulate the economy by spending nearly a trillion dollars it doesn't have. If our federal government had an extra trillion dollars it didn't need then it could and should return it to the taxpayers from whom the government got the dollars. That would stimulate the economy.

But the federal government, any federal government, doesn't have an extra trillion dollars. It must borrow the money or create new money. By borrowing the money it's removing money from the economy, which is the opposite of stimulative. Accordingly, borrowing the money and then spending it on a "stimulus" package is a wash. The borrowing and the spending might not occur at the same time so there might be a time when more had been borrowed than spent or vice versa but otherwise the two things are a wash. Keynes had a theory about a multiplier effect but it was theory, not fact.

Suppose the government doesn't borrow the money but creates new money to spend instead. Obviously, that puts more money in circulation but it doesn't change the total value of all the money in circulation. It just makes each dollar worth less, which is known as inflation.

By insisting that our economy is headed for catastrophe if Congress doesn't give him a "stimulus" bill, Obama risks discrediting everything he says. If we can't believe Obama about the "stimulus," will we believe him when he says in the future something like "terrorists threaten the U.S. with catastrophic loss of life and property if we don't protect ourselves against them" or "Iran could cause catastrophic losses if it obtained nuclear weapons capabilities."