Another Day, Another Stimulus Hose Job

Well, here comes another “stimulus package”. This time it is $75 billion for troubled mortgages. Of course, there is no reduction in mortgage rates for anyone who is currently paying their mortgage on time. Is anyone else seeing the trend in all of these stimulus and bail out packages? Let’s see if we can spot a common theme in these packages.

In the case of the bank bail out, the Treasury Department takes money from the general revenue fund and “infuses it” into banks that are in trouble. Banks that did not engage in questionable lending practices do not receive any help and just get to pay their taxes on time. The successful banks are having their money taken to support the unsuccessful banks. It seems a little counterproductive. With the Federal Deposit Insurance Corporation guaranteeing that depositors would not lose money, banks that go under would be replaced by other successful banks rapidly and individuals would not lose any deposits less than $250,000.

In the case of the automobile manufacturers, there is no help for any of the successful companies in Tennessee, South Carolina, or Texas. The provision to give tax credits for all automobile purchases was stripped from the bill. Therefore, the only help is going to the automobile manufacturers in Michigan which have United Auto Workers Union plants. What a coincidence. Therefore, tax money from auto workers in the south who earn about $45 an hour is being used to prop up wages for union auto workers in Michigan who earn about $71 an hour. The successful companies are having their money taken away to support the unsuccessful companies. If the Michigan-based automobile companies stopped making cars, would everyone stop driving? I think not. People would buy cars and trucks from the more successful and better-run companies. The Democrats say the answer is more union involvement when the very millstone around the neck of the auto industry is the United Auto Workers.

In the case of the bail out to the states, tax money from states with responsible governments like Texas is used to bail out irresponsible state governments like California and will only encourage more bogus spending and will delay the state legislature making the appropriate decisions to balance their spending and income. California refuses to secure the Mexican border and continues to provide free health care and public education to illegal aliens. Should it surprise anyone that their budget is screwed up? The successful states are therefore being screwed to reward the unsuccessful states. Irresponsible governors like Schwarzenegger are not held responsible for their actions.

In the case of the mortgage bail out, tax money is being used to refinance mortgages of people who, in many cases, should have never qualified for a mortgage in the first place. Will those people suddenly be flush with money? What is always failed to be mentioned is that the mortgage lenders will have to make their money back somehow. Let’s see… how will they do it? They will increase the rates on newer mortgages. Who will receive those mortgages? Only those people who are well-qualified will receive them because the mortgages lenders have been burned once and won’t do it again. Therefore, money will be taken from successful home buyers to bail out unsuccessful home buyers. At least this one has a logical argument in that preventing foreclosures reduces inventory of existing homes and stabilizes home prices. It does hurt the rental market. In listening to President Obama today, to his credit, it seemed that at least someone has put some thought into this package. That is a refreshing change from "You have to sign it now or the Earth will explode" spending packages.

Did anyone notice that Senator Harry Reid snuck a hand-written amendment of five billion dollars in the stimulus bill for a light rail system from Los Angeles to Las Vegas? Bernie Madoff is a small-time operator next to Harry Reid. The worst part is that no other Senator will point out how crooked that is. Five billion dollars without a hearing, without oversight, without anything but a pen. It makes you want to vomit.

The common thread throughout the processes is obviously to reward the unsuccessful and sometimes criminal at the expense of the successful and responsible. It is economic redistribution which rewards bad behavior. In time, people who are responsible will either stop producing because it won’t be in their best interest to produce or everyone will jump on the bandwagon and just start behaving badly to get on the gravy train. The problem there is that someone has to pay for that gravy train because it is a government-sponsored Ponzi scheme. When enough people stop putting money in, the whole thing will crash. That is where we are heading with these “stimulus” packages. All they had to do was stabilize the housing market and let people keep more of their money and the problem would have corrected itself. Every time the new administration interferes, the stock market dips lower because smart business people recognize where this is headed. It is nice to finally see some effort to do something about housing. In this case, it seems the right thing to do.