Government can't create stimulus without taking money from citizens

What matters is what something is, not what it is called. Shakespeare wrote this line for Juliet, "What's in a name? That which we call a rose by any other name would smell as sweet."

Of course, he was referring to Romeo's last name, but the phrase has become a common symbol of how language is easily distorted. So it is with the current "economic stimulus" package being debated in Congress.

A recent Gallup poll shows that the stimulus bill is supported by 52 percent of the pubic.

But what if it was called something else, something that is closer to what it actually is?

How many would support the "Bill to add $900 Billion to Government Debt"? I suspect the number would be significantly less. How about the "Bill to Increase the Indebtedness of Every Family of Four Americans by $12,000"? Even fewer, I suspect.

Just because it is called a "stimulus" bill, doesn't make it so.

Government has no money. Before it can spend one dollar, it must first tax one dollar, print one dollar, or borrow one dollar (borrowing is the promise to tax or print in the future). There is no intent to tax it, so we are left with printing more money now and in the future. How can the printing of pieces of paper possibly stimulate the economy? It didn't work for the Weimer Republic in post-WWI Germany. It didn't work for President Jimmy Carter in the 1970s, and it won't work for President Barack Obama in 2009.

Put another way, the real value of money belongs to the citizens, and is determined by their productive ability. How does shifting money from citizens to the government, to spend it back on the citizens, make the citizens better off? This is known as "Keynesian economics", and has been accepted as thoroughly debunked by all but the most stubborn university professors.

They would have you believe that paying a person to dig holes, and paying another to simultaneously fill them in, would increase "national income." It does indeed increase the income of the pothole diggers and fillers, but only at the expense of other productive citizens. No net national income is created. To believe otherwise is to believe in a free lunch. There is no such thing. In fact, it can be reasonably argued that national income is destroyed by this process, through the perverse incentives and attendant unanticipated consequences.

While there is some needed infrastructure spending in the current stimulus bill, it is laden with pothole filling, also known as "pork spending". I'm shocked, shocked, I tell you, that government would do such a thing.

Here's another way to follow the logic of government "stimulus":

Q. What is an Economic Stimulus Payment?

A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?

A. From taxpayers.

Q. So the government is giving me back my own money?

A. Only a smidgen.

The stimulus bill is being touted as creating jobs. But we need more real production, not more potholes. The Soviet Union had lots of jobs. We could create lots of jobs by banning tractors and requiring all food to be produced with horse-drawn plows. If that didn't work, we could create more jobs by banning horse-drawn plows and requiring all food to be produced with shovels. If that didn't work, replace all shovels with spoons. It goes on and on until we are all using a digging stick just to survive. Lots of jobs there. No unemployment at all. But also very little real production - i.e. very little real income.

Since it is our money that is being spent in the first place, to support the "stimulus" bill is to believe that government can spend it better than we can. Would you support a bill called "The Government Is Smarter than You Bill"?

I thought not.

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Prentice, of Colorado Springs, is with the Economic and Civic Literacy Project of the Limited Government Forum, a senior fellow at the Independence Institute and an adjunct scholar at the Ludwig von Mises Institute.