Sunday, February 08, 2009

After the Stimulus Package Passes Who Really Pays?

There have been a lot of questions about this stimulus package, but there are a few questions that nobody wants to ask. After the Stimulus (Spendulus) package passes into law: How do we pay for it? Who actually pays? and . . .How will this affect the average American’s pocketbook?

The obfuscating words continue to fly out of the mouths of most stimulus supporters, not the least from the leader of the package, President Obama. We’ve heard all of the pro stimulus mantras several times daily. It’s absolutely necessary to save our economy. We are in dire straits. If we don’t pass it, we might never recover . . .

But nobody wants to address the most important questions. How do we pay for it? Who actually pays? and . . .How will this affect the average American’s pocketbook?

The scale of the problem was addressed by Nelson D. Schwartz, who wrote an article on January 29th in the New York Times “Global Worries Over U.S. Stimulus Spending.”

According to Schwartz, most of the world’s economic gurus believe that the package could eventually reach $1 trillion over two years and the long-term “fallout from increased borrowing by the United Stated government” could drive up inflation and interest rates around the world. Printing more money isn’t the answer because in the long run “that could force long-term interest rates higher and drive down the value of the dollar.”

The article points out that one way or another there will be an “avalanche of Treasury debt needed to pay for the plan on top of the bailout measures approved last fall, like the $700 billion Troubled Asset Relief Program, or TARP.”

To be sure, Congress and the White House will ultimately need to refill the government’s coffers, but how they might do that is barely on the radar screen in Washington at this point. . .

. . .Niall Ferguson, a Harvard historian who has studied borrowing and its impact on national power. . .now estimates that some $2.2 trillion in new government debt will be issued this year . . . “There is no way you can have $2.2 trillion in borrowing without influencing interest rates or inflation in the long-term.” . .

“It’s huge,” Mr. Roach, the chairman of Morgan Stanley Asia, said. “President Obama has now laid out a scenario of multiyear, trillion-dollar deficits.”

The stimulus is widely expected to pass, but once it does, Mr. Roach said the focus would shift to “who foots the bill and what is the exit strategy. We don’t have the answer to either question.”

Ok we get it. Trillion-dollar deficits for years to come but someone please tell us, How do we pay for it? Who actually pays? and . . .How will this affect the average American’s pocketbook?

The short answer is a non answer. Congressional supporters say “Let’s just talk about borrowing from foreign governments.” They don’t want us to face the painful reality of the eventual pay back. So we will just borrow the money for now. And it looks like we will just borrow it from China!

Here’s an excerpt from what Matt Cover of CNSNews wrote in “Democrats Have Mixed Opinions on Borrowing Money From China to Pay for Stimulus.”

House Financial Services Committee Chairman Barney Frank (D-Mass.), told that he doesn’t see “a problem” in the U.S. borrowing money from China for the stimulus. . .

As of November 2008,the People’s Republic of China was the largest single holder of U.S. debt at $681.9 billion, according to figures released by the U.S. Treasury Department. China, in fact, holds 10.8 percent of all publicly held federal debt.

The communist nation has increased its share of U.S. federal debt by $223 billion since November 2007 and by $95 billion since September of 2008.

Ok I get it. We will just borrow the money from Communist China and sooner or later we will have to pay the piper in one way or another. And when that happens, many of us will still be asking: How do we pay for it? Who actually pays? and . . .How will this affect the average American’s pocketbook?

Finally a little honesty! An article by Tom Raum of the Associated Press, “WHO GETS WHAT: Taxpayers will pay stimulus costs,” points out what Congress obviously hopes we will overlook.

Raum says that we going to be paying higher taxes, paying higher interest rates, and most likely receiving reduced government services!

While lawmakers and economists debate whether the gargantuan stimulus package grinding through Congress will work, one thing is certain: It will create a hefty increase in the federal debt.

And that will affect us all directly for years, as well as our children and possibly grandchildren. Even if it succeeds in producing enough jobs and consumer and business spending to end the recession, it could lead to a combination of higher taxes, higher interest rates and possibly reduced government services down the road. . .

If the stimulus package and government industry bailouts work as expected, the surge in federal spending and tax relief will be temporary. When the economy recovers, tax revenues will rise and government social-service spending should moderate. But even if annual deficits return to more normal ranges, the cost of the stimulus package and related measures will long be embedded in the national debt. . . .

Not including new stimulus, the Treasury Department projected that interest payments on the federal debt alone would be about $450 billion this budget year. The stimulus package will add roughly $40 billion more a year. . .

Interest on the debt has already become the fourth largest federal spending item behind Medicare-Medicaid, Social Security and defense costs. . .

The U.S. debt now in the hands of foreign governments — primarily China, Japan, Britain and Arab oil-producing nations — is about a third of the total, roughly double that of a decade ago. . .

Allen Sinai, chief economist of Decision Economics, a Boston-area consulting firm, suggested the stimulus package still may not "be enough for a real recovery this year." He said it will take time for consumers to adjust "after having overspent, overborrowed, undersaved for years and years."

Following a political discussion with a friend yesterday he emailed me his notions of what just might happen. It’s just a guess by an average tax-paying citizen, but so far, nobody in Congress has dared to offer any ideas on this subject.

So, you were wondering about how they are going to pay for it all.... here are my thoughts.

1. Tax audits of middle class. Simply go back and hit as many people as you can for some "problem". Figure most people will pay things rather than fight (who has the money for that). If you simply hit 1,000,000 for $10,000 in fines, that is 10 Billion dollars. Now that this pays for it, but I’m sure that it keeps the interest at bay. If you took that to 10 million families, then you would have 100 billion.

2. Cut defense spending. What did Clinton do? He not only balanced the budget, but left a surplus... how? Some of that was shrinking the military. Cutting other programs will be in order as well.

3. The goal has to be to increase the tax base .... so legalizing illegals, or doing something else... but the wider the base, the more money

4.Final option that I can think of.... by nationalizing industries, the government has shown it can make money. While I don’t agree with this concept, many nations are doing this at some level. Remember, the issue with business is, are you going to be around tomorrow? If the government is backing them, then the answer is yes.

Well it looks like my friend has hit the nail on the head with his #3. An article today in NumbersUSA suggests that the Senate might go through with plans to give stimulus jobs to Illegal Aliens.

The feds' monthly report was even worse than expected: 598,000 jobs cut in January. And, yet, Senate leaders have still not given permission for a vote on a Stimulus Bill amendment that would keep illegal foreign workers from getting jobs created by the massive taxpayer effort.

How many Americans have to lose their jobs before they are given priority over illegal aliens and the outlaw companies that hire them?

So  How do we pay for it? Who actually pays? and . . .How will this affect the average American’s pocketbook?I think you get the picture and it isn't very pretty!


  1. We're all going to pay, as will generations to come. This is a disaster.

  2. ah yes..great minds think alike..I posted as well..what a disaster!!

  3. Other countries will continue loaning to us or buying our debt. Pay day will come soon and when it does, they may want payback in a way that America has never even imagined. It won't be pretty.

    Debbie Hamilton
    Right Truth

  4. Great post, i must say.
    this blog make every one to think about it. No one can imagine that a great disaster is coming to us slowly but heavily.
    You really make me to think about it seriously after reading your post.
    keep posting and sharing such information.

    Millionaire Maker