NITA LOWEY LOVES JOHN MAYNARD KEYNES

Voted YES on the Economic Stimulus Act of 2008
(Jan 2008)

Total cost: $152 billion

This law provides for tax rebates to low- and middle-income U.S. taxpayers, tax incentives to stimulate business investment, and an increase in the limits imposed on mortgages eligible for purchase by government-sponsored enterprises (e.g., Fannie Mae and Freddie Mac). For this article, I will be focusing on the effect of the tax rebate on the economy.

The justification for this bill and in fact, all government spending, relies on the principles of the Keynesian Economic Theory. It states that government stimulation and control of the economy is necessary for its general health. In this bill's case, by increasing the money supply and sending everybody a check, people will be encouraged to buy things and, as a result, stimulate the economy. Sounds good, right? But it is this injection of new money into the market system, even when directly sent to lower income individuals, that creates artificial bubbles of prosperity resulting in a greater depression.

When people decide to spend a stimulus check in the market, they create a demand for items that they would not have usually purchased. As a result of this increase in sales and profits, entrepreneurs begin to reinvest the new money into their own store in an expectation to meet future demand. By this time, however, all of the stimulus money has been spent and the store owners are left with an overstock of items that people are no longer willing to buy. Entrepreneurs have now wasted precious capital and resources, and must sell their products at a loss only to eventually go bankrupt. That is, unless another stimulus bill is passed, which inevitably happens.

Nita Lowey's unwavering support of stimulus packages, like this one, leads to a constant injection of new money into the market. This not only destroys businesses, but also destroys the value of the dollar. She does not understand that real growth in an economy comes from savings. An increase in savings, increases the supply of lending capital and lowers interest rates naturally. It is at this time that businesses should be investing in new technology and products.

It is time that Nita Lowey is replaced by someone that understands the importance of a free market system and that will allow our economy to actually grow.