Should the Democrats’ “Titanic Stimulus” pass (as I expect it will), expect a short-term boost to the economy.
But, I fear the long-term consequences. It will not lead to economic recovery, only prolong our day of fiscal reckoning.
Here’s why. Imagine, if you will, an individual who has all but maxed out his credit cards. As he pays off the minimum balance due each month, he can barely afford anything but the bare necessities. He’s been peitioning the credit card companies to increase his credit line, but to no avail. Finally, one day, with a change in the management at those companies, they agree to his request.
With a new higher line of credit, he can start spending money again, so we see an increase in his “economic activity.” But, as he spends more, he adds to the debt he has already accumulated. He’s going to have to pay it off sometime. And when he does economic activity will slow down.
So, let’s hope our elected officials think about that as they consider a massive increase in the federal credit line at a moment when the federal government is already saddled with trillions of dollars in debt.