By Jeff Clark
They're supposed to provide a boost to the economy, but the government's stimulus programs are having the opposite effect.
The Fed's own statement, released yesterday, said, "Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit."
In other words, despite losing your job or having your salary reduced, and despite your housing nest egg falling in value, and despite your inability to get a loan, you've somehow managed to increase your spending.
Good job. You've done your part to improve the nation's economy. But it begs the question..."How the heck did you do it?"
Of course, we already know the answer...
Government stimulus programs allowed you to take on more debt, which allowed you to spend more money than you otherwise would have been able to do.
Think about the wildly successful "cash for clunkers" program (please note the heavy use of sarcasm). Americans all over the country drove their beat-up, old, paid-off cars into their local dealerships and drove out with brand new, shiny, environmentally friendly automobiles... and a new monthly payment for the next five years.
The program was well intentioned... Let's help some of the lower-income folks get a new car. Let's help Detroit get back on its feet. And let's improve the environment at the same time.
But like so many well-intentioned government ideas, the consequences will be a disaster.
Lower-income Americans, who really can't afford to take on debt, were motivated by the promise of $4,500 to pay top dollar to upgrade their vehicles and part with a good portion of their income for the next 60 months.
Car salesmen loved the program. There wasn't much price haggling involved. Since folks were getting paid $4,500 to buy a car, dealers didn't have much of a problem marking up the sticker price by $4,000 and then offering to throw in the undercoating for free.
The problem with this program will be evident months from now when your local handyman/housekeeper/bank teller/store clerk doesn't show up for work because his car was repossessed.
This isn't what an economic recovery is based on.
The biggest mistake, and the one the government seems hell-bent on extending, is the $8,500 first-time homeowner's credit. It's supposed to expire November 30, but the geniuses in Washington D.C. will likely extend it... and they'll likely expand it to include existing homeowners.
This is perhaps the stupidest program ever devised. Let me explain...
My neighbor's daughter, Marcie, called last weekend to share some terrific news (again, please note the sarcasm). She and her husband had just purchased their first home.
