The Commerce Department will release the preliminary estimate of third quarter GDP on Thursday and the consensus expectation is for a positive growth rate of 3%. Considering what has been spent on behalf of economic recovery I would sure hope that we get something north of 3%. TARP took roughly 5% of GDP from the private economy and passed it on to the financial and auto industries. The stimulus bill took another 5% of GDP from the private economy and passed it out to a variety of constituencies apparently chosen from a Democratic Party campaign contribution list. If the Keynesians are right, the spending of this 10% of GDP should be working some wonders right about now through the magic of multipliers. . .
Steve Rattner, the Obama administration official in charge of the auto bailout, said last week that they were shocked - shocked! - at the poor management they found at GM and Chrysler. Really? Did it take a car czar to figure out that GM and Chrysler were poorly managed? I would think losing billions of dollars would have been a clue but then I’m not a hot shot hedge fund manager like Rattner. . .
I’m sure there are some good things in all this spending but the basic bet of government spending as a recession cure is that 535 politicians, heavily influenced by lobbyists, can make better spending decisions than the other 220 million adults in the US. I just find that hard to believe.
For evidence I offer the following observation. I live near Black Point marina in Miami and I often head out there to watch the drunks launch and retrieve their boats at the ramp. . . Anyway, a few months back, I started to notice a lot of new golf carts using the bike path out to the marina. Until a few months ago I’d never seen one so I got curious. In talking with one of the drivers of a totally tricked out model, I learned that the purchase of this vehicle was so heavily subsidized that the total cost to the driver was less than $500.
It turns out that the American Recovery and Reinvestment Act, otherwise known as the “stimulus” bill, included a tax credit for the purchase of electric vehicles and someone convinced the government that golf carts should qualify. And so, I have apparently been purchasing golf carts for my neighbors which they drive on the bike paths, also built with my tax dollars by the way, endangering those of us who are trying to use them for their intended purpose. I’m sure the golf cart manufacturers are ecstatic about this, but is this really how the US economy will lead the 21st century global economy? Through the domination of the golf cart industry? Really? The shape of the fellow behind the wheel of the golf cart I purchased involuntarily would seem to indicate that the purchase of a bicycle would have been more beneficial for him and our future health care costs. Stimulated is probably not the best way to describe my mood upon learning of the great golf cart tax credit.http://alhambrainvestments.com/tarped-and-stimulated/