VOODOO STIMULUS

"The American consumer led us out of previous recessions with some semblance of gusto. They're too old to do it now."

Tax revenues are down, not a surprise to anyone because the economy is doing poorly. Unemployment is over 10% in some states (such as Oregon) and people are not getting raises, businesses are sheltering their money and even closing down parts to survive. That means less tax revenue, as this story in USA Today by John Waggoner points out. However, there's a line in here that just made my jaw drop in disbelief:

The White House thinks that tax revenue will increase in 2011, thanks in part to the stimulus package, says the report from AIER, an independent economic research institute.

I understand that the AIER isn't supporting or agreeing with this statement, and I understand that the White House wants to spin the "stimulus" package as best as possible but... let me see if I have this straight.

• The US Government takes money from people
• The US Government gives part of it back as "stimulus spending"
• The US Government then taxes some of that money

And they think that's going to increase government revenues? But wait, there's another possible scenario:

• The US Government pretends it has several trillion dollars which do not exist
• The US Government gives people some of that money
• The US Government then taxes a portion of that money

Well look, they've just created money! Except... printing money to hand to people equal in value to money that has been generated by a free economy. In fact, printing money without anything to back it is ultimately worth nothing. All it does is reduce the value of all the money already in the system by a portion equal to the amount printed. If you have 100 dollars worth 100 units of market effort and productivity then print 100 more worth nothing... all those dollars dropped in value.

So by printing money that is worthless, the US government is actually reducing the value of the dollar and further reducing tax revenues. The American Institute for Economic Research (AIER) also had this to say in response to the White House's absurd spin:

"Even if that does happen, the administration also projects that government spending will be so much higher each year that large deficits will continue, and the national debt held by the public will double over the next 10 years."

Even if, by some miracle, all economic and mathematical reality is defied and the stimulus package somehow increases government revenues... the resulting debt will erase any such gains by many many times over.