LETTER TO THE EDITOR: The Illusionist: Government of United States

Written by Ankit Rauniyar Friday, 27 February 2009 08:00

The government of United States does nothing but create an illusion of development that was never there to begin with. Saving is the only cure to this economy. The recession of ’07 was only a trailer of the movie that we will see in the future. It’s primarily happening because Americans borrowed to consume and never cared to pay it back.

But are the people and the government ready to accept the fact that the party is over? No; they want a bigger, much better party and this is the reason: Obama was voted in -yet another politician who thinks the same. Obama’s stimulus package includes:

• Redistributing tax
• Investment in infrastructure and renewable sources of energy.

Obama’s plan works well for developing countries like India and China however; it will have an adverse effect on developed countries. His investment plan involves building infrastructure such as roads, schools and buildings, but these additions only create temporary jobs (2.5 million jobs). But what happens once the infrastructure building is complete?  Obama’s plan of investing in alternate resources is not all bad, but to implement and see a plan like this come to fruition will take a long time and cover a small share of U.S. consumption. All his plans require money; where will we get it? Any government’s primary source of income is tax, and distributing tax does not allow that to happen. This means that a trillion dollar budget deficit will be financed from either foreigners lending us money or us printing money and depreciating the dollar.

People think that all the government’s spending comes from government savings, but past trade deficit and budget deficit wars clearly suggests that the government has no money. The U.S. is borrowing $10.6 trillion only because we are able to convince rest of the world to lend it to us. If they stop, we stop. Every other company and state demands bailouts from the government, which needs a bailout itself. Institutions like Citigroup, Bank of America, JP Morgan and many others survived because of the government bailout. If government had let them down, as it did to The Lehman Brothers, all fake systems would have collapsed, evaporating all the savings. Banking in today’s world is an illusionary system created by the government, which runs on people’s trust, and digits are exchanged to hide the actual money. So if any of the banks face loss, it automatically drags the other associated banks.

It is time to understand the problem before it becomes a disease. Government should encourage saving and less consumption based on the limited resources, rather than discouraging it. The government’s attempts to solve the problem by intervening in the free market always bring back bigger problems.  The Obama administration will create a boom, which will be followed by a bust. His intent for change seems right and will look right in upcoming years, but in the long run he will destroy it.

Ankit is a junior studying architecture and music.