Stimulus? How?

I know that the several stimuli that have been put forth since the collapse of the markets are old news. The proposed stimulus that is winding it's way through Congress as I write this will, in all likelihood, pass, and the money will be inserted into the vast economy, never to be seen again. Stimuli are not political, at least not in usual sense. They are usually vomited forth by whomever is currently in (and wants to stay in) power. The so-called TARP stimulus was put forth by the Bush administration, making it the first of many during this economic down cycle. I simply want to put in my two cents as to the nature of government stimuli and it's harm to the economy as a whole, and to those who lack political power in particular.

The general concept is that the injection of large amounts of funding into the general market by the federal government will serve to buoy the market and the economy as a whole, giving a needed boost to the economy and stopping a free-fall in the general market. I know that this explanation is simplified in the extreme, but will do for our purposes.

I have a few issues with the concept. These are simple, general principles, but I think that they are valid.

1. In order to place $1 into the economy, the government must first procure $1 in funds. Since the government operates as a zero-sum entity, in theory at least, they do not have $1 that is not already committed to other purposes. They can remove $1 from another purpose in order to place it into the economy, but they do not, as a rule, do this. They can borrow $1, but anyone who borrows money knows that in order to borrow $1, one has to service (pay interest on) this debt, and eventually one must pay it back. They can simply print $1, but when they do this, they reduce the value of all the other dollars in existence by a percentage equal to $1. This is called inflation. Finally, they can confiscate $1 from certain citizens in order to make $1 available to other citizens. This is called taxation. Simply put, the government cannot stimulate the economy by interjecting $1 without first removing $1 from the economy. Coupled with the cost of actually doing this makes the concept of government stimulus a joke, if one were to describe it kindly.

2. A government stimulus is executed by humans. Humans decide from whom they will confiscate funds and to whom they will give the aforementioned confiscated capital. Certain groups and individuals will suffer as the result of government stimulus, and certain groups and individuals will be given an advantage. With TARP, Lehman Brothers was allowed to fail, while Goldman Sachs was helped to survive. Both companies were similar in nature and size. Goldman Sachs has had close relations with both the current and past administrations, and it is possible that these relationships made all the difference. To disclaim personal relationships as a factor is to be overwhelmingly naive. Realistically, companies that curry favor with the party in power will probably be viewed favorably when it comes time to doling out stimulus funds, and companies that stand in opposition to said party will probably see little in stimulus funding. Human nature dictates that most people with power over the purse will use this power to help friends and punish enemies. A cursory look at government funding in general proves the truth of this theory.

3. Interference with failure is as distasteful to the free market as is interference with success. Companies fail, usually because they did not do business in a proper way, or because what they do simply becomes obsolete. This is a natural function of the free market. Should we have stopped the natural death of the adding machine by barring Texas Instruments from manufacturing the calculator? Financial markets tend to weed out weak segments of industry and reward good planning and quality financial stewardship. This natural evolution is magnified by downturns, but businesses fail in the best of times. Government stimulus serves to build a false economy, sort of in the way that unions tend to protect under qualified and difficult workers.

I trained for years to become a journeyman in an industry that was decimated by the introduction of a computer that would do the same thing I had done by hand. I had to find something else to do in order to provide, food, clothing and shelter for my family. I found something else to do and went on. Such is life in a free economy. Maybe GM should do the same thing.