I feel real bad about this Post because Strauss-Kahn is one of the intelligent leaders existent in a field increasingly unnoted for such. I must go back to basics here. We must start at the fact that no matter how large an economy may have become, it exists in a spectrum of limited Capital and Resources. This means that the levels of Stimulus must be limited, else all Price schedules within the economy will become skewed; None will reflect actual economic conditions or the scarcity of resources involved. Study of that Notion will eventually reach the Understanding that levels of Stimulus must float, said levels being inverse to the productivity of the economy. This means that Stimulus must decrease in the face of economic performance, and it is time for current Stimulus to melt before We lose rationality in market pricing.
The whole principle behind Stimulus is Government absorption of lost Consumer Demand by its own Spending; the Concept being more Spending than Taxes. Any practical political scientist will inform that this is a very dangerous ideation for Politicians, individuals relatively unrestrained by any inhabitation with principles of budget management. The real problem derives from the matrix of politics itself; the conflict between Liberalism and Conservatism eventually evolving into Spending which satisfies both parties, which means Each gets exactly what they want, even though it means intrinsic deficit. This trend finds reenforcement by a Judicial position that all benefits must be maintained, once granted. The Reader might begin to understand that Government will always fail of budget procedure, and it will get progressively worse until some collapse will occurs. The trouble here consists of the huge magnitude of the system failure necessary to return to normal.
There stands no real Solution to the above problem. Politicians show real reluctance to control themselves, and Voters have an irritating habit of eliminating Those who would hold to financial restraint. One could pass Constitutional amendments at both National and State levels prohibiting Government assumption of debt, but this is a curtailment of financial practice which would bring Government to a standstill; sheer intermediate transfers insist on some level of debt, as Accounting procedures remain too slow to fund suppliers who have to uphold short-term Pay Schedules. I have contemplated a system where all Government Spending must be funded by debt, the Treasury is restrained from devoting Tax revenues to anything other than Government debt, and Government is restrained from manipulating Interest rates. This system would constitutionally prohibit Government paying any Interest above a certain limit, and this would automatically dictate an increase in Taxation as Interest rates rose. It is specifically counter to the entire idea of Stimulus, though, and Opposition to such a system would be extreme. lgl