FOLLOW THE MONEY [STUPID]!

Sometimes a strange revelation hits like a flash of lightning with an acute clarity that one wonders why it had not been noticed earlier. One of those "Ah-Hah" moments came to me as I read the latest report about the drop in consumer spending. The report details how consumer spending had been negatively affected by the run up in prices over the past few months. Of course, it is no startling news that consumers would become more guarded in their purchases as inflation begins to hit hard. The revelation came in a kind of connect-the-dots understanding that arose from the background facts in the article.

The consumer behavior was artificially boosted by the $168 Billion "Stimulus Package" passed by Congress. The receipt of stimulus payments put more cash in the pockets of consumers and, as was predicted, the majority of the public chose to spend the cash rather than put it in savings or pay down existing debt. The glitch in the process was that over the same period of time that these stimulus payments were being received, the price of gasoline skyrocketed to an average of more than $4.10 per gallon. Now that the receipt of the stimulus payments has tapered off and is ending, the price of gasoline at the pump has come down. In effect, the petroleum companies rose to the surface like fish in an aquarium at feeding time to gobble up the government largesse intended to provide economic support to average consumers. The effect of the economic stimulus is that the consumer was able to obtain roughly the same economic status (in terms of goods purchased for the family)as before the stimulus payment. With the stimulus payment spent, the consumer now has to reduce spending to the level of resources currently available. There was no "real" benefit to the consumer because the additional money received simply went to cover temporarily increased costs. The stimulus is spent and the costs now settle back down toward pre-stimulus levels.

This process of exploiting government subsidies is not unique, isolated or surprising. When the government opens the faucet to put money in the hands of consumers, there will be "enterprising" businesses ready with plans to fleece those dollars from the pockets of the recipients. Usually, the payments and the fleecing are not done on such a grand scale. For example, when government programs made educational loans available for post-high school technical and vocational training, a number of less than reputable "schools" began encouraging drop outs and other "target" students to secure government grants and subsidized loans to pay tuition for substandard or non-existent professional training. However, the recipients of the $168 Billion Stimulus Package payments number in the millions and every one of them needed to purchase gasoline.

If there were any doubts about what happened, one only needs to take the advice of an old mantra investigators use, "follow the money." Exxon Mobil just reported record profits in the billions of dollars at a time when the public pronouncements from the petroleum giants is that prices had to rise to respond to lower oil supply and increased costs of production and delivery. If those public relations gambits held any truth, then the profit margin for their operations would have been reduced rather than enlarged over this period. In fact, the enormous profits that the oil companies have been raking in, and will continue to skim, are largely the result of the governmental handout intended to help the average citizen. The economic stimulus might have had a greater impact, perhaps, if the government had given each taxpayer a share in Exxon along with the stimulus payment. And we might expect to see a portion of those profits funneled back into the campaign coffers of members of Congress so eager to press for such stimulus packages.

There was an additional push to suspend the gasoline tax for the summer months. Some in Congress and on the campaign trail contended that the proposal was just a political gimmick. Others who supported the proposal argued that it was the humane and necessary thing to do to help consumers pay for gasoline during the summer vacation period. In retrospect, the suspension of the gas tax would have only made the large oil company profits larger while robbing the Transportation budget of badly needed funds to repair and rebuild the crumbling infrastructure [roads and bridges] in the United States.

Some still predict that the stimulus funds will help the economy in the coming quarter. It is difficult to see how that will happen on the basis of a single payment that has already been largely spent to cover the run-up in gas prices that occurred. Only if you define bolstering the economy as elevating the stock price of the large oil companies can a credible prediction of any significant benefit to the economy-at-large be advanced.

Quick fixes and shortcuts are almost always very attractive and almost always a failure in retrospect. Use of government funds, that same $168 Billion, to secure projects to rebuild the nation's infrastructure would have directly resulted in more jobs for construction workers, more sales for the suppliers of materials needed for such construction and an influx of cash to the local merchants and establishments in areas where the constructions was being done. If equitable distribution were a concern, the unfortunate truth is that bridges and highways in every state are in serious need of reinvestment and repair. The drawback of using the money in a more effective way is that such use is not as "sexy" and does not result in perceived benefits that each taxpayer can actually see and feel. When election time is coming, the age old practice of "walking around money" seems to surface. And as in old times, schemes abound to fleece the voters of the dollars that they get to temporarily hold.