Better known as "the bailout," Congress passed the $700 billion Troubled Assets Relief Program last October. This program was widely criticized for its sheer volume as it nearly doubled the federal deficit for 2008.
People also wondered what else could be done with $700 billion - a figure higher than the gross domestic product of Turkey.
What did we learn from this outrageous government spending? Is it that we need to put an end to this excess? Or maybe we should just put a stop to the regulation and government interference that caused the economic disaster in the first place?
Nope. We learned absolutely nothing from the bailout. In fact, President-elect Barack Obama is about to go at it again.
Even though he's not the president yet, he's already working with lawmakers to create an "economic stimulus package" of $800 billion. Yes, you read that right - $100 billion more than last year's federal bailout. Insiders have estimated that this could push this year's deficit spending up to about $2 trillion - more than double what it was in 2007.
The package includes about $300 billion in tax cuts for the middle class and businesses, in addition to about $500 billion in new spending on infrastructure, development and renewable energy. The question is, would this stimulate the economy? And does such a responsibility fall on the government's shoulders?
Unfortunately, government spending and handouts have proven largely ineffective at stimulating the economy. The $165 billion "stimulus package" last summer that sent $600 checks to families did nothing to stop a looming recession. And "government spending" is usually just a nice way of saying inefficient allocation of resources.
Unless the spending is an equal or better allocation of the money than it would be if the money were spent by the people who earned it, the government spending is actually hurting us. And I don't trust the same people who run the DMV to properly allocate $800 billion.
Nothing about Obama's package or the one before it makes any attempt to address the causes of our recession in the first place. Government regulations which mandated low-income loans caused the housing bubble, and the federally controlled Fannie Mae and Freddie Mac undercut private competition to lead our financial sector into ruin. The federal bailouts set an ominous precedent in which bad management is federally protected.
And so Obama's solution is more government spending.
This would be like stuffing your face with five cheeseburgers. After that much meat and cheese, you're probably going to feel sick and tired.
Most of us at this point would probably stop eating, but the federal government would do otherwise. It would say that it is tired because it needs more energy, and so to get that energy would eat another five cheeseburgers. Hopefully after 10 servings, the government will finally realize its mistake.
I was under the impression that Obama would bring about change. Hopefully next week he'll change my mind, but as of now I'm thoroughly disappointed.
Johnathan Lott is a political science and economics sophomore. His column appears on Thursdays.
