This from Investors Daily Edge:

From the government that brought you $1,000 toilet seats and $500 hammers comes the “Great Economic Stimulus Boondoggle of 2009″. Okay, while it might be an appropriate title, that’s not what it is called. President-Elect Obama’s stimulus plan is actually called the “American Recovery and Reinvestment Plan.”

In my article last week, I brought up the distinct parallels to Ayn Rand’s book Atlas Shrugged and what is happening in the financial and political world today. In a Wall Street Journal article highlighting these startling similarities, Stephen Moore tells how Rand pilloried various acts of government futility and their “benevolent-sounding titles”.

There is the:

• “Anti-Greed Act” which is meant to redistribute income
• “Equalization of Opportunity Act” to prevent people from starting more than one business (to give others a fair chance) and the
• “Anti Dog-Eat-Dog Act” to restrict competition between firms and slow the wave of business bankruptcies.

While these acts sound far-fetched, they are not too far removed from what we have seen from Washington in recent months, such as the $700 billion “Emergency Economic Stabilization Act” and the “Auto Industry Financing and Restructuring Act” which followed.

And now we look forward to what will certainly be one of the biggest government-spending programs in history – Obama’s “American Recovery and Reinvestment Plan”.

Will it work? Will it help America to “recover”? Of course not. Let us count the flaws and discuss why this plan not only will not help America to “recover”, but will make the sick patient even sicker.

In a speech before the student body at George Mason University on January 8, 2009, President-Elect Obama stated:

“It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.”

I won’t even go into the assumption that what Obama is looking to do is provide a “short-term boost.” Do you really think this will be a quick in and out procedure? Not hardly.

But the bigger flaw is Obama’s Keynesian assumption that government can fix this economic downturn by increasing spending. In some cases, government spending can boost the economy. But most economists agree that too large an infusion of government spending ultimately slows growth, raises interest rates, and makes tax increases a certainty.

Federal government spending already accounts for one out of every four dollars in U.S. economic activity. This is the highest rate since World War II and it’s only going higher.

Let’s return to Obama’s recent speech:

“Only government can break the cycle that is crippling our economy – where a lack of spending leads to lost jobs, which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit.”

Now we’re getting somewhere. According to Obama, what is crippling our economy is a “lack of spending” and “an inability to lend and borrow”. So our economic problems have nothing to do with loose monetary policy, the systematic dismantling of prudent regulations by crony capitalist bankers and legislators, and the parasitic expenses of an out-of-control government.

None of those things had anything to do with our current situation. Instead, we got here by not spending enough, not consuming enough and not borrowing enough. Debt is a large part of what got us into this mess. More debt will not get us out.

The President-Elect continues:

“[...] we need to put money in the pockets of the American people, create new jobs, and invest in our future.”

Obama has stated that he plans to create over 2.5 million jobs. But artificially created jobs will not boost the economy. What we need is increasing productivity. And you don’t get that through government programs.

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In a recent essay, Ron Paul wrote:

“A ‘job’ could be to dig a hole one day, and fill it back up the next, or perhaps the equivalent at a desk. This does no one any good. The value in that paycheck ultimately has to come from taxing someone productive.”

It doesn’t take much thinking to reach the conclusion that this closed-circle economic model won’t get us anywhere, and is, in fact totally counter-productive in the long-run.

But the bigger question – one that very few in Washington seem to be asking – is where is all this money going to come from?

On January 6,  the Congressional Budget Office (CBO) released the government’s latest budget forecast. The CBO estimates that the U.S. deficit for fiscal 2009 will be nearly $1.2 trillion!

This level of deficit spending is entirely unsupportable, especially for a nation as far in debt as we are already are. But this figure is not even the half of it… literally.

The CBO estimate does not factor in the spending increases and tax cuts proposed in Obama’s stimulus package. Nor does it include new healthcare promises. And that’s not all. The CBO estimate also includes numerous unlikely assumptions. To wit, that:

• There will be no more bank failures or bailouts (just yesterday Bank of America rattled the cup for a few more billion)
• Federal revenues will remain stable (no rising unemployment or corporate losses leading to falling tax revenues)
• The government will get most of its bailout money back (the assumption is that 75% of the TARP program funds will be paid or earned back)
• Interest rates on government debt will continue to decline (these interest rates are already at more than 50-year lows, and in a recent report I sent to 20th Century Prosperity subscribers, I showed why they will inevitably rise and how to profit)

When Casey Research analyst Bud Conrad accounted for what is not included in the budget deficit along with the goldilocks assumptions, he came up with a 2009 deficit of $3 trillion!

Thankfully, besides Ron Paul, there is at least one other politician in Washington asking the question, where is all this money going to come from. Speaking to the Washington Times, Michele Bachmann (R-Minn) said:

“[...] someone has to pay for [the stimulus package] whether it’s today’s taxpayers or their children and grandchildren. There comes a time when government simply cannot provide enough government jobs to bolster the economy. There comes a time when the taxpayers’ burden to pay for all of the projects is too heavy to carry. With the trillions in bailouts and stimulus packages that have already been passed and that are in the works, that time may be sooner than we think.

“Government should not take on the role of creating the jobs and buying the goods. Government should be in the business of establishing an environment in which businesses can thrive and play those roles themselves. Americans need a stimulus proposal that actually stimulates the economy.”

I heartily agree. But I am also realistic enough to understand that that is not what we are going to get. What we will get is a massive “stimulus” program with an emphasis on infrastructure, similar to the public-works projects of the Great Depression.

If you’re looking for a way to capitalize on the government-sponsored bull market in infrastructure, I expect there will be some upside to the usual cast of companies that benefit from government construction and engineering projects. Companies like Fluor (NYSE:FLR), Shaw Group (NYSE:SGR) and Jacobs Engineering Group (NYSE:JEC).

But the real winners – in the long-term – will be those investments that benefit most from rising inflation… precious metals and precious metals mining stocks.

Source: The Great Stimulus Boondoggle (And How to Profit)