This president talks and acts as if Reagan and everything he did never happened.
The entire U.S. GDP is roughly $14 trillion. The government currently spends roughly $3.5 trillion of that. In his stimulus plan, Obama proposes effectively to borrow another $1 trillion from the private economy to add to $1 trillion in still further government spending.
How exactly is that supposed to stimulate economic growth and recovery? Is America’s economic growth and prosperity produced by increased government spending, deficits, and debt? I don’t think so. The American people don’t either.
But Barack Obama thinks it is so obvious it’s funny. Speaking before a laughing House Democrat Caucus last week, he said, “So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? [HaHa]. That’s the whole point. [HaHa]. No, seriously. That’s the whole point. [HaHaHa].”
As the Wall Street Journal said over the weekend:
In fact, there is no net gain to the economy from this stimulus fraud, which is all the more obvious when you look at what Obama and his hopeless liberals spend the money on. There is funding for federal baby sitting programs, for needles for drug addicts, for federal birth control programs and condoms, for the National Endowment for the Arts, and for increased welfare. In fact, 30% of the stimulus spending is for increased welfare. Is this the foundation for future American prosperity?”
As the Journal further explained:
Moreover, as I have emphasized in this column, what drives economic growth is incentives to save, invest, start or expand businesses, create jobs, take risks, and work. Incentives are increased through reductions in tax rates and unnecessary regulatory costs, which allows people to keep a higher percentage of what they produce. But for the government to borrow a trillion dollars from the private economy to increase government spending by a trillion dollars does nothing to increase such incentives.
Keynesian economics was born in the 1930s, was always a failure in life, even though it was heavily favored because it justified expanded government power, and died at the end of the 1970s, when it was slayed by Ronald Reagan in self-defense.
Keynesian theory argued that the way to stimulate the economy was precisely to increase government spending and deficits, because this would increase total aggregate demand in the economy, stimulating producers to produce more to meet this demand. The discussion above shows why this theory is wrong. Keynesians failed to consider where the government would get the money for its increased spending, and the offsetting economic impact of that. Moreover, they failed to appreciate that it is economic incentives that drive the economy.
That is why it has always failed over and over. FDR embraced Keynesian economics as the cornerstone of his New Deal. As a result, federal spending soared during the 1930s to the equivalent of a trillion dollars a year today. Yet Census Bureau data shows that the unemployment rate for nonfarm sectors never fell below 20% during the decade. By the end of the 1930s, the U.S. economy was still 10% smaller than it was in 1929. The stock market did not return to its 1929 levels until 1954.
Amity Shlaes told this revealing story recently in the Washington Post:
By the end of the 1930s, even FDR’s Treasury Secretary and close personal friend Henry Morgenthau told the House Ways and Means Committee, “We have tried spending money. We are spending more than we have ever spent before and it does not work.…I say, after eight years of this administration, we have just as much unemployment as when we started…and an enormous debt to boot.”
For a more recent example, Japan suffered an economic crisis in 1991 very similar to what the U.S. is suffering now, with collapsing stock and housing bubbles. They turned to old-fashioned Keynesian economics, increasing government spending by the equivalent of $900 billion in the U.S. today. As a result, Japan fell backwards during the 1990s just as the U.S. fell backwards in the 1930s. Japan’s per capita national income fell from 86% of the U.S. level in 1991 to 74% in 2000.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?