Obamanomics: Keynesianism, Deficits, Big Government

President elect Barack Obama has made clear that his first priority upon seizing control of the presidency will be an economic "stimulus" package intended to give the ailing economy a shot in the arm. This package will likely look something like the stimulus of this past summer when the Bush Administration and the Democratic Congress spent 150 billion dollars to send everyone a few hundred bucks, hoping that this would increase aggregate consumer demand and prevent the economy from entering into a recession... It didn't. That stimulus package proved a complete failure in accomplishing its stated goals while tacking on another 150 billion to the already obscene federal budget deficit. A University of Michigan study showed that only one fifth of people went out and spent this stimulus money, while most people saved it or used it to pay off debts, thus resulting in no substantive benefits to the macroeconomy. Unfortunately, Barack Obama, Nancy Pelosi, Barney Frank and co. along with the media wing of their agenda (The New York Slimes... typo) are planning to push forward what will likely be a much bigger stimulus plan. Such an action would be a flat out mistake.

A central component of this ill conceived stimulus plan would be a massive public works program to "rebuild our crumbling infrastructure," one of Barack's million dollar phrases during the campaign cycle. In fact, Obama promises to "create" 2 million jobs in public service projects such as the building of roads and bridges. Obama also promises to spend 15 billion dollars a year that will "create" 5 million "green" jobs in the alternative energy sector. Unfortunately, the Obama plan will not "create" any jobs and will likely result in a net less of jobs, wealth, and productivity. If I went to the money tree in my backyard and pulled a hundred billion dollars from its leaves, I could then use that money to create jobs. I would hire a Swedish model as a personal assistant, find me a personal chef that makes a fine steak, and maybe even by myself a personal zoo and hire people to take care of my giraffes, etc. I'd be overflowing in so much cash that I'd probably even hire some people to build windmills and rebuild our "crumbling infrastructure" (is it really crumbling? I always wished Obama could back that up with facts. I haven't come across any crumbling bridges or highways) like Obama wants. The net result of my acquiring a hundred billion from my money tree would be the creation of many jobs. This would be a great way to boost employment in this tenuous economy. Unfortunately, the federal government does not possess one of my money trees (and I'm keeping mine so they never will). Thus in order to "create" these two million jobs building tunnels, filling potholes, sweeping dirt off the roads, or whatever else Obama has in mind, he needs to take that money from somewhere else. The money used to "create" all of these jobs, will come from two sources: the rich and borrowing (mainly from China). By hiking taxes on the rich, many jobs will be lost to make up for all of the new one's "created." When the rich have less money, there is less investment capital available for start up companies. When these start ups do not receive adequate financial backing, they cannot expand their operations or hire more people. When you tax the rich, money flows out of the markets, causing even further decreases in stock prices. Thus people's savings and retirement plans are hurt, they spend less, companies do not earn as much, and they need to let employees go. When the rich ain't as rich, they let go of their maids, their dog walkers, and those Wall Street guys taking a beating might decide they only need three secretaries rather than four. If instead you decide to borrow the money, you simply have to pay it back later. Thus, for the extra jobs "created" now, we lose jobs in the future (with interest). The government cannot spend its way out of a recession. This is the failed, antiquated idea of John Maynard Keynes, the early 20th century British economist who advocated increased deficit spending during times of recession in order to boost the economy. This is what FDR tried in the New Deal. At first, the economy expanded as more people became employed by his public works programs. However, the economy nosedived again in 1937 because of a lack of private investment capital (because the government took all of your money if you made any) and attempts to repay the ballooning fiscal deficit that paid for earlier New Deal programs. Thus stock prices did not regain their pre-depression values until the 1950's and the New Deal never really got us out of the Depression. This is the path down which the Democrats will take us... more government, less private innovation. If we actually wanted to stimulate the economy, we would reduce marginal tax rates across the board, thus increasing the incentive for people to work and produce. Such tax cuts under JFK led to an economic boom in the 60's which was stifled after years of liberalism, government expansion, excessive regulation and relative stagnation under Johnson, Nixon, and Carter. This trend was of course reversed with the massive tax cuts of Reagan that ushered in a new era of prosperity (even Clinton's tax hikes took us nowhere near pre-Reagan tax levels, allowing the economy to continue its expansion). Even the Bush tax cuts helped pull us out of the 9/11 recession as according to a Goldman Sachs economic model they resulted in significant GDP growth. Instead of following the successful past model of cuts in marginal tax rates to stimulate the economy, we give handouts to all (regardless if you actually pay taxes) and spend government money like it's going out of style. Now, if anybody truly believes that the government is more efficient than the private sector, I would like to challenge that person to a high stakes poker match because that person is clearly an imbecile who just doesn't get it....

Oh yea, and didn't the libs complain throughout the whole campaign cycle about those damned Republicans and their budget deficit? Just wait until we see what they do about deficits, considering that their "stimulus" will tack on at least 300 billion to the debt during Obama's first year alone although the far left (Paul Krugman of the New York Slimes and this year's winner of the Nobel "Commie" Prize in Economics) advocates an even bigger 600 billion dollar budget busting stimulus. And we also have to pay for the libs promises of free health care, free preschool, more government college tuition grants, etc etc on top if this stimulus. The dems promise the world but how will they pay for it?Funny how deficits are only a problem when those Republicans are in office....