Sunday, February 22, 2009

Barak Hoover Obama

While styling himself as Franklin Roosevelt, Obama keeps saying that we need to not return to the failed economic policies of the past. It lifts my heart to hear that, until I realize that he wants to return to the failed economic polices of Keynes. As Obama noted in his address to the Democratic meeting a couple of weeks ago, he is being accused of having a spending bill instead of a stimulus bill. Then he asks rhetorically, "what do you think stimulus is? It's spending!"
But does government spending actually create jobs? As the article linked to in the title says, government spending simply robs from Peter to pay Paul. Governments do not create wealth. Instead, through their tax policies, they destroy it. Right now, it takes thirty nine Montanans working full time paying taxes to pay for each government employee (of which I am one). If the Left's version of economics were to be carried to its absurdist position, then if everyone worked for the government except for one person, that one person would be richer than Bill Gates. But commonsense knows that is not a true statement.
Money is a measure of wealth. In a way, it is an imperfect measure, since with inflation it can be a falling measure, not a static one. It's as if your ruler keeps shrinking an inch at a time, even though it is still divided into twelve equal segments. By flooding the economy with borrowed, or worse, made up money, the value of your efforts is going to be compromised in direct proportion. Some of us are old enough to remember the old days when Jimmy Carter was president. With inflation running at 13%, retirees on fixed income were trying to find Alpo on sale, just so that they could afford something to eat. Are those days coming back? Yes, and even worse.
Obama has indicated that he plans to allow the Bush tax cuts expire at the end of 2010. Raising taxes during a recession is the same policy that Herbert Hoover tried, and it also failed miserably. But raising taxes at the same time as the interest payments come due on the borrowed money for the "stimulus" is only going to further suppress any private sector economic development. By stealing capital that would otherwise be available to the private sector for investment, growth or increasing productivity, the private sector will be kept stagnant. But at least we will have unemployment insurance for all the people who are not hired by the private sector. Or, we will until the Chinese stop buying our debt.
Just to shorten up the comments, let's predict the predictable responses: For instance, George Bush ran up the deficit and the debt through the war in Iraq. No doubt. But if deficit spending is supposed to get us out of the problem, Bush should have succeeded immensely under this theory, since he expanded government at a rate that Obama is going to be the only Democrat to exceed. Not to mention, that the "stimulus" bill is more expensive than the cost of the Iraq war plus all of the New Deal spending. Put together. At one time. I just don't think that you can argue that Bush was wrong for raising spending, and then say that it can be solved by more spending.
Another argument is that the last time that the deficit was eliminated was under Clinton and he raised taxes. And superficially at least, that is true. Except that there were several unique factors that make that scenario impossible to replicate. First, taxes were raised after we were coming out of a recession. In spite of the trite statements about the worst economy in 50 years, the recession had ended before the election. Second, the demise of the Soviet Union led to a reduction in defense spending. In fact, the entire surplus was equal to the amount of spending reductions in defense. Not that it wasn't needed, but to claim credit for an historical anomaly is either be cynical or stupid, and I am willing to bet that Bill Clinton is not stupid.
Finally, with the Republican revolution of 1994, one of the primary agenda items was welfare reform. Faced with poll numbers that showed the popularity of the reform, Clinton reluctantly signed off on the deal and then proceeded to claim credit for what he had long opposed. Fine, that's politics. But it wasn't Clinton's policies, as much as the forgoing and the tech bubble that provided for the prosperity. That is not going to happen over the next four years.
By raising taxes, accelerating pet Democratic policies that have no direct improvement on the economy, Obama is going to send us into a crater that will make Herbert Hoover's mistakes look like a mere misstep versus the catastrophe that is coming. My advice: Start buying guns and ammo. You will need them.

1 comment:

Aaron Goldberg said...

You’ve covered so much ground in this post it’s nearly impossible to address adequately all the issues it contains. But here’s my outline.

1. Government taxes as theft. Governments do not just “steal” wealth from people. That is only the first half of it. The second half is they misallocate it. So you have unjust laws that take money from people because they were smart and successful and then you waste it by giving it to people who are stupid failures. That’s called a Double Whammy.

2. Inflation. Trillions of paper money are piling up in the system like trash in an abandoned factory. Once the factory starts up again there’s going to be a serious fire hazard. Ben Bernanke swore on his mother’s grave this week that he will never allow inflation to exceed 2 percent. That’s called Blowing Smoke.

3. Bankrupt nation. Government spending is always a terrible idea because the money is never spent wisely. But borrowing money to spend unwisely is a suicidal. That’s what’s happening now. The government can’t pay on all its promises already and has to borrow to cover them. Now it’s loading more promises on top of those and borrowing even more. That’s called a Death Spiral.

4. Guns & Ammo and civil unrest. The people who will need the guns and ammo the most will be the same ones who banned guns and ammo in their town. That’s called Justice.