“Stimulus” Nightmare

From last night’s (2/9/09) first press conference with President Obama:

Obama: “The Federal government is the only entity left with the resources to get the economy going again.”

*The federal government doesn’t have the resources! It is going to borrow and print money in a futile attempt to create the “resources”. This will make things even worse. And the Bureau of Labor Statistics says that government debt is not the solution. It was private sector job growth that got us out of the recessions of the late 70s and 80s. 

Obama: “You have some people, very sincere, who philosophically just think the govt has no business interfering in the marketplace. And in fact there are several who suggested that FDR was wrong to intervene in the New Deal. They’re fighting battles that I thought were resolved a pretty long time ago.”

*The Democratic “solution” is unfortunately based on something that was tired and failed nearly 80 years ago – in the 1930s! That Depression lasted 15 years. More recently, Reagan did the exact opposite in 1981 when he came into office with an even worse recession than the one we have now. He slashed government spending. Froze government programs and gave substantial tax breaks to businesses and workers. 

*The Democrats are doing the exact opposite. They’re drastically increasing government spending and debt, while letting tax breaks expire (next year). This can only have the opposite result of Reagan’s success in the 1980s. 

*The non-partisan Congressional Budget Office (CBO) says the spending package will actually lower GDP by .1 – .3 percent. “Do nothing” according to the CBO and it would result in less debt and higher growth. 

*Wall Street may not understand history, but it understands economics and the Dow plummeted more than 4.5% today (nearly 400 points) after Obama detailed his economic plan in a press conference last night. They are wholly underwhelmed. 

OBAMA: “Most economists almost unanimously recognize… that government is an important element of introducing some additional demand into the economy.”

That sound familiar to anyone? Sounds kind of like Al Gore doesn’t it? “The debate is over. All scientists agree!” There are a few hundred respected economists who disagree. 

ECONOMICS FOR DUMMIES:  You can’t SPEND your way out of economic problems. You can only PRODUCE your way out of problems. Spending causes more problems. “Production” solves problems. If you get in way over your head in your personal life, is the solution to spend even more money? No! It’s to work harder, get a second job, find a way to be more productive and MAKE more money! DEBT-BASED SPENDING JUST CREATES MORE PROBLEMS.

I predict the following will occur after this plan is implemented:

1. The retail sector will collapse in 2009. 

2. The commercial real estate sector will collapse like housing has done.

3. Ghost malls

4. Bank “holidays” 

5. Recession will eventually grow into a depression – unless the course is changed rapidly and dramatically. 

The stock market lost almost half its value last year from its all-time high a year earlier. Residential real estate has lost 20% – 30% of its value. This is a huge loss of wealth for individuals and having the government go into massive debt in a futile attempt to fix it will only compound the problem. 

Obama says the economy will start to turn around sometime next year (2010) if his plan is put into place. So we’ll see. I hope for the best, but unfortunately I don’t see any historical or economic reason to expect it. 

Programs from the 1920s are NOT going to work in 2010. It’s unbelievable that they’re looking to FDR from almost a century ago for the solution. (whatever happened to looking FORWARD to the future)!?

All of my Obama-supporting friends (which is most of my friends!) wanted socialism, they didn’t see a problem with it. They’ve gone to schools where they weren’t taught about the devastation socialism wreaks on society. They weren’t taught about Adam Smith and how nations build wealth. They live in a place where everybody accepts socialism’s tenets. 

In an idealistic nod toward “fairness” my friends wanted redistribution of wealth. They wanted the guy who spoke well and was charismatic – they didn’t really care what he said or what he believed – they just knew they felt good after he spoke (as do I). Now, I’m afraid we’re all going to suffer devastating consequences in the next few years as a result of these careless choices.

Tags: economy

This entry was posted on Saturday, April 25th, 2009 at 7:12 pm and is filed under All, Economics. You can follow any responses to this entry through the RSS 2.0 feed.