Just over two years ago, in control of the White House and both houses of Congress, Democrats promised us that the key to economic revitalization would be found in a near-trillion dollar stimulus. Ever more government spending would be sure to jump start the economy. Well, here we are nearly twenty-six months after the president signed his recovery act and only now is the economy beginning to recover, but not because that “stimulus” is just beginning to kick, but instead as Veronique de Rugy reminds us, because it’s “winding down“:
The unemployment rate for March dropped to 8.8 percent, which we should remember is the rate that the Administration said the economy would reach if the stimulus had not been passed. It took two years to reach this rate, and as it turns out, it is on the way down, not up.
(Via Instapundit.) Increased government spending, to paraphrase an expression, was not the answer, it was part of the problem. One man who gets this is Paul Ryan, the fetching Wisconsin Congressman who chairs the House Budget Committee. In anticipation of the release of the GOP budget which he authored, he took to the pages of the Wall Street Journal to explain why his plan is necessary:
No one person or party is responsible for the looming crisis. Yet the facts are clear: Since President Obama took office, our problems have gotten worse. Major spending increases have failed to deliver promised jobs. . . .
The president’s recent budget proposal would accelerate America’s descent into a debt crisis. It doubles debt held by the public by the end of his first term and triples it by 2021. It imposes $1.5 trillion in new taxes, with spending that never falls below 23% of the economy. His budget permanently enlarges the size of government. It offers no reforms to save government health and retirement programs, and no leadership.
Calling his op-ed, “The Path to Prosperity,” Ryan outlines the spending cuts and reforms necessary to get our government’s fiscal house in order while “reforming the nation’s outdated tax code” to help encourage economic activity. The less government interferes, the more private enterprises will be revitalized.
The Republican budget even “budget targets corporate welfare, starting by ending the conservatorship of Fannie Mae and Freddie Mac that is costing taxpayers hundreds of billions of dollars.” Seems under Ryan, Republicans are making a comprehensive approach to federal spending and not dodging the tough issues or the sacred cows which increase the flow of red ink. Everything, Moe Lane writes, is “apparently on the table.“
Well, not quite everything as Ace notes, the package “seems to punt on Social Security, stating vaguely that it will ‘force’ policymakers to propose common-sense reforms. Which means it itself doesn’t touch them.”
And despite the effort that Republicans put into tackling our nation’s spending problem before it drowns the economy, John at Verum Serum warns
In addition to the run of the mill demagoguery and repeated use of the word “extreme”, I’ve no doubt we will learn tomorrow that Ryan’s road map is the most disastrous thing ever conceived by the mind of man for a host of other reasons. It will be interesting to see if the arguments of Chuck Schumer, Ezra Klein, Paul Krugman and the rest of the usual suspects overlap significantly as they get talking points from the DNC telling them how best to respond.
Let us hope that they consider the merits of the plan instead of wail about its alleged excesses, bearing in mind the president’s professed concern about the deficit and his past promises of a “net spending cut.”
And kudos to Congressman Ryan for making the tough choices we expect of leaders concerned about America’s fiscal health.
It’s been amazing, these last few years, to watch some of the people who had bewailed Bush’s $400B deficits as the end of the Republic, then turn on a dime and defend Obama’s $1.5T deficits. And to watch them claim (falsely) that since fiscal conservatives supposedly hadn’t objected to Bush’s $400B deficits, they couldn’t complain about $1.5T deficits.
Lefties may wonder, how is it that government spending actually blocks economic recovery? Let me count the ways.
1) Government spending is always paid for either by taxes, borrowing or money printing (now called Quantitative Easing). All those things take from the private sector. (QE loots the stored purchasing power of private cash balances / savings / capital.)
In other words, contrary to Keynesian propaganda, government spending is *always* taken from the private sector, never additive to it. You see the Bridge to Nowhere that the government built (if you’re lucky i.e. if the government didn’t just blow the money). You don’t see all the businesses that were stifled and jobs that were lost, because the government taxed, borrowed and/or inflated in order to pay for it.
2) Government spending is less efficient than private sector spending. Since government collects money by force (taxes) and/or by a printing press that no one else has, it has no reason to be efficient. The larger the role of government spending in an economy, the less efficient it is and therefore, the less capable of growing / recovering.
3) Government borrowing means future taxes and/or inflation (money printing). Massive government borrowing, i.e. massive deficits, mean massive future taxes and/or inflation. The prospect delights moochers, but depresses productive people. To get an economy going, you kinda hafta not depress your productive people.
4) Since government spending is usually designed to prop up society’s failures – people who, whether they are poor or very rich, cannot make it without the government fixing the game for them – government spending actively *blocks* the kind of economic and business changes that constitute recovery; the changes that would otherwise liquidate past mistakes and enable future growth.
Thatcher found, in the 1980s and in defiance of conventional economists (Keynesians), that cutting government spending assisted her country’s recovery. So did Harding/Coolidge, in dealing with the Depression of 1920. But we’re not supposed to remember.
Meanwhile, Hoover/Roosevelt in the 1930s and Obama today, found that boosting government spending did little or nothing to help recovery. But we’re not supposed to notice.
(continued) Likewise, Japan has been doing “stimulus” and QE for 2 decades… and only dug itself deeper into the hole. They haven’t collapsed entirely, only because they keep working hard and producing real goods that the world wants to buy.
Nobody’s ever explained HOW laundering billions of taxpayer money through liberal cronies was supposed to help the economy. They figure Chairman Obama will spend a billion on his campaign. I want to know how much of those “donations” will come from bailouts.
Or, we can embrace the alternative: Continued Spending along Obama-Reid levels financed by an 88% tax increase.
TGC, the explanation usually offered is that the economy is a big circle of spending and if you create more of it, it will multiply as it ripples through society. Kind of like those “Pass it on!” songs at the church campfire.
The explanation puts the cart before the horse: in reality, the economy is a big circle of production and trade, and once you’ve established basic law and order, you have to get government out of the way, to encourage production and trade. But that explanation is less fun. It won’t justify spending with abandon.
Anyway, some newsflow courtesy of HotAir. First, after 2+ years of Obamanomics, prices are rising, and wages aren’t: http://hotair.com/archives/2011/04/05/shocker-inflation-is-back-wages-falling-behind/
Morrissey rightly notes on the side:
Ryan’s new 3-minute video for his plan: http://hotair.com/archives/2011/04/05/paul-ryans-promise-we-will-cut-spending/
ILC,
I look at government ownership/management of Amtak and the post office and I see all I need to see about controlling the natural forces of the market as a business plan.
The idea that unknown government bimbos can take over General Motors and have any concept of what they are doing is laughable. Think of John Kerry wandering into the Ohio shop and asking: “Can I get me a huntin’ license here?” Posturing and pronouncing does not weed turnip patches. Neither does driving a turnip truck cause it to grow and load turnips. (I choose turnips, because the elite love the metaphor in their abusive view of fly-over America.)
So, Obambi and cronies got their hands on a TRILLION US manufactured-out-of-thin-air dollars and they set out upon the path to create a return to prosperity through Ouija Board partisan selected “stimulus.” Well, lets see the jobs created and forget about the jobs saved. As I see it, every job in the private sector was “saved” as the result of careful business management. Every job “lost” was the result of careful business management or business collapse.
Funny how the jobs “saved” by Obambi and cronies are in the public sector. Maybe the DMV needs to triple the number of employees who don’t serve you in a timely, friendly fashion.
Yeah, but the “big circle” only included liberals and their cronies. They’re passing the money back and forth between each other whilst giving the country the finger. What the hell is beneficial about that?