Sunday, June 27, 2010

Stimulus as Depressant

The best stimulus? Spend less, borrow less - Jun. 24, 2010

For Meltzer, the courageous, damn-the-sages stance that Thatcher took three decades ago should guide President Obama today. "If Obama announced a strategy to deal with the long-term debt and stopped doing things to increase the uncertainty that businesses face, it would do a great deal to stimulate the economy," declares the 82-year old Meltzer.

The difference is that Thatcher believed in people, business and the essential correctness of the principles of capitalism. It ought to be very clear  by now that BO does not. He believes that the answer is ALWAYS bigger government, in any form, even the form of limitless debt.

Today, the administration is pursuing a totally different policy. It's sharply raising expenditures when the U.S. already faces gigantic, chronic deficits that barely shrink even in a recovery, and burgeoning debt. "Keynes specifically warned against structural deficits when both U.S. and British economists were pushing for them at the end of World War II," says Meltzer. "He never said that more spending on top of chronic deficits was a stimulus. Just the opposite, in fact."

The rub is that the shadow of inexorably rising debt, with no plan to curb it, isn't a stimulus at all, but a heavy depressant. The solution is to sharply reverse course and bring the budget into balance over the next decade. That solution will require either a 50% increase in taxes, a 35% reduction in spending, or some combination of the two. The weight should fall heavily on the spending side.

The modern media looking glass world means that on the political front and many more, certain myths are stated as facts even beyond the point that they are clearly false, at which point, they are just dropped as stories. Thus, in this past week, we see BO move to hang his Afghan war effort on the General once derided as "General  Betray Us" with his tacit approval (he refused to vote for a "sense of the Senate" repudiating the ad). BO was 100% wrong about the surge. The media notices not at all, since their royal BOness might be seen as less than perfect for such a turn of events.

Sadly, not reporting on the emperors lack of clothing does nothing to cover his nakedness -- nor ours, as his wrong headed policies destroy our economy, security, and culture.

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