$447bn Obama plan sets the US up for a Japan-style lost decade or two
Posted on 08 September 2011 with 4 comments from readers
After the Japanese economic crash of 1990 the government tried successive stimulus and spending packages for over a decade and failed to get the economy moving, though admittedly the national infrastructure was greatly improved. Domestic debt also soared above 200 per cent, leaving the national finances in a terrible mess today.
So is that where President Obama is taking us with his much leaked $3447 billion infrastructure and general public spending program for national revival and job creation? New roads, railways, bridges and tunnels financed by printing even more dollars?
Big government
The problem is that governments are not job creation institutions. Healthy and dynamic businesses create jobs. Governments swallow up capital and produce very little in return. They are very poor creators of wealth and poor creators of jobs.
At least a highway or high-speed railway project employs people. But they are very expensive and that money has to be borrowed. Still when the government is over $14.3 trillion in debt what is another $447 billion?
Actually it would be a lot if it went into the right hands. Infrastructure spending is at least better than pumping money into the stockmarket as a way of improving the economy. It is what JM Keynes had in mind as pump priming an economy. He would have hated the bank bailouts, the ultimate sign of failed central bank regulation.
But does it not perpetuate the cycle of big government gone wrong that has gotten us to this odious place? Rolling back the frontiers of government and releasing the dynamism of the American entrepreneur would do a much better job, not least of which in creating jobs.
Socialist America
How did the capitalist American economy ever come to the point where socialism is prescribed as a solution to a faltering economy? Did America not show the communist bloc that it does not work and how to do things better?
America needs to get back to its roots and turn its back on socialism. It needs to reduce its debts and deficits in a workable plan. Ironically that might well include a big increase in spending on infrastructure but it would be funded by slashing bureaucracy not more borrowing.
All the same the road President Obama is treading leads to the Japanese lost decade, actually make that two lost decades. Surely America can do better than that?
4 Comments posted by readers:
I think the best and most efficient way of both pump priming the economy and using capital efficiently would be to actually distribute part or all of the USD 300 billion in cash to the poorest 20% and among families where not even a single wage earner has found work for the last 3 months.
Sounds simple and unsophisticated, but the best solutions often are remarkably simple. People are the most efficient spenders of their own wealth and beat the Government in efficiency by a huge margin.
Ed Note: Qatar just gave public sector workers a 60% pay rise, I suppose this is somewhat similar except that Qataris are the wealthiest national group in the world. It would be very inflationary, however.
@ Jag
Send everyone who filed an income tax return a debit card with the money loaded on it. Send them out over a period of a year or two, with a one year life, after which, they would become void. Giving people cash wouldn’t be as effective at stimulating consumption because they would use it to pay down debt, and some would put it into their bank account, where it would just sit there. As long as they didn’t hand out trillions all at once, and as long as the unemployment rate was high, inflation would be limited. Don’t borrow the money, just create it electronically. It is all legal.
President Obama should fire 99% of his economic advisors (dopes) and hire Bill Bonner to advise. Obama’s next speech would go something like this:
My fellow citizens. We are faced with a choice. Either we continue with our program of trying to police the entire world. Or we give it up. If we continue, we will go broke. And our armies will be destroyed…along with our economy and our currency. If we stop now, we can save our currency…our economy…and our way of life.
Which will it be? Guns or butter? A respectable nation…or an empire with a death wish? I know which I will choose.
Effective immediately, as Commander-in-Chief, I am ordering all US troops stationed overseas to come home. We will defend our nation to the death, but we will no longer meddle in other countries’ affairs. We will be a decent nation, a good nation; we will no longer be a great empire. Most Americans never wanted it anyway.
I am also submitting a balanced budget for next year. You will see in it that I am closing all foreign bases and eliminating all military spending that is not directly related to our real national defense.
My fellow Americans, I don’t know about you, but I’m tired of supporting all these zombies. Why are there so many zombies? Because there’s so much meat for them…
You wanted change…I’ll give you change…
Here’s how to get rid of zombies. I’m proposing to scrap the entire tax code. From now on, Americans will pay 10% of their income…no deductions…no nonsense. You’ll fill out your tax return on a postcard.
Serfs in the Dark Ages were only required to work one day in 10 for their lords and masters. You shouldn’t have to do more.
The federal government will have to get by on that. That’s all. I’m proposing a Balanced Budget Amendment…with a permanent 10% tax rate. No ifs. No buts. No zombies.
You all know what a 10% flat tax will do? It will make the US the most dynamic economy in the world.
And what about all the debt? Simple. We’re raising interest rates. Yep. To 5%. It will drive all these deadbeats into bankruptcy. The debt will disappear…almost overnight. So will a lot of these big, zombie banks.
And by the way, by executive order I’m hanging George W. Bush, Dick Cheney, Joe Biden, Alan Greenspan, Paul Krugman and Thomas L. Friedman.
Some of them for war crimes. The others…well…just because the world will be a better place without them.
Thanks for listening.
Simple!
@ Peter:
Enjoyed your commentary; especially this sentence:
“America needs to get back to its roots and turn its back on socialism. It needs to reduce its debts and deficits in a workable plan. Ironically that might well include a big increase in spending on infrastructure but it would be funded by slashing bureaucracy not more borrowing.”
Well said, Peter! But sadly, Mr. Obama is a flaming Marxist, and there’s no way that he’ll change. Yes, the US did show the communist bloc that it doesn’t work; and yes, the US did show the communists how to do things better? But during those history lessons, Obama skipped school.
@ Jag:
Interesting proposal ! Regarding the $16 trillion that the FED (Bernanke) printed and handed out to banks from 2008 – Dec 2010, if instead, he could have given almost $1 million to every adult American citizen. Imagine what that would have done to the economy (. . . and to inflation!).
@ Paul King:
Bonner is a class act!
“And by the way, by executive order I’m hanging George W. Bush, Dick Cheney, Joe Biden, Alan Greenspan, Paul Krugman and Thomas L. Friedman.” Amen to that phrase!