Published August 27, 2010
So this is the economic growth that by far the largest Keynesian stimulus in American history produces? President Obama’s $814 billion in stimulus, a more than $1.3 trillion annual deficit for the second year in a row, has produced what the administration has declared is the long awaited "Summer of Recovery."
Last fall the economy grew at a reasonable 5 percent annual rate, though even that was not particularly fast for a "recovery." Yet, it has dropped since then: during January through March, the growth rate dropped to 3.7 percent and April through June, 1.6 percent.
But Americans didn't need the new incredibly slow GDP growth numbers that came out on Friday to tell them that the economy was growing slowly or see through the Obama administration's constant cheerleading. An Angus Reid survey released on July 31 found that only 11 percent of Americans rated their economic conditions as Very Good / Good, down from 15 percent in April. In July, as incredible 86 percent of Americans felt that their economic condition is Poor/Very Poor, up from 83 percent. A just released CBS News/New York Times poll finds that 83 % now say that the economy is bad, with an incredible 37 percent saying that they believe the economy is in permanent decline.
Since April, the Bureau of Labor Statistics Household Survey has shown that 1.7 million Americans have left the labor force and simply given up looking for work. The total number of people employed has dropped by nearly half a million.
Depressingly, next year's huge scheduled tax increases mean that growth will be slow in 2011. If you know that your tax rate is going to rise in the coming year, you will work harder this year while you are able to keep a larger share of your income.
But President Obama does not understand incentives. To him it is just greed. As he famously told "Joe the Plumber" during the 2008 campaign, "I think when you spread the wealth around, it's good for everybody." He keeps on talking about how the wealthy can afford to pay more. Yet he doesn’t talk about what needs to be done to make the economy, the economic pie, bigger for everyone. What tax cuts the administration has put forward have lowered average tax rates and raised marginal rates. Obama proposed and got Congress to sign off on a lump sum deduction in 2009, but it still discouraged people from working more because as they earned more, the size of their deduction shrank.
Talking about the "Recovery Act" in a new interview with Time magazine, Biden waxed on about how "Now the fun stuff starts! . . . This is a chance to do something big, man!" What excited him was all the social engineering the government was going to do with the stimulus, creating "green energy" and "green transportation." Now THAT'S telling. So, the stimulus wasn't really about growth, it was about changing America. It was about subsidizing projects that no one would have invested in without the subsidies.
Moving trillions of dollars around from places where you and I would have spent it to places where Obama wants to spend it just creates a lot of economic chaos and wealth redistribution, that isn't economic growth.
The administration promised from the beginning of last year that recovery would start soon after the stimulus was passed. The only thing that Obama has proved is that Keynesian economics is dead. But the huge debt that our children will inherit will ensure that they remember this experiment.
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