Friday, January 9, 2009

Obamanomics - The Not New Deal

Based on Mr. Obama's speech yesterday, the federal government plans to spend it's way out of this recession mounting a trillion dollar or more deficit in the federal budget. I hate to break it to him - but it won't work. It will make matters much worse, and subject our children and their children to an unbelievably enormous debt. We will be faced with rampant inflation when the money that is being printed up out of thin air right now hits Main Street. Additionally, to make people more dependent on government handouts, and encourage people to spend and accrue more debt is a path to further destruction. The way out of debt is not to accrue more debt. Mr. Obama has surrounded himself with people who are dealing with Keynesian economics which, in part, is what has gotten us into this mess in the first place.
According to Keynesian economics the state should stimulate economic growth and improve stability in the private sector - through, for example, interest rates, taxation and public projects.
One might be reminded that FDR and his government expansion extended the time which the country spent in recovering from the Great Depression. The New Deal did not cure the depression and unemployment; entry into World War 2 did. FDR's policies, in fact, prolonged the Depression. (here's another good article with other links)

Is history repeating itself? Have we learned nothing? The Roaring 20's, and the excesses of the late 1990's and early "aughts' are very similar. Put Bush in the role of Hoover and Obama in the role of FDR, and the only thing really different is the clothing styles and technology.

The way to solve these economic problems is through living within our means. Encourage business - don't stifle and restrict it. Debts need to be paid or forgiven. The toxicity of debt must be cleared from our system. Let's bring jobs and industry back and encourage people to save so that they have the real wealth to consume goods as they can afford them. Let's have some sound money that is backed by something other than faith and credit. But the path we are on now with massive bailouts and government deficit spending is the path to disaster.

Here is one opinion from economist Peter Schiff on the situation:

"We have to remember that Government does not spend money efficiently, effectively or timely. The taxpayer is best at spending their own money."
(quote attributed to Andrew Ian Dodge a commenter responding to the article by the Heritage Foundation linked to his name)