Economic Stimulus or Stagnation?
Josh Harding
February 04, 2009
As someone once said, insanity is doing the same thing over and over and expecting different results. Which can be the only explanation for President Obama's belief that his "stimulus" package will cure our current woes and rejuvenate the economy.
The heart of Obama's plan is a massive increase in government spending, doling out money for renewable resources, education, public works projects, and health care. In essence, we're going to borrow and spend our way out of our current economic situation, dousing the budget with even more red ink.
This approach is not new. Economic policy during the 1960s and 1970s was dominated with this sort of thinking. Leaders back then, like the current Democratic leadership now, believed that by "stimulating" the economy with increased spending, the economy would continuously grow and we would operate at "full employment." If needed, measures would be adopted in case the economy was too inflationary.
So it was off to the races. Programs were created, and the Federal Reserve increased the money supply to help pay for those programs. But a funny thing happened. Instead of these policies creating a golden age of economic growth, this time frame experienced sustained economic stagnation. Inflation spiraled out of control, even reaching double digits. Unemployment would go down, then return to a natural rate, only the natural rate would be higher, thanks to inflationary pressures. Annual productivity growth averaged only 1.1 percent during the 1970s.
Does this sound like the kind of prosperity we want to return to?
If that isn't enough evidence, then take a look at last year's "stimulus" plan. Or the bailouts. How come those measures haven't turned the economy around yet?
President Obama has recently stated that the economy will get worse before it gets better. Unfortunately, his "stimulus" plan has the potential to push the good times even further into the future.
The heart of Obama's plan is a massive increase in government spending, doling out money for renewable resources, education, public works projects, and health care. In essence, we're going to borrow and spend our way out of our current economic situation, dousing the budget with even more red ink.
This approach is not new. Economic policy during the 1960s and 1970s was dominated with this sort of thinking. Leaders back then, like the current Democratic leadership now, believed that by "stimulating" the economy with increased spending, the economy would continuously grow and we would operate at "full employment." If needed, measures would be adopted in case the economy was too inflationary.
So it was off to the races. Programs were created, and the Federal Reserve increased the money supply to help pay for those programs. But a funny thing happened. Instead of these policies creating a golden age of economic growth, this time frame experienced sustained economic stagnation. Inflation spiraled out of control, even reaching double digits. Unemployment would go down, then return to a natural rate, only the natural rate would be higher, thanks to inflationary pressures. Annual productivity growth averaged only 1.1 percent during the 1970s.
Does this sound like the kind of prosperity we want to return to?
If that isn't enough evidence, then take a look at last year's "stimulus" plan. Or the bailouts. How come those measures haven't turned the economy around yet?
President Obama has recently stated that the economy will get worse before it gets better. Unfortunately, his "stimulus" plan has the potential to push the good times even further into the future.