Hope and Change is Risky!

Do Keynesian economics work? I don’t think so, at least not if you place a high priority on keeping people employed.

Read this article. It compares the U.S. employment figures with Canada’s – and Canada rode out the downturn without the massive bailouts the U.S. has enacted (wasted?). And read this one for information on how many workers no longer show up as ‘unemployed’ because they have given up trying to find a job, thus distorting the ‘official’ unemployment rate, making it look better than it really is.

I’ll be the first to admit that I am not an economist. I do understand instinctively that increasing debt beyond what you can comfortably afford to pay back can feel good when you have the influx of cash, but doesn’t feel so good when you have to pay it back.

Pouring money into the economy via stimulus projects that do not create permanent, self-sustaining jobs that will continue after the stimulus money is used up, is stupid and shortsighted. As soon as the money is gone, those people will be unemployed again. How many stimulus dollars have been poured down this kind of rathole?

In short, for stimulus to have a lasting effect on employment and the economy, it must be applied to private companies who have an economic reason to exist in the real world – that sell real products and will continue to do so after the stimulus is gone – and who would use such money to invest in new company infrastructure and employees. Such a stimulus would have a positive, long-lasting effect on the economy.

Oh, wait – that’s what the Bush tax cuts did! And Obama is going to let them expire at the end of this year. As well as pile on quite a few more (there are around 20 new or increased taxes in Obamacare).

I work for an entrepreneur; I see every day what his thinking is relating to money and the expenditure thereof. Obama’s policies result in great uncertainty in terms of predicting future costs of hiring. What taxes will we have to pay? What will insurance cost? Will cap and trade pass, or be mandated into law by the EPA; and if so, what will it cost us? Will his policies affect our customers? Until we know the answers to these questions, my employer is not likely to hire any new people.

This uncertainty is at least part of what is keeping employment down; and it will probably be this way until we have new management in Washington. Stability is important to businesses. Hope and Change is risky!

Regardless of your (economic) belief system, facts are facts. Obama’s economic policies are either not working at all, or are not working well enough. Obama’s response to money getting tight is to spend A LOT more; and much of it, for things that have nothing to do with financial security for the nation. This is, in my opinion, contrary to common sense – and possibly, suicidal. (And yes, Bush did the same thing; but that was then, and this is now, and Obama was hired to fix this mess, not make it worse).

And then, when Obama’s spending spree doesn’t work, he wants to spend even more. This may be throwing good money after bad. Or something.

As for me, when money gets tight, I quit spending so much, especially on frivolous, non-survival items. This has happened several times in my life, and this approach has, so far, invariably worked. These economics, I understand.


Postscript: I just found this. Here is a good article on the Keynes vs Hayek debate, which has been raging since the end of the Great Depression. This article neatly frames my own thoughts above.

This entry was posted in Fuzzy Thinking, Philosophy, Politics. Bookmark the permalink.