Sunday, February 8, 2009

Why the Obama New Deal Spending Plan is Bad

Originally, I was going to title this "... Will Fail", but that would be misleading. The goal of the massive pork wasteful spending plan isn't to help the country, as many politicians claim; rather it is designed to give special-interest handouts to Democrat supporters and push the Democrat agenda, at the expanse of the country. To this end, I believe it will be a success, just like the original New Deal was a success at pushing a largely socialist agenda on the American people during a time of crisis. Why am I convinced this plan is not even an attempt to help the country? Read on...

First, I would recommend reading this blog post, which describes in fairly good detail why the original New Deal was a complete failure at helping the US economy. To quote from a quoted article,
In 2004, a team of UCLA economists concluded that the policies of the New Deal, which suppressed competition and kept unemployment in the range of nine to 16 percent, actually prolonged the Great Depression by seven years.

Now, it doesn't take a PhD economist to see that government market manipulation and suppressing free-market competition causes the economy to do poorly. In fact, there are many example of fascists and socialist governments in history that we could look at to demonstrate this point. What's interesting in this case is that we have an exact parallel to what's currently happening (massive government spending on market manipulation and government jobs), and we can see exactly what the results will be: a prolonged depression and more debt. The fact that we have such an exact parallel example to learn from and politicians are still telling us that this time will be different is stunning: it's either textbook insanity, or one of the most pronounced and audacious lies in American history. I'm betting on some of each; in either case, though, it's bad for the country.

Now, you might say that I'm all negative, with no good ideas of how to "fix" the current "problem". I would certainly critique anyone with only criticism and no plan to fix a problem: look at all the politicians stumbling around the looming Social Security Ponzi scheme leftover from the New Deal; at least the people trying to privatize retirement had a viable plan to fix the problem, even if it might not have worked. So, here's what I might do:

First, I think the government should be careful to only solve "real" problems. By that, I mean market corrections happen, and trying to reflate every bubble as it's popping is a recipe for beating yourself in the face, over and over. There's no reason for the government to give Trillions of dollars to the banks to pay off all their bad debts, and even less reason the Fed should get a free pass for allowing all the systemic risk to become so large in the financial industry. Everyone who participated in the housing securitization debacle must be allowed to fail if they are insolvent; it's essential for the free market to operate correctly in the long run.

Second, economic downturns are a necessary part of a healthy economy, especially in a country as litigious as the US. There's simply no other way for otherwise healthy countries to offload dead-weight employees than layoffs during slow times: it's the only thing which is allowed by our courts. Consequently, we could use a downturn every few years for optimal business operation, even if it only lasts a few months. As the government, I would not take any action until or unless unemployment got into double digits: anything less is a normal, required, and as it turns out, beneficial downturn.

Third, if and when we feel like it's essential for the government to sacrifice the future prosperity of the country by printing money to stimulate the economy, it's also essential to make sure it's done the "right" way. The only spending which helps the actual economy in a long-term, meaningful way is spending which creates or preserves jobs in the private sector, without interfering in the free market or creating mal-investment through special-case rules or special-interest handouts. To this end, several things could be considered: tax cuts (which, if done fairly and non-progressively, distribute extra money without bias or manipulation), consumption (that is, the government buys goods and services as a normal consumer from private industry, stimulating production), military spending, or something equivalent. I would be inclined to try one or more of these, while being careful not to allow the government to fall into any of the pitfalls which could prolong the recession and hurt the economy in the long-term.

Anyway, I hope this blog post has been educational (for the 1-2 people who will read it). Here's hoping the damage isn't too great in the next four weeks (not to mention four years), and that the country is strong enough to eventually recover, despite the Obamanation.


  1. I hope this blog post has been educational (for the 1-2 people who will read it).
    If you get a free tracking object like
    Feedjit, you'll probably be amazed at how many people at least go to your blog.

    Here's hoping the damage isn't too great in the next four weeks (not to mention four years), and that the country is strong enough to eventually recover, despite the Obamanation.
    These stimulus measures won't produce more debt than the Bush presidency did, assuming we get the budget under control after the stimulus is over. I still have hopes that some hard-to-dismantle programs (that you and at least a third of the population will oppose) to help the truly poor will come out of the next eight years. I've got a few more items on my wish list. If we get half of them, I can take the pandering and reckless spending as the price.

  2. What, pray tell, would lead you or anyone else to conclude that the government has any chance of getting the budget under control, post porkulus bill or at any other future point? While it's true that Bush did run up a fairly large deficit, "large" is a relative term. For example, the size of the eventual pork spending bill we're hell bent on passing is roughly equivalent in cost to the entire Iraq and Afganistan military actions over the last 7 years, combined. At least with the military spending, we never had a $40 Billion house flipping subsidy...

    Honestly, I wouldn't mind helping the poor, as long as that help comes in the form of job and prosperity opportunities, and not just government handouts and wealth redistribution. A free market economy is the most powerful force known to man for raising the standard of living for entire countries, and I sincerely hope that some part of the US's historical free market survives the Obamanation, so we at least have a chance to rebuild the country from the ashes. As they say, the audacity of hope.