Keynesian economics holds that the key to promoting economic recovery is to increase federal spending, deficits and debt. If that sounds nuts, that is because it is. Borrowing or taxing a trillion dollars out of the private economy to spend another trillion dollars back into the economy does nothing to promote the economy or economic growth overall on net. Counting dislocation effects of the policy, and the negative incentive effects of any higher taxes to finance the increased spending (higher deficits are recognized in the market as increased future taxes), the result is actually an overall net drag on the economy. That is why President Obama’s blowout stimulus spending of nearly $1 trillion adopted as one of his first acts in office in 2009, never worked to produce the expected economic recovery and growth. Instead, it produced the worst economic recovery from any recession since the Great Depression, reflecting the net drag on the economy discussed above, along with Obama’s explicit tax rate increases, and the Fed’s counterproductive monetary manipulations.
Posted on: Wed, 11 Sep 2013 16:47:01 +0000
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