by Locker Room contributor
A year ago (January 23rd, 2009) when President Obama was on the verge of passing his nearly $1 trillion stimulus package, I published this assessment of the plan in John Hood’s Daily Journal. In that article I pointed out that the plan not only would not, but could not stimulate economic growth and reduce unemployment. The argument was simple; all government spending must, by definition, preempt private sector spending and investment, no matter how it is financed. I also predicted that if the new spending was paid for with deficit spending that it would squeeze out borrowing and therefore job creating investment by the private sector. Private sector borrowers would not be in any position to compete with the federal government for limited supplies of loanable funds. I made these claims with confidence, not because I have a crystal ball but because the basic laws and principles of economics tell us that this must be the case. There ain’t no such thing as a free lunch!
Well, a year later where are we? After being promised that the stimulus package would keep unemployment rates from rising above 8 percent we are now at 10 percent nationally and 11.2 percent in North Carolina. And the Obama Administration’s latest complaint? Well the nasty old banks aren’t lending to entrepreneurs and small businesses. True enough. But this is not the fault of banks and other lending institutions. Responsibility for the credit crunch lies completely with the massive amount of borrowing by Obama’s own Treasury Department.
If the president’s new focus on jobs and the economy continues along this same path, which seems likely, we will be looking back a year from now telling the same story. It has been said that the definition of insanity is continuing to do the same thing over and over again, expecting each time to get a different result. If this is true then this Administration is cirtafiable.