Its Government Spending That is Killing the Recovery

Lots of great news is coming out now that the Obama stimulus (i.e., spendulous) is proving to be a flop.

Nolan Finley of the Detroit News provides an airtight argument against the claim by the Obamaites that the stimulus prevented another depression.  He writes:…

Wait a minute — economists are now saying the Great Recession ended in June of 2009, when the economy began growing again.

But President Barack Obama is defending the $787 billion stimulus package, which failed to deliver the promised reduction in unemployment, by claiming it kept the economy from falling into a depression.

And yet, according to some economists, the recession was over before the stimulus dollars were spent.

We’ve been had, folks. Nearly $800 billion of our money was spent to end a recession that was already over. The massive spending didn’t put Americans back to work. So all we end up with is a hugely expanded government and a gigantic debt that will be repaid with higher taxes on either ourselves or our grandchildren.  

And it’s the expectation of higher taxes that will result from higher government borrowing and spending that is the reason for the sluggish economy, so says Alberto Alesina, Professor and former chairman of the Department of Economics at Harvard University (of all places).  Professor Alesina writes in the Wall Street Journal:…

Politicians argue for increased stimulus spending, as opposed to spending cuts, on the grounds that it would speed up economic recovery. This argument might have it exactly backward. Indeed, history shows that cutting spending in order to reduce deficits may be the key to promoting economic recovery.

In the U.S., meanwhile, recent stimulus packages have proven that the “multiplier”-the effect on GDP per one dollar of increased government spending-is small. Stimulus spending also means that tax increases are coming in the future; such increases will further threaten economic growth.  

He argues that the best medicine for the economy is to cut government spending and cut taxes.  Read the whole thing!

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