A majority of Americans now give President Obama's handling of the economy a negative rating and many economists and city officials are concerned that Obama's gargantuan stimulus effort has not given the expected quick boost to the economy. Some argue this is because funds have been slow in coming due to bureaucratic red tape meant to ensure that the money spent will not be wasted. Jared Bernstein, chief economist for the office of Vice President Joe Biden (who knew that the Vice President needed a chief economist?), is quoted as saying "We're hitting the right balance between speed and oversight." Unfortunately for the American public, sound economics teaches that, regardless of how fast the money is spent or how much oversight is provided by bureaucrats, the money doled out by the stimulus plan will be wasted and will have a detrimental impact on the economy in the long term, because that is the nature of profligate government spending...
The moral of the story is that we are right to be concerned that the Obama stimulus plan will not stimulate economic progress and will not usher in the next age of prosperity. Government spending merely directs scarce factors of production away from their most productive uses. Taxation, government borrowing, and monetary inflation all produce negative economic consequences. Real economic expansion is the product of wise entrepreneurs using capital that is funded by real savings. Such economic progress results in more goods that can be purchased for lower prices. As we are seeing play out before our eyes, the only thing that government stimulus plans stimulate is capital consumption and fewer goods available for higher prices — not a recipe for economic recovery.
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My thoughts: Remember Thomas Sowell's dictum that: "The first law of economics is scarcity, and the first law of politics is to disregard the first law of economics."
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