Do We Need Another Stimulus?

If there is any “recovery,” it is a false recovery, one based not on any tangible economic progress but rather on financial trickery and printing money. Our “recovery” is a fraud perpetrated by Washington and its Amen Chorus in elite higher education and the mainstream media.

For the U.S. economy to have a real recovery, the economy first must shed the huge number of malinvestments that piled up like garbage on New York streets during the last unsustainable boom. Unfortunately, as the economy dumps these failed investments, that means people who were employed in those areas also lose their jobs, which simply is unacceptable to the political classes.

Had the Bush and Obama administrations left the economy alone, those malinvestments would have been shed quickly and the economy now would be moving toward a real recovery that could be sustained over time, employing new people in those sectors. Alas, the political classes believe that “inactivity” is anathema, so Bush and Obama engineered hundreds of billions of dollars of “bailouts,” which have served to prop up whole sectors of failing enterprises.

What does that mean, economically speaking? It means that instead of being directed into those sectors that could have grown without aid from the government, resources are being shoveled into the economic equivalents of bottomless pits. Americans are forced to prop up domestic automakers that are bankrupt, keep zombie financial institutions going on life-supports, engage in energy policies that literally destroy wealth and produce less energy, and to be taxed even more so government can destroy the part of the medical sector it has not already ruined.

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The Worst is Ahead of Us

In fact, not only have Obama’s policies made this downturn worse, the policies have not yet begun to run their full course, and that means we have further to go before we hit bottom...

First, we have to realize that the trends of mass layoffs had to end, albeit temporarily...

Second, the effects of the environmental policies such as “cap and trade” and other new regulations have not yet been fully felt by U.S. employers...

Third, increases in the minimum wage will take their toll on lower-wage workers, while other new labor and “workplace safety” policies are going to make it more costly to run a business...

Last, whether or not Obama’s health plan will pass Congress intact is irrelevant. The government is going to make medical care more costly, less available, and a greater financial burden on employers and employees. That is a given, and it also translates into higher rates of unemployment.

At best, the “stimulus” has created a lull in the downturn, an eye in the economic hurricane...

From its expensive wars abroad to its multitrillion-dollar borrowing to the continued criminalization of routine business practices, the government has sent a message to private enterprise that it is the enemy. The rest of us will feel the blunt edge of government policy as we watch the economy implode.

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Recommended Reading: Roads, Bridges, and Socialist Capital

"Neither the US government nor the State of Minnesota, which jointly "own" the bridge that collapsed, received "profits" from that bridge. Once it was built, it represented pure cost to these governments.

Thus, we then see the sets of incentives of which both Edmonds and Sowell spoke now making more sense. The owners of a privately owned bridge would have the incentive to keep it in repair because the bridge is bringing them income; loss of that piece of capital is the loss of the income that flows from it. Therefore, we see the economic calculation for privately owned capital at work.

Governments, on the other hand, operate according to a very different economic calculus. Since the bridge does not bring an income to the state, at least directly, it is much easier for politicians to want to spend on those things that provide fame, glory, and votes. In fact, in a perverse way, the bridge collapse in Minnesota provides a benefit to politicians, since they now have an excuse to confiscate even more taxes from individuals, thus expanding the power of the state."

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