The Recession Looks to Be Over. Well, Not Here, But Everywhere Else.
I want to write more on this editorial by Bush-administration economic guru Bruce Bartlett, but, for now, let me just give you his central point. Bartlett contends that our recession, which is still going on despite unprecedented government attempts to make it end, required government solutions.
Over the past year, we have heard much criticism of the stimulus and Keynesian economics from conservatives, but we have heard precious little about what should have been done instead once it was clear that a very serious recession was underway. This implies that conservatives think the government should have done nothing and allowed the economy to crash or recover on its own.
Setting aside the humongous strawman right in the middle of the point, there is evidence that a “do-nothing” or at least a “do-little” strategy would have worked better than what our government did. Right now, it look is as if those nations who didn’t launch a New, New Deal are doing better than we and haven’t been stuck with even more debt that will slow them down for years to come.
Meanwhile, in Brazil, India, China, Japan and much of Continental Europe the recession has ended. In the second quarter this year, both the French and German economies grew by 0.3 percent, while the U.S. economy shrank by 1 percent. How can that be? Unlike America, France and Germany had no government stimulus worth speaking of, the Germans declining to go the Obama route on the quaint grounds that they couldn’t afford it. They did not invest in the critical signage-in-front-of-holes-in-the-road sector. And yet their recession has gone away. Of the world’s biggest economies, only the U.S., Britain and Italy are still contracting. All three are big stimulators, though Gordon Brown and Silvio Berlusconi can’t compete with Obama’s $800 billion porkapalooza. The president has borrowed more money to spend to less effect than anybody on the planet.
Actually, when I say “to less effect,” that’s not strictly true: Due to Obama, one of the least-indebted developed nations is now one of the most indebted – and getting ever more so. We’ve become the third most debt-ridden country, after Japan and Italy. According to last month’s IMF report, general government debt as a percentage of GDP will rise from 63 percent in 2007 to 88.8 percent this year and to 99.8 percent of GDP next year.
That last paragraph is where our future trouble is buried. I have no idea how our economy can sustain itself when our government owes as much wealth as our entire country creates in a year. All that money has to go somewhere; debt just doesn’t float around in the aether until it dissipates. We owe that money to someone and, increasingly, the total amount we owe is becoming more than we may be able to pay. According to Mark Knoller, under current projections, our National Debt will hit more than 90 percent of our total GDP in 2019.
Keep in mind also that our debt affects our economy as well, meaning that the projected GDP in 2018 may well not be as strong as the government economists believe it will be. In that case, we are well and truly hosed.
No Stimulus Plan can do any good if it pushes current problems into the future, where they end up bigger than they were in the first place. That’s just common sense. If we borrow a dollar now and end up having to pay, say, three dollars back later, we’d better darned-sight make sure that we’re making enough to afford to pay it back when the debt is due. We’re not doing that. In fact, we’re doing the exact opposite of that. The current administration is making things very difficult for those who create real wealth by threatening to cripple small businesses with higher taxes and government mandated fines to pay for government-run health care and unnecessary environmental schemes. There is no answer from the fans of the Stimulus Bill, Bartlett included, for how they plan to create the amount of wealth required to pay back all they’ve borrowed in the past seven months. But if they are intent on preventing the private sector from doing it, they need to explain how the government can (remembering that “creating wealth” is not the same as “printing money”).
The real question isn’t what we should do when the next recession hits. The real question, which I would like to see Bartlett try to answer, is what we should do to pay for what the economic wastrels have done so far.
Other Posts of Interest:
- The Pelosi Rule: Just Agree to Vote Yes and She’ll Let You See the Bill
- Joe Biden’s Wacky, Mixed-Up Economic Stimulus Fantasy Land
- Next, the Corned Beef on Rye Stimulus!
Category: The Economy and Your Money
The reason there is no recovery here is that other countries just bought securities based on bad loans bought by our government supported by Democrats.They don't have the foreclosures that happened when people had to choose between buying $4 a gallon gas to get to work or paying there mortgage.They don't have the job losses in construction when credit became tight and noone could buy a new home and the job losses from those job losses.
Where was there $4 a gallon gas this year? We haven't even hit $3.
Of course, credit is tight because banks have to hold onto their money to obey Federal rules. Gosh, if only there were some way to infuse those banks with millions of dollars of customer money say, but lowering the taxes of people so they would spend a bit and save a bit in their local banks.