Economists Take On Obama

by Sal on January 29, 2009

in Economy,Politics

Obama recently has been acting if his economic stimulus ideas are universally accepted.  Indeed, he recently argued:

There is no disagreement that we need action by our government, a recovery plan that will help to jump-start the economy.

Indeed?  Well, a group of over 200 economists, including Nobel laureates, have written a letter to Obama criticizing his economic stimulus plan.  This letter is being placed in full-page ads in newspapers all across the United States.

With all due respect Mr. President, that is not true. Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

The reference to Japan struck me as interesting.  Last night, I was reading Debt of Honor, a novel by Tom Clancy in 1995.  Part of the storyline has to deal with the economic crisis encountered by Japan in the 1990s.  I decided to do some research on that recession.  It is remarkably similar to our own crisis today.  Both crisis’ were triggered by housing bubbles that ended up causing problems with bank solvency.  Both were years in the making due to excessive government intervention in the free market.  Japan responded with increased government spending and raising taxes.  We are on the verge of doing the same.  Japan’s recession lasted ten years, and is known, as noted above, as the “Lost Decade.”  With this stimulus vote, I fear we are on the way to a similar situation.

H/T: The Patriot Room

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