President Obama has taken to arguing that his stimulus plan has worked and that if Congress would only pass the second one he has proposed unemployment would start to drop and the economy improve. Let’s look at the facts.
In a Wall Street Journal article worth reading, noted economist Arthur Laffer explains quite well why the President’s argument is sheer fallacy. The statistics show that increases in government spending result in relatively proportionate decreases in GDP. Since 2007, those nations in the 34 nations of the Organization of Economic Cooperation and Development with the highest spending increases also saw the smallest GDP growth. More importantly for Americans though, as the Obama Administration increased spending (up 7.3%) the growth in GDP shrunk (down 8.4%).
The reasons are simple. Stimulus is by definition spending public money on “suffering” business under the theory that it will jump-start those businesses and get them off and running again. However, that public money has to come from somewhere. Tax payers – more importantly tax payers who have worked hard and are earning an income – have to pay money into the system in order to cover these payouts. The end result is the biggest redistribution of wealth in American history. That’s right: redistribution of wealth.
Looking at in a more nuanced way, the government takes money from those who are productive and gives it to those who are not. The result, as Laffer points out, is an inevitable outcome. Those working hard and making an honest wage take home less and those who do nothing or are unsuccessful take home more. The result is an incentive system that favors non-producers over producers and depresses economic output.
If one reviews the economic numbers and honestly assesses the success of President Obama’s economic policy, there can be no other conclusion but that it has failed. Unemployment remains high (not to even speak of underemployment), the federal deficit continues to grow as a percentage of GDP, and the economy refuses to grow.
It’s not rocket science. It’s common sense. The President’s policy has failed and a second stimulus would be a disaster.