Once again, a professional politician who believes that wealth comes from spending borrowed money has abused the patience of our nation and proposed another mechanism for wasting an enormous amount of money on a vaguely defined program which will accomplish nothing of benefit and inflict further damage on our economy – at least whatâ€™s left of it.
As it turns out, the President of the United States is rather clueless as to why the economy is in the doldrums, but under the political doctrine of â€œsomething must be done, even if that something will make the problem worse,â€ he now urges the nation to stagger into another stimulus program.
An economy can be roughly divided into three main sectors: The primary economy is one of resource-harvesting, such as farming, fishing or mining; the secondary economy is the manufacturing sector, where resources are processed into products; and then there is the tertiary economy, where services and retail goods are sold to the public. Commit this to memory, because it is important.
During the housing boom, people became convinced that they were wealthier than they actually were. Confident that their houses were going to make them rich, countless Americans went on an unprecedented consumption binge, buying cars and clothes, taking trips, patronizing restaurants, spas and every other manner of service sector businesses.
As Americans lined up to spend money they didnâ€™t have, a bubble in retail and service sector businesses was inflated to parallel to the bubble in housing prices. Land, labor and capital were all misallocated to feed this massive bubble economy, and in the process our trade deficit went through the roof. When housing prices stalled, these mal-investments were exposed.
The American people, under water on their homes, fearing layoffs and bankruptcy, no longer had the disposable income – or more accurately, the credit – to spend on consumer goods, restaurant dining or gourmet coffee. The American economy was left fundamentally out of balance; the service sector was too big, and the primary and manufacturing sectors were too small. Think about all the closed restaurants and shops in any town after the main employer packed up and left. We are facing the same effects on a national scale.
And then came the politicians. First Bush and then Obama, armed with ideas for stimulating the economy. The rhetoric used by both Presidents serves as a window to their thinking, as both Bush and Obama obsessively chanted the exact same trope – â€œGet consumers spending again.â€
Then things descended into absolute farce; through Obamaâ€™s stimulus, our new economic model would be one were the government borrowed money to fund make-work jobs, which will give some people some money to spend. Then, unemployment benefits became the paragon of economic stimulus, as the Presidentâ€™s press secretary pointed out that the unemployed will take their unemployment money and spend it, which would eventually make us rich, somehow.
Enter the â€œJobs Czar,â€ General Electric CEO Jeff Immelt, who selflessly agreed to donate his time to the service of his country. His spare time that is – when he was finished hiring several hundred Chinese nationals to manufacture fluorescent light bulbs to replace American-made incandescent light bulbs which were scheduled to be banned.
Then there is the massive expansion of government itself – by definition a tertiary economic actor (it doesnâ€™t harvest or make anything), as the government itself became the basis for the new economic model of the Obama administration: The government will tax and borrow and print money, spend it, and essentially become the new consumer class. If the American people stubbornly refused to spend borrowed money on junk, the federal government would do it for them.
It might be too late to dig ourselves out; after a decade-long spending binge the American people are broke and heavily indebted, and with no aggregate savings our country does not have the domestic capital necessary to rebuild our industrial sector. The government has placed itself squarely in the way of re-industrialization as well – at times it seems like the National Labor Relations Board and the Environmental Protection Agency got together one day and decided – over organic coffee no doubt – that the United States would simply not be permitted to revitalize herself.
And so the Obama administration continues down the wrong path; everything the Obama administration has done has been aimed at preventing the imbalance in our economy from correcting itself, and like Sisyphus pushing an impossible boulder up an impossible hill – an Ivy League lawyer with no business experience at all has declared that we will continue to spend money until we are rich again.