Spend, Spend, Spend

B Hussein is getting advice from his economic team that he must run huge deficits and push enormous government spending programs to get the US on the road to economic recovery.

Many of these government programs involve the "greening" of industry and heavy spending on Federal buildings to make them more efficient. Of course Jimmy Carter tried this. He spent in the neighborhood of $15-20 Billion to find an alternative to oil and we taxpayers have nothing to show for it today. My guess is that B Hussein will spend many multiples of Carter's folly and have a similar result. Why? Because oil is cheap and oil is effective. Even at $143 per barrel, oil is the best energy bargain there is.

B Hussein is trying to force the economy where he wants it to go. In the meantime, he is suffocating business by employing scarce capital and resources into larger government instead of letting it find its way into productive businesses. Government does not create value, it only robs people of their money. Government programs are nothing more than paying people to dig holes and others to fill them in. They might be disguised as something else, but the results are the same. Expensive programs that add nothing to the wealth of society.

No on entity, not even the Federal Government, can force the economy into a direction it does not want to go. For that matter, the Russians could not even accomplish that feat with fear and intimidation. Market forces are unstoppable and the sooner B Hussein realizes that the sooner we will be on the road to actual recovery. This means companies must fail (and government must let them) and the government cannot run unlimited deficits.

Speculation is that B Hussein will propose over $1T in deficit spending when he takes control. This is money the government does not have. They will either raise taxes and/or borrow more money. If they raise taxes (on individuals or businesses), they send the signal that government knows how to use money more effectively that it citizens. If government decides to borrow more money, it robs the private sector of loans to finance expansions or improvements. After all, there is only so much investment capital to go around. What the government takes, private industry losses. Borrowing will much more expensive, as private sector is forced to compete for funds with the government, and return on investments lower since interests rates will be higher. Since returns will be lower, fewer projects will meet private sector hurdle rates thus fewer of them will be completed.

What needs to be done is to close Federal buildings instead of improving them so government can get even bigger. Government spending needs to be balanced with tax receipts, and the corporate tax rates need to be lowered to levels that are competitive against our economic competition around the globe. Lower government spending and lower corporate taxes mean the private sector will grow creating new jobs and industries. These jobs will make society better and new industries will employ workers in areas where there will be improvements in standard of living.

Bigger government means more bureaucracy and more waste. Bigger deficits mean our children and grandchildren will live in a more uncertain world where their economic security is at risk (as if more than 40% of the US Federal Budget to pay interest on debt was not enough today). A program that decreases the size of government, spends less, and lowers taxes will take incredible courage and there will be short-term despair. However, this is the process of economic pruning that will make society more prosperous in the future.