How Did We Get In This Mess?

Source: The Second American Revolution

Tuesday 9/21/2010

OF POLITICS, BUSINESS AND STIMULUS

There are a few things the main stream media and the liberals fighting for their political lives don’t want you to know about how we got into the current mess we’re struggling to overcome.

In the free enterprise system, most if not all successful businesses are constantly looking several months ahead to predict the business environment to determine the best course of action to ensure the profitability and sustainability of their companies.

When American businesses evaluated the election results from

November, 2008, what they saw was a disaster in the making for the American

His Royal Arrogance

economy. Not only was the newly elected President the most anti-business, anti-free market President in recent history, but he was given carte blanche to implement his “share the wealth” agenda because of the overwhelming majorities he enjoyed in the Congress.

When the dust settled, the Democrats had a huge majority in the House, the most socialist Speaker in history, and they also had a filibuster proof Senate majority as well.

Unfortunately, the administration and Congress lived up to their anti-business billing, running up trillions of dollars in debt, taking over large portions of the economy to be run out of Washington, making a mockery of bankruptcy laws in the process, passing an enormously debilitating national healthcare system and thousands of pages of new regulations (many unread and most without any hearings or public input).

It is no coincidence that, beginning just after the election results were final and extending for 6 months, businesses, anticipating the DC attacks on profitability and operating in the survival mode, shed 4 million jobs. The unemployment rate went from 6.6% in October 08, before the election, to 9.6% just 6 months later…all in reaction to the anti-business environment this new administration and lap dog Congress represented.

President Obama has told us publicly that we cannot hold him accountable for the more than 2.1 million jobs that vanished between his election and his inauguration…and a compliant press have echoed his “Blame Bush” mantra, the truth is that his “hope and change…share the wealth” philosophy of government sent businesses scurrying for safety before he could put his agenda into place and punish successful entrepreneurs.

"It's Bush's fault" - BHO

Since May 09, having achieved a sustainable level of labor expenses, businesses have reduced the number of layoffs and in some cases actually added a small number of employees. Therefore, the unemployment numbers have stabilized but there has been no appreciable growth (except in the public sector).

The administration expresses frustration that American businesses have stockpiled several trillion dollars in capitol they have not reinvested in their companies. But, with the uncertainty of the future of the business environment, facing possible huge increases in energy costs, unknown liability in wake of the healthcare bill, 1000s of pages of new regulations, with more threatened and the looming tax increases promised by this administration, is it any wonder they are hesitant to invest in this economy?

HOWEVER:

In keeping with the premise that successful businesses are always looking ahead, as the potential for a significant change in the political environment in DC this November becomes more certain, the stock market has begun to rally. If Republicans take control of the House of Representatives and are able to balance the power in the Senate, promising a friendlier legislative environment and reduced federal spending and, if the current tax rates are extended across the board, those companies looking to the future, will begin to reinvest in the economy, private sector jobs will begin to reappear and we will see the return of a vibrant and growing economy.   Please recognize however, that the economic environment described in this paragraph is the antithesis of what the Obama/Democrat government has pursued these past two years.

Their trillion stimulus package is emblematic of their philosophy and explains in tragic detail why their big government approach is not the answer.

While this administration, the Democrats in Congress and the press are proclaiming, “It’s not as bad as it could have been.” they are either ignorant of the facts or intentionally misleading the public.

The Congressional Budget Office, in scoring the stimulus bill for the Congress said on February 3, 2009, (two weeks before the stimulus bill was signed into law) that in the long haul, the stimulus bill would be worse than doing nothing.” Judging by the results 20 months later the CBO projection was spot on and the Administration is flat wrong…it is worse than if they had done nothing.

Why has the CBO projection proven true?

Although difficult to quantify exactly, most economic models predict that one dollar of government spending injected into the economy recycles three times giving a major boost to private sector spending, thus creating demand and jobs. The Democrats used this model to promise that unemployment would not go above 8% if the stimulus bill was passed.

The problem is, that the models also show that the approach they chose, siphoning a trillion dollars from the private economy to wash through the Washington bureaucracy before returning it to support labor unions and public sector jobs, means that only about 35 cents of every dollar drawn from the economy is returned…so the stimulus bill, at best, has added less than 10 cents return for every dollar spent.

But even worse, these same economic models show that if the stimulus money is borrowed, the return is closer to a loss of 10 cents for every dollar spent; therefore, the CBO was correct in projecting that borrowing a trillion dollars to stimulate the economy would be worse than doing nothing.

Could the government have achieved the desired economic stimulus and avoided the extended pain of the recession?

The $3 return on every dollar invested could have materialized if the “investment” had not been taken from the economy and sent to Washington in the first place. Instead, if a trillion “tax holiday” had been established, leaving the money in the private sector…the resulting $3 trillion boom would have greatly shortened the economic downturn and resulted in a much quicker recovery than we are currently experiencing.

Remember these economic truths when you vote November 2nd!

Capt Jim Kinney, USN (ret)

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This Inspire & Ignite newsletter is intended to provide an alternative, conservative view to the one note chorus of the liberal mainstream media.

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