2010 Stimulus Trickery

The economy has not responded to the stimulus plan passed in February. Unemployment actually rose again in July from 9.5% to 9.8%, but the media managed to ignore the statistics about “discouraged” workers – those who have given up looking for work and who caused the rate to rise – and made it look like the unemployment rate dropped to 9.4%.


When Bush was president the media made every effort to make sure that every last “discouraged” worker was counted in order to push up the unemployment rate.


President Obama has all the cards right now. Only about 10% of the stimulus money has actually been spent according to various news reports, and that very may well be intentional. So why so slow in dribbling out the stimulus?


Answer: 2010


Right now, no matter how dissatisfied voters are, nobody can do anything about Obama. He is president and there are no big elections until November 2010.  He is pushing through every radical program that he can because he knows he is going to lose Democrat Congress seats in the 2010 election. He must act now, even if it is unpopular.


So what is he going to do with the huge chunk of remaining stimulus money?


He is going to hold onto it and then use it to artificially pump up the economy in 2010 for the election. He is going to target any close congressional districts and shower them with government cash to try and assure a Democrat win in those districts. He is going to carefully spread money around to influence the national economic statistics a few months before the election so that the public thinks things are getting better.


This is a risky gambit, however. Because currently long-term pressure is building against Obama as reflected in falling poll numbers, while he is making many mistakes like saying that the government-funded post office is having lots of problems while advocating more government  control of health care.


And this negative political pressure may not be relieved by stimulus spikes because those spikes will be vigorously challenged as short-term by Republicans.


When the Bush administration used a stimulus of more than $150 billion in taxpayer rebates in May 2008, it did goose the economy for a short period. But eventually the surge went away.


The reason is simple. The economy may respond to rebates like we feel jolted by a cup of coffee. But it needs much more. To initiate a new nationwide growth strategy, the economy needs long-term tax and spending policies that favor hiring and business expansion. Without a long horizon line ahead, business can’t possibly plan to make the capital investments it needs. There is too much uncertainty.


Temporary consumer spending spikes do not give business the confidence it needs; they only feed the month-to-month bottom line.


The American economy boomed in the 1920s and again in the 1980s because presidents Hoover and Reagan both lowered tax rates on top earners substantially, Hoover from 63% to 25% and Reagan from 70% to 28%.


Obama, however – being a socialist who knows only one kind of economic policy – is going in the other direction, talking regularly about increased taxes on small business and wealthy individuals who have much of the investment cash in America and the expertise to deploy it. But they are holding onto their money waiting for better times and more reassuring policies. Most money is “on the sidelines” right now, according to economists, not “in the game”.


Now the same media that are refusing to report on worsening unemployment are declaring that the recession is ending. Newsweek even said recently that the recession is over. These are the same media and Democrats who caterwauled when Bush had 5% unemployment and gushers of money flowing into state and federal coffers, saying that Bush only cared about “tax cuts for the rich.”


Meanwhile Obama has been claiming that he “inherited” the economic crisis when in fact it was built up over long periods from reckless lending forced on banks by the government itself.


The Community Reinvestment Act of 1977 forced banks to make loans to poor people who banks declined to loan to in the first place. Then the Federal National Mortgage Association began buying the CRA loans from the banks, to shift the risk onto the taxpayer. Then in 1999, FNMA began buying NINJA loans, those made to people with No Income and No Job. This is the road to disaster, and that is the disaster that we are in now. Conservatives have warned for decades about these kinds of policies.


And now Obama is trying to get us out of this disaster with more spending, which is simply doubling down on CRA, FNMA and big government. It will not work.


Like CRA and FNMA, more government stimulus spending will give the appearance that the economy is improving when it is not. And rather than reform the lending system and government mandates like CRA, Obama & Co. are forging forth into uncharted waters of massively increasing debt, and tax and regulatory policies that are chasing jobs overseas and harming the economy long term.


Obama and his cronies know only thing – spend, spend, spend. In New York state, which is deep in debt and losing jobs and population every month, the Democrat governor David Paterson even recently suggested that the state give poor kids $200 each for back-to-school supplies! This is on top of the tens of billions in subsidies for those kids’ food, clothing, shelter, education, medical care and everything else that has put once-prosperous and powerful New York in deep red ink. It never stops with these Democrats.


Will Obama’s 2010 Stimulus Strategy work?


Only if the economy starts to rebound on its own, which it will to some extent. But the economy has too many problems to be turned around significantly unless major policy shifts are implemented to stop deficit spending; to reignite manufacturing through lower tax rates on corporations and fewer environmental restrictions; to stimulate the housing market which has unprecedented problems; to move to market solutions on health care; and to promote sensible energy development like nuclear power. Obama is pursuing none of these. This bodes poorly for the long term, along with the coming end of Bush’s 35% tax rates on upper-income earners.


Americans today are much more educated about economics and the effects of debt and government spending than ever before in our history. They no longer equate government largess with positive values, but with negative ones like debt. And that is why Obama’s 2010 plan is likely to face rough seas and a big Democrat defeat in the year that he was hoping to just stay even and hold onto Democrat gains of 2006 and 2008.


Please visit my website at www.nikitas3.com for more. You can print out for free my book, Right Is Right, which explains why only conservatism can maintain our freedom and prosperity.