Time, more than anything else, reveals the quality of our decisions. This principle applies to every human endeavor. And it is amazingly revealing when it comes to the policies of the Obama administration. Now that the economy has ground nearly to a halt, I believe it is time we look at what has brought us to this point. After nearly 3 ½ years, it should be clear that the world is in such a precarious position mostly due to the policies of Obama, Bernanke, and Little Timmy Geithner.
Greece is probably gone from the EU, and I predict that it is highly likely that two other nations will also be forced to leave the Euro behind. Portugal almost for sure, and probably Spain or Italy as well. Even Ireland, nearly fully recovered from their previous debt debacle is coming under pressure again. Obviously, sovereign nations create their own debt crises, but the failure of the Obama administration to strengthen the American economy has only amplified the issues facing Europe and the rest of the world.
Portugal and Greece are by their own decisions lost causes. But Italy could very likely have been salvaged, and Spain almost certainly so after electing a very conservative government. But Europe has suffered from an American economy that is not able to support the previous levels of European imports, or even maintain a helpful level of travel and tourism that could have provided a least a little shot in the arm to some of the struggling countries such as Spain.
Almost from the moment Obama was elected, I was among the chorus of voices that warned about the destructive nature of leftist policies that were being implemented, the results of which we are seeing play out today. At first, there was little impact of those policies, not even inflation, as well as little benefit. But oh, how times have changed!
The printing of money has definitely caused the increase in consumer prices now. This is best seen in food and gasoline prices, which despite being labeled as “volatile” but will never again go as low as they were in 2008 because the price increases are due to a weak dollar and not some gigantic spike in demand.
That is where Keynesian economics has gotten the formula wrong; an economic recovery occurs because of the money in people’s pockets. The problem right now is that no one has any money, a direct result of following Keynesian economic policy. But it need not have been this way.
There are 3 parts to the Obama administration’s error; the stimulus, the “Quantitative Easing”, and the racking up of government debt.
First, the stimulus. According to USA Today, the average salary of a generic government worker is $96,481 (average of federal and state averages) while in the public sector the average worker receives $61,051. Let’s assume that 50% to 100% of the stimulus was used to create jobs (fanciful I know, but humor me). In the private sector, this is enough to create between 9,100,273 to 14,381,418 jobs. But by paying the exorbitant amounts received by government employees, only 4,550,118 to 7,190,709 jobs would have been created.
In reality, the Obama administration has only created 4.3 million jobs since the bottom of the recession, leaving them somewhere between 250,000 to over 10 million jobs short of what would have been created with the same money in the private sector. And that does not include getting nothing at all out of the other 4 + trillion in deficit spending over the last few years.
The borrowing and printing of the five trillion has had two other negative effects not counted on by the left and those who support liberal economic policies. Let’s review the scope of the damage to see what has made the borrowing and printing of the 5 trillion so damaging. It all goes back to the amount of money in people’s pockets.
If Obama had been even moderately reasonable in his economic policy, there is no reason why he could not have limited the federal deficit to $300 billion a year. And even if he had spent the equivalent of all 4 years of that already, the deficit would only be up $1.2 billion. That would have left $3.8 billion of extra money in the market. If we assume $800 billion of this was printed, $3 trillion still would have been left to investors.
Assuming $1 trillion of this money came from overseas investors, American investors would still have been left with $2 trillion in cash to put back in the economy. This money would have been focused in the areas where we are hurting the most economically. Investors could have purchased thousands of the homes still underwater, easing the housing crunch considerably more by now. And, they would have also provided somewhat of a source for small business investing, which would have helped buoy job growth. And I am not just guessing here--these are traditional uses of a good percentage of investor monies. Don’t believe what you see on TV, not everyone puts all their money into the stock market.
The government may have made short sales easier, but that is still not the same thing as actually buying short sales. Instead, all of these trillions investor money was sucked up by the government, mostly to be wasted. How bad is it? Here in the Phoenix area, the housing market has been propped up mostly by investors from…Canada.
Consumers can’t help, because the printing of the $800 billion has raised prices across the board, regardless of claims to the contrary. For most of the 2000’s I would not spend over $2 for a box of cereal, now I have to spend $3 or eat cheap Corn Flake knockoffs. Truth is, the weak dollar has guaranteed we will never see $2 gas or cereal ever again.
This keeps consumers from helping in the recovery, because it is the money they have left after paying bills and buying necessities that consumers use to buy all the other things in the economy that spurs growth. Inflation, even if the government does not want to recognize it, has hamstrung consumer spending. Like I said, the problem is no one has any money - not investors, not consumers, not small businesses. And this is a problem.
Instead of being in a period of economic growth, we have borrowed and spent trillions of dollars without any return. We could have been well into a solid recovery at this point and once again the economic engine that supports the rest of the world, but the Obama administration blew it. If the $2 trillion dollars the government sucked out of private investor's pockets had been put into hiring people in the public sector, spread over the last 4 years, it would have created 8,189,874 permanent jobs.
Think about that.