The coming economic meltdown

Steve posted earlier on the economy and the $800 billion stimulus package that appears to be doing nothing to lower unemployment. His biggest fear is that the Democrats will use this to go back and request more money. A legitimate fear to be sure BUT THAT IS NOT my biggest fear. My biggest fear is that the numbers indicate a languishing economy with no money left to truly stimulate the economy. Newt Gingrich put my fear into words on Fox News Sunday yesterday when he told Chris Wallace … Obama’s problems will be coming down the road.

The numbers would seem to indicate the money the Democrats are spending is not stimulating the economy and the result could indeed be frightening. A few examples.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration’s plan. In one of the few positive signs, the actual 2009 deficit is likely to be $250 billion less than predicted because Congress is unlikely to provide another $250 billion in financial bailout money.

And yet the evidence as pointed out in Steve’s post would seem to indicate the stimulus is not stimulating employment … even on a government employee level. Case in point, the money appears to be being spend not on need but on … politics?

Although the intent of the money is to put people back to work, AP’s review of more than 5,500 planned transportation projects nationwide reveals that states are planning to spend the stimulus in communities where jobless rates are already lower … Altogether, the government is set to spend 50 percent more per person in areas with the lowest unemployment than it will in communities with the highest.

The only conclusion one can come to is that the Democrat spending proposal (roads, bridges, schools, yadayada) is not only not producing the desired affect … but instead is bankrupting the nation. Leaving nothing left for a tax cuts that actually might produce growth … nothing for generations to come.

We also are learning, first hand in real time, that if you do not stimulate the private sector, where capital is created which ultimately leads to more wealth and jobs being created and thus a growing economy, the Feds will quickly run out of cash to stimulate the government sector, leaving behind a sea of debt and … higher interest rates and taxes.

“Goosing” the economy via government spending only works when it is, first and foremost short term, and is limited enough to allow the private sector the room and capital to grow to ultimately pay off the government tab. Unfortunately there is every indication this stimulus is neither temporary not limited and likely doing little more than crowd out the private sector. More on that in a follow up post. Suffice it to say … the coming debt/economic stagnation tsunami will soon be upon us if this administration does not change course soon.

Generational theft indeed … and likely, nothing to show for it.

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  1. […] This is really the third in a series of posts but in many ways I think is the most important. Make sure you read Unemployment estimates with and without recovery plan and The Coming economic meltdown. […]

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