Skip to comments.Don't be surprised or fooled by the "recovery" later this year
Posted on 07/11/2009 11:04:26 PM PDT by dangus
It doesn't take an economic recovery to have an increase in the Gross Domestic Product, because government spending is included. The spending authorized by President Obama's stimulus package will result in a positive GDP as long as the private sector economy does not contract at an annual rate faster than 5.3 percent. Or put another way, the private sector economy could experience the fastest contraction since the 1930s, twice as fast as the past year's, and the mainstream media will be able to report economic growth.
Don't be fooled by this. When the government stops spending the money, the economy will be no larger than it was had the government not spent the money. If the spending masks a 5 percent decline in the GDP, the GDP will decline by 5 percent when the spending is finished. This happens whenever deficits, including those caused by tax refunds, are used to combat a recession. Severe recessions often have "double dips" when deficit spending is curtailed, such as happened in 1937 and 1982.
Tax refunds can also spur temporary gains in the GDP. The theory behind them, however, is that preventing unemployment, factory closings, and other inefficiencies into the economy, true economic growth can occur before the effect of the refunds is finished. The theory behind permanent tax cuts is that the economic gains they trigger can offset the loss of revenue: A 25% tax can yield more money than a 30% tax if 20% more money is taxable.
Obama has left liberals in a severe quandry. The trillion-dollar stimulus will expire. Astonishingly, the stimulus neither stirs private investment to aid economic growth, nor does it yet perpetuate government spending beyond its expiration. This means that the United States will not need conservatives to be elected for the illusion of economic growth to be ended next year. There will be a second dip to the current recession, and it will begin before the 2010 elections.
Therefore, conservatives, do not flock to "fiscal conservatives." A conservative is a conservative is a conservative. The next Republican-led government must undo whatever government constructs Obama creates. It must go further, however. Real conservatives seek smaller government not only because returning money to the private economy directly spurs economic growth, but because regulations themselves stifle growth, or concentrate power and money into the hands of those who can influence the enforcement and design of those regulations, at the cost of innovation.
A real conservative will not simply offer tax cuts. Tax cuts do stimulate the economy. All things being equal, cutting taxes from 50 percent to 40 percent requires only 20 percent growth to recoup lost tax money; cutting from 20 percent to 10 percent requires 100 percent growth to recoup lost tax money. (All things are not equal of course, as there are tax shelters, etc.) The real power in tax cuts is that they limit the power of government by choking off the means by which it exerts its power.
This is where President Bush's "compassionate conservatism" was a collossal failure. Bush did cut taxes, but these tax cuts did not yeild the resultant economic growth that occured following the victories of Reagan and Gingrich. This is because he expanded or reinforced regulations. Spending was not mandated through the appropriations and government spending, but through regulatory mandates whose costs were difficult to quantify.
One such mandate, seeded during the Clinton years, but furthered by the Bush justice department, was an outrageous notion of discrimination on the basis of national origins. The quantification of persons with limited English became a proxy for measuring such discrimination. The quantification of non-English speakers was done with deliberate disregard for citizenship, and even legal status. Most non-English speakers are illegal immigrants, because most means of legal immigration require language competency, and children in America are supposed to learn English in schools. Fannie Mae and Freddie Mac heavily promoted lending to non-English speakers, using the presumption that failure to give loans to non-English speakers represented discrimination. Since 8% of the people residing in America don't speak English as a primary language, their reasoning went, you are discriminatory if you 8% of the loans you give are to people who don't speak English as a primary language. (This is admittedly a gross over-simplification.)
The problem is illegal aliens are much more likely not to speak English, and people who don't speak English aren't likely to be good credit risks, even if they are legal. The banks greedily sided with such regulations, however, since they were able to re-package their risks. Investors figured that even if the borrower defaulted on their loans, the investors would receive real estate which would be worth more now than when originally purchased. Hence the popularization of sub-prime loans. You'll be hearing a lot in coming months, for instance, about "Alt-A" loans, given to people without proper documentation.
This is but one way in which the government has been coercing businesses to greedily accept government setting policies. For the economy to improve, we need business to follow policies to be set by rational, market-oriented thinking, not by the exploitation of regulations. This means a return to freedom. Burrying costs in abstract objects is not freedom.
The House of Representatives will probably go Republican in 2010, and the GOP stands a solid shot at reclaiming the Senate and the White House. But if our economy, and our society as a whole, is to prosper, we must look beyond mere promises of tax cuts, and demand real economic liberation. The GOP has plenty of back-door socialists and Chinese-style fascists. The solution isn't third parties, it's to ensure conservatives win primaries in 2010 and beyond.
Real conservatives are conservative on social issues, too. If a candidate cannot see how social issues and economic issues inter-relate, they probably don’t understand conservatism on economic issues, either.
I just saw the illegitimate president state that the stimulus wasn’t meant to work for two years. So he better not take any credit for this.
As long as the Government owns GM...the stimulus has not worked.
Only is GM can be reprivatized, then the ‘porkulus’ would have worked.
Sadly, many FReeepers fell for the GDP (more closely tied to “spending” than “productivity”) scam throughout the GWB drunken-sailor years, too.
Just like all leftism.
Gasp! How dare you?
It looks like an ox market rather than a bull market. An ox, in some regions, is used to describe a castrated bull. Any rallies in this market is simply a sucker’s rally, I.E., a castrated bull.
I generally wholeheartedly agree with you except for the part where you say Republicans are going to take back the house in 2010. You don’t know that, nor can you make any predictions about late next year.
Once again, if you are out to screw the public; you will eventually get screwed. Listen to this very carefully, Obama of unsound ideas and thinking.
Obama will be a clossal failure.
The market will churn around sideways for a few more weeks/months. Then crash. Unemployment will rise to true Depression levels—30-35%.
We should HOPE for a true Depression, because with all of Obama’s violent poll-watchers, Black Panthers with clubs, ACORN fraud and thuggery, the rigged Census, etc., etc., the only way the true anti-Obama vote can overwhelm the fraud is if the economy is truly wretched.
The WORST thing that can happen to us is if the economy seems to be doing well in 2010 and/or 2012.
This needs to be shouted from the mountaintops. Same goes for people looking for "social conservatives." A conservative is a conservative is a conservative.
Would you invest in a compnay owned by the government? I would not, while it can be back stopped, it also can be sent through bankruptcy again. On going through a second bankruptcy the investor will get wiped out again. A real bad investment!!!
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