New Heights in Keynesian Failure
Since the so-called stimulus bill was passed, the Obama administration has reached new heights in spending; creating a current year (2010) budget deficit of roughly $1.3 trillion dollars and setting the stage for subsequent deficits in out years 2010-2015 of $3.1 trillion as the Congressional Budget Office web site reports. The CBO positions this record deficit as a percentage of GDP rather than reporting that this year’s deficit is a full 59% of the revenue of the United States government in 2010. So our government is borrowing $.40 out of every dollar it spends.
What’s a bit different about this administration’s spending is that redistribution dollars are being allocated to every level of governmental entity…local, county, state, and federal in an effort to, we are told, create jobs and keep us away from the brink of economic collapse. Here in Charlotte we’ve seen a “grant” of $25 million dollars for the debated streetcar project that City Council voted to accept even if we don’t know who will run the line and how the balance of the cost of the project will be funded. Charlotte Mecklenburg Schools has received $25 million dollars in stimulus funds to prevent teacher lay-offs. On the state level, the “Race For The Top” school funding has netted North Carolina handsomely as WRAL.com in Raleigh recently reported:
“North Carolina will receive about $400 million as a winner in the second round of the “Race to the Top” school reform grant competition, Gov. Beverly Perdue said Tuesday.
The money, part of $4.35 billion being given out nationwide, will pay for recruiting and retaining quality teachers and administrators; a turnaround plan for low-performing schools; and technology for assessing students’ needs, Perdue said.”
A recent Triad Business Journal article summarized the current state of stimulus spending in North Carolina as:
“At the state level, about 62 percent of the $6 billion overseen directly by North Carolina has been disbursed, according to Dempsey Benton, who heads the Office of Economic Recovery and Investment. About $3.5 billion of the total amount is in the form of “stabilization” funds making up for budget shortfalls, and $2.5 billion is in project funds. A lot of that money will be spent in the next 12 months, Benton said.”
Stimulus scenarios like ours here in North Carolina are being replicated all across the country in spending the $700 plus billion dollars authorized in the recovery act. The Obama administration has doled out billions to government entity after government entity, absolving those entities of their budget constraints, damaging state sovereignty, and making confetti of the United States Constitution along the way. And still the reported unemployment rate hovers at 9.5% nationally and the true unemployment rate, counting those who are no longer actively seeking work, is estimated to be in the 15%-18% range.
The evidence abounds now that Keynesian economic policy that encourages government spending to cure economic slumps like the one we are experiencing currently, does not in fact, work. Government spending to cure the Great Depression did not work…spending by the Japanese government did not work, in fact it exacerbated the recession in Japan several decades ago…and government spending to cure our recession has not worked and will not work.
Mr. Benton’s words above tell the true tale about government “stimulus” programs. Over half of the funds are simply routed to government entities to cover their budgeting needs…most of the balance of the funds are routed to more government spending projects that include roads, bridges, and government buildings…all public sector spending that must be redistributed from you and me and the businesses that employ us in the private sector.
True economic growth in America comes from the private sector with businesses improving their productivity and profits and thereby investing in plant and equipment and of course, employees. American corporations pay some of the highest tax rates in the developed world which hurts our ability to compete internationally and it stifles our ability to recover from the inevitable and necessary economic downturns that will occur in a capitalistic economy. But that is the recipe for recovery…reduce taxes, reduce government spending and watch the great American economic engine rev.
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