The cause of the recession makes little difference. Government spending helps the economy...ESPECIALLY when the private sector is not spending. To choke off government spending AND private spending is a recipe for disaster.
This is a good opportunity to do some of the things that need to be done anyway: Establish universal health care, repair our infrastructure, expand the EITC, and build a high-speed rail system.
If Government spending was the end all answer to economic prosperity, Keynes would be a hero today. Instead, he has been relegated to the trash heap of old failed economic theory.
Introducing Obama; the new hero of Keynesian theory; but alas, where, one may ask, does one get the money to spend 1.9 trillion to revive the economy? Why they borrow or print is the age old answer. But what happens when you borrow too much and start printing too much becomes the question? You get inflation with a devaluation of the money because supply has been increased too much to pay off current obligations and interest. What happens when you get inflation? You get less buying and as a result, the double edged whammy of high unemployment combined with high inflation.
So what then is the answer to the current recession? The answer comes by understanding that free markets have cycles and we are currently in an adjusting cycle called recession. They occur with much more limited frequency as a result of market influences like Government interventionism making home loans readily available to people who can't afford them which thus creates a "bubble" in demand combined with a failure to pay.
It also occurs when these mortgages get bundled by quasi Government agencies as safe derivatives backed by mortgages.
When one understands that this is not the crises to end all crises and that we have been in much tougher times where inflation was higher, unemployment much higher and interest rates much higher, they then resist the temptation to OVER REACT to create a far worse situation in the future.
Unfortunately the current mentality of the country is so lemming like that we forget these very important historic lessons and pretend that Government can spend and borrow us into prosperity; that is a false economy and can only be professed through ignorance. The ONLY thing that can allow the economy to recover is by renewing confidence to the consumer and having them re-engage by starting to spend and save again. In addition, we need our Government to act responsibly by cutting spending and reducing the deficits.
Remember the OIL Crises last summer? Government Liberals were all in a panic with $140 a barrel oil prices and gas prices hovering over $4.00 a gallon. They ranted about obscene oil profits and demanded penitence from the greedy oil barons, they pointed the finger of blame at Bush for letting his "cronies" gouge the American consumer and they claimed the ONLY solution was to release oil from the vast Government Strategic reserves.
But alas, the market did work. Demand dropped and so did oil prices and the speculatory pressures on them. Now gas is under $2.00 a gallon and a barrel of oil is about $40. Is it not surprising now how those same rabid Liberals who pointed their fingers of blame at the Oil CEOs and Bush are now silent and NOT giving the same credit for the DROP in fuel costs and have moved onto the latest "chicken Little" issue.
One thing is certain with Liberals and their willing accomplices in the Democrat party, they will always be quick to point the finger of blame at those they politically disagree with, claim ALL issues are a “crises” which requires their actions and NEVER point the finger of blame at their own reflection in the mirror.
Carry on.
