Smith
Faculty Opinion Article
The 30
Seconds Outlook
October 1, 2009
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“Some economists . . . think government borrowing is the
only thing between us and disaster. This may or may not be true, but in my
opinion it is disaster deferred not disaster avoided.”
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— Floyd Norris, New York
Times, September 26, 2009 |
This discussion of the ongoing
financial and economic crisis
continues the “Lessons Learned”
theme from the September 15 Outlook:
5. The
U.S. has lost 3.6 million jobs under
the Obama Administration, and the
unemployment rate has reached a
25-year high of 9.8%. Obama’s
experts estimated that the $787
stimulus plan would create four
million jobs by the end of 2010. To
do so would require the largest
average monthly increase in
employment in modern history—“not
going to happen.” But government
jobs have increased. To date, the
stimulus plan appears to be based on
some unsound assumptions that
continue to add to lost jobs and to
record deficits.
6. The
stimulus plan appears based on other
than sound empirical analysis. The
“bottom line” of sound empiricism is
that “stimulus spending doesn’t
work” (WSJ 10/1/09). The belief
stimulus spending will create a
“multiplier effect” that increases
GDP by more than the amount of
government spending is not supported
empirically, which means current
deficit spending is wasteful.
7. What
works best in growing GDP and
reducing unemployment is the use of
economic incentives, not government
imposed regulatory mandates, higher
taxes, and deficit spending. These
actions are also inconsistent with
the country’s founding on individual
liberty. What the country and the
economy require is for the
government to provide positive
incentives, including tax
reductions, that will motivate our
country’s potential in technology
and energy development,
entrepreneurship, new markets
expansion, and private based
universal healthcare, all of which
can be supported by our advanced
capital markets. It is private
sector incentives that drive a
robust GDP with high employment.
John A. Haslem
