White House Acknowledges Economic Reality?
Well, here’s a surprising admission:
Christina Romer, the chair of President Barack Obama’s Council of Economic Advisers, said the initial jolt of the $787 billion stimulus expanded the economy in the second and third quarters of this year. But she said the remaining spending will simply keep the economy from slipping.
In other words, shoving money into the economy expanded it to fit the new dollars, and that spurt must become a constant flow in order to maintain the size of the economy. Of course, to the extent that the new money was borrowed, it will have to be repaid out of the economy (with interest), and to the extent that the new money was printed, it will deflate in value.
The sooner we let the economy return to an unstimulated state, the less the bill will be when it comes due. The economy should be encouraged, through policy changes, to grow on its own.
“Of course, to the extent that the new money was borrowed, it will have to be repaid out of the economy (with interest), and to the extent that the new money was printed, it will deflate in value.”
This seems suspiciously like taking cash advances on credit cards to pay bills. While the bills might initially get paid and for a short time you might have extra cash, in the long run all of that borrowed money must be returned along with exorbinant fees. It becomes a cycle of robbing Peter to pay Paul and down the road, one’s finances will only suffer more. If this is a bad policy for handling personal finances, it certainly doesn’t seem like a good policy for handling national finances. The best way to actually get ahead – personally and at a national level – is to just bite the bullet and cut back on those things that are not essential. For a household this might mean no trips to movies, restaurants, etc. For the nation, it means we have to seriously look at where and how we are spending taxpayer money and think about redirecting some of those funds towards covering the essentials and paying our debts. At the state level, it seems, this has been what Carcieri has tried to do and he gets reamed out for it every time. Cutting back isn’t easy or fun, but it is sometimes necessary and ultimately will be beneficial in the long run.