The Economics of #StimulusFail

As we have stated on numerous, numerous occasions, President Obama’s so-called "stimulus" has done little other than stimulate unemployment, whilst leaving us in massive debt, crippling our economy for generations.

As such, it is worth emphasizing that the "stimulus" does not simply do nothing to the economy, but rather, has a distinctive negative effect. Writing in Investors Business Daily, Robert Higgs, a Senior Fellow at the Independent Institute, provides a great synopsis on how government spending hurts the every economy it purports to help.

While private investment is the engine of economic growth, government spending (despite what generations of Keynesian economists have asserted) is the brake. To understand this negative relationship, we need only scrutinize how the federal government’s spending is determined: namely, by political processes devoid of economic rationality.

 

In this light, we can appreciate that enhanced government spending does not bulk up the economy, nor merely crowd out worthwhile private activity. Instead, it undercuts, penalizes and distorts everything that private parties attempt to do to create wealth. Ham-fisted government regulations and additional taxes are known killers of economic growth. The investors’ famine and the government’s feast therefore are not merely coincidental, but causally connected.

 

Making matters worse, the explosion of the federal government’s size, scope and power since mid-2008 has created enormous uncertainties among investors.