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Barack Obama's economic illiteracy
Posted By Floyd and Mary Beth Brown On 12/17/2009 @ 12:00 am In Commentary | Comments Disabled
Barack Obama is demonstrating just how little he understands basic economics. He believes growing the government at a rapid rate is what causes prosperity, declaring America must “spend our way out of this recession.” He also in recent weeks scolded “fat-cat bankers,” telling them they need to loan more money out to get our economy going again. Obama’s economic illiteracy is plunging our country into economic ruin.
From bailouts, to company takeovers, health-care reform and stimulus bills: if it involves greater taxpayer involvement, Obama supports it.
When Obama reported that the Treasury had received back $200 billion in TARP funds, he declared that he planned to spend that money on a second stimulus while paying down the debt. This is patently untrue. America will not be paying down any debt. The Senate is moving to raise the debt ceiling by over $1.8 trillion. Actually, we will be borrowing a record sum, as Obama mortgages our future to “spend us out of this recession.”
The problem with his policy is that it doesn’t work. Government spending has never created prosperity. Every dollar the government spends must be taken from someone else. Government engages in wealth transfer not wealth creation. Borrowing money and running sizable deficits is transferring wealth from the future generation, which faces paying off Obama’s credit card. The bill must be paid someday. Obama is robbing future generations in order to support his binge spending.
Is Obama really out to defend the “little guy”? Far from it. Learn realities of president’s policies you won’t see on cable news: “Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses”
Obama’s first stimulus was nothing more than a slush fund of money used by Democrats to support their liberal pet projects. Six million dollars’ worth of stimulus money lined the pockets of Democratic pollster Mark Penn who used it to create three jobs; $18 million from the stimulus went to fund Obama’s recovery website, which reported on jobs saved and stimulus money spent in congressional districts that do not exist. With that kind of success rate it should surprise no one that Obama’s approval rating has plummeted to 45 percent. American voters understand government spending is not the recipe for recovery.
Recently, Obama met with leading bankers, individuals he referred to as “fat cats.” In his meeting, Obama pushed these banks to lend more and loosen up their capital requirements on loans. Nobody is arguing that these banks need or deserve the outrageous bonuses they have been pocketing after Obama bailed them out with the taxpayers’ dime, but the idea that they need to lend more is nearly ludicrous.
The reason the housing market collapsed in the first place was because Congress pushed Fannie Mae and Freddie Mac to loan nearly half of their assets to families with incomes below the national median. Coupled with the Community Reinvestment Act, which forced banks to make imprudent loans, overzealous lending created an artificial housing bubble that collapsed. After the Act was expanded in 1995, bank loans going to low- and moderate-income families increased by 80 percent. These were the same banks that were later attacked for being predatory for taking undue risks. They were making poor loans, but it was at the behest of a federal government that was trying to artificially increase home ownership amongst people not equipped for the responsibilities of home ownership.
Fast forward back to today. Obama is now encouraging banks to make more loans, asking banks to take more risk. This is the same Obama who has criticized banks for making risky loans in the past. By creating business-climate uncertainty Obama is not helping our country to stabilize. Obama’s conflicting messages are confusing. Which “Obama” are banks supposed to listen to – the one who demonizes risky behavior, or the one who demonizes banks for sitting on their assets?
Obama’s meeting with bank leaders was simply political theater as was his recent “jobs” summit. Jobs aren’t created by bureaucrats sitting around talking. They are created when people are free to innovate and create without undue fear of erratic government behavior. If the government would cut back on its wild spending, cut taxes and promote a stable regulatory environment, the private sector would start creating new jobs.
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