Budgetary Woes: The False Choices of Obama's Budget

I was watching the Daily Show the other night, and one of President Obama's financial advisers was the guest. I am not going to lie, I was so irritated by his doublespeak and nonsensical assertions that I ranted for quite some time after. I will spare you the meanderings of the rant and, instead, give you the Cliff's Notes version.

The gentleman was under the impression that the "Stimulus" bill and Troubled Asset Relief Program (TARP) were unjustly under fire, and the new budget proposed by the administration, which is even larger than the last, is necessary to dig us out of this recession. This guy is an economics PROFESSOR. No wonder college kids these days are graduating so stupid.

The idea that government spending can have a net positive effect on the economy is true. IF that government is running a surplus. The State can then flush that money back into the system to free up liquidity in markets, employ in the short term many people for infrastructure projects to make the wheels of commerce run easier, even give rebates to the citizens to provide a short term boost in spending. Because, in the end, it is real money.

But we are so far in the hole that every dollar thrown down the rabbit hole of the recession is a net drain on our economy. The state needs to borrow much of it, which will need to be paid back. The rest of it, and in this case the majority of the money used, is worthless. Worse than that it actually makes each dollar you already have worth less. A modern dollar is a unit of currency that is an idea of the net value of the total assets of the united states. It is backed by what we have and what we produce within this country. So simply printing more money doesn't make more money, it just means it takes more of it to do the same things.

In the 1970's, the money supply was increased by about 17%. Ask around about how that policy worked then: the resulting inflation caused interest rates to skyrocket. This in turn caused people to stop buying houses, investing in businesses and so on. If you look at today, the Fed has increased monetary supply, backed by nothing at all, by between 130% and 150%. The only reason we are not awash in a sea of worthless dollars is that much of that cash is in banks right now, and they, selfishly or wisely, are not lending it out.

The Obama Administration is holding out a promise based on economic fallacy, and is simply kicking the bill down the road- the only hope he holds is that inflation will not swamp the nation on HIS watch. He sees the same thing that many Americans see right now, that the wide modern liberal grip on the House and Senate is very temporary, that his reelection is not a certainty, and that any problems he creates for the future will not be attached to him after he is gone. He has blamed his predecessor for everything, including what he himself has caused, but the same will not be able to be done to him if the legislature switches hands.

The false choice Obama gives us is this: Prosperity through greater debt or crushing economic failure. The truth of the matter is that through his own actions and those of the Fed he has brought on economic failure in any circumstance. The only question is when and how bad it will be.

We could choose to go down now, take our lumps and come out stronger on the other side, or we can choose to make this the next administrations problem (or the one after that)and become a third world country. The unemployment levels we see today are not the effects of bad banking regulation, but rather our economy resetting to where it realistically is. This has been caused not by bad mortgages or faulty derivatives but by how much our own government has unbalanced our capital systems.

When the State tells banks where they can loan their money and whom they can loan it to it sets a dangerous precedent. Banks have a vested interest in lending only to those who can pay the money back, and with interest. They loan to those people or companies who have that ability because that is the only way to make sure your own money is protected. If a loan goes bad at a bank, the bank is left holding the bag. But guess what? They have your bag, too, and the money you think is sitting in a vault somewhere is actually sitting in that house that went belly up because the government told the bank that had to lend to someone who claims food stamps as income. And they have the gall to call banks "predatory"? Who was looking out for your money? The banks. Who messed that up? Modern Liberal politicians who don't understand that not everyone can afford a house.

And this new Obama budget is more of the same, more financing that would make Enron executives squirm with joy. More robbing those who have earned for those who have not and telling people it is good for the country. Hell, at this point it is robbing those who have not earned because they haven't been born yet to give to people who haven't earned who have been. More money we do not have for false promises on pillars of sand.