In an aptly-titled piece in the University of Florida’s Alligator (“As orchestra plays, U.S. economy sinks”), Chris Ceresa reminds college students about the continuing economic stagnation they’ll face once they graduate. (The recent report of an anemic May job market creates even greater cause for concern.) But Ceresa has no illusions about the current administration’s strategy for reviving economic growth:
Part of the problem is the prevailing economic philosophy. The people in power subscribe to the Keynesian school of thought, the idea that when demand is low, the government should spend money to create artificial demand thus preventing a slowdown of the economy. The problem is that Keynesianism is ultimately unsustainable. Constant spending to bandage the limping economy leads to deficits and debt. Capitalism is natural selection in the economy, and government interference is its antithesis.
We are also part of the problem. The average voter has consistently opposed tax increases, yet yearned for more social services. We hold dear to programs that are now unsustainable, such as Social Security. We must stop vacillating and choose between more government or less government. Judging from the excesses of Washington, I’d prefer less government.
Economics is complicated, and it is hard to blame specific downturns on specific policies. But it is not as hard to see when specific policies—like the administration’s stimulus package of February 2009—have failed to achieve their stated goals. By this time according to Obama’s 2009 projection, the unemployment rate should have declined to under 7%. Instead it is now lodged at just over 9%, with little hope on the horizon for renewed job growth.
Of course even the best economists regularly fail to predict the future. But there are underlying economic and even philosophical reasons for which we should have expected the stimulus package to fail to kick start economic growth. Back in 2008, Yaron Brook explained why reducing the size of government (as Ceresa suggests) is needed to help bring the return of economic growth:
[T]he key economic activity that causes growth is not consumer spending but production.
Economic growth means an increase in the amount of wealth that exists in a country–and all wealth must be produced. Houses, health care, air-conditioning and transportation do not come ready-made from nature. We have them only to the extent that individuals and businesses bring them into existence.
The focus of today’s stimulus packages on consumer spending is therefore completely backward. Consumption is a consequence of production. This fact is ignored by the Bush plan, which attempts to achieve prosperity through $100 billion in deficit-spending. Though this might bring the appearance of prosperity, in the same way that an unemployed man appears prosperous if he goes on a shopping spree with his credit cards, the reality will be the opposite.
The fact is that consumer spending is slowing because production is slowing. . . . Production does not need stimulation from the government; it needs liberation from the government. What a productive, dynamic economy requires of a government is that it restrict itself to protecting property rights from force and fraud, and refrain from interfering in free production and trade.
Brook’s words apply to Obama’s policies just as much as they did to Bush’s. Read the whole article to see how we could have reasonably predicted back in 2008 much of what we are experiencing today. And if you’re a student, remember this the next time you’re considering voting for a politician—Democrat or Republican—who promises to create jobs by force of law.
Creative Commons-licensed picture from Wikimedia Commons