Sowell opens his succinct RCP post with an Abe Lincoln story: President Lincoln asked an audience how many legs a dog has, if you call the tail a leg? Some shouted “Five” but Lincoln corrected them saying that the answer was four. “The fact that you call a tail a leg does not make it a leg!”
The professor uses that tale to drive home the truth about the “stimulus” and the “jobs bill.” The idea behind stimulus, for example, is to get investors to invest, lenders to lend, and employers to employ. Prime the pump, put a little bit of water in to get the well flowing. That little bit of water, the government money, was never meant to restore the economy by itself, but to get the private business sector going. What has happened?
- After the Bush-started stimulus in 2008–business spending fell by 28%.
- Durable goods spending fell by 22%.
- Four months after the TARP billions–large TARP banks made 23% fewer loans.
- The velocity of money fell faster than at any time in the last half century.
- The WSJ reports the “sharpest decline in lending since 1942.”
Why would banks lend when, “from the White House to Capitol Hill, politicians are coming up with all sorts of bright ideas for borrowers not to have to pay back what they borrowed…” Why would investors invest when a substantial number of the consumers are unemployed? Why would employers employ when faced with higher taxes and more Obamacare mandates? In short, the outlook is uncertain and certainly more big government than private sector oriented.
Sowell points out that none of this is new: during the Great Depression of the 1930s, money velocity, lending, investing and employment were all lower than they were in the 1920s. The anti-buisness rhetoric and anti-business policies did not inspire any more confidence then than they do now. “In an atmosphere where nobody knows what the federal government is going to come up with next, people tend to hang on to their money until they have some idea of what the rules of the game are going to be.”
Economists have estimated that Roosevelt’s New Deal prolonged the depression by several years, how long will Barack Hussein Obama, Reid and Pelosi prolong our current difficulties?
Tom Motherway