Obama still calling for more stimulus but world leaders balk
The problem is that Obama and Democrats like Paul Kanjorski fall for the Kenysian theory on the economy. When the government spends a $1.00 it produces a $1.50. Well as we all see "that ain't happenin".
Like many bad ideas, the current Keynesian revival began under George W. Bush. Larry Summers, then a private economist, told Congress that a "timely, targeted and temporary" spending program of $150 billion was urgently needed to boost consumer "demand." Democrats who had retaken Congress adopted the idea—they love an excuse to spend—and the politically tapped-out Mr. Bush went along with $168 billion in spending and one-time tax rebates.
The cash did produce a statistical blip in GDP growth in mid-2008, but it didn't stop the financial panic and second phase of recession. So enter Stimulus II, with Mr. Summers again leading the intellectual charge, this time as President Obama's adviser and this time suggesting upwards of $500 billion. When Congress was done two months later, in February 2009, the amount was $862 billion. A pair of White House economists famously promised that this spending would keep the unemployment rate below 8%.
Seventeen months later, and despite historically easy monetary policy for that entire period, the jobless rate is still 9.7%. Yesterday, the Bureau of Economic Analysis once again reduced the GDP estimate for first quarter growth, this time to 2.7%, while economic indicators in the second quarter have been mediocre. As the nearby table shows, this is a far cry from the snappy recovery that typically follows a steep recession, most recently in 1983-84 after the Reagan tax cuts.
The response at the White House and among Congressional leaders has been . . . Stimulus III. While talking about the need for "fiscal discipline" some time in the future, President Obama wants more spending today to again boost "demand." Thirty months after Mr. Summers won his first victory, we are back at the same policy stand.
Meanwhile, in Congress, even many Democrats are revolting against Stimulus III. The original White House package of jobless benefits and aid to the states had to be watered down several times, and the latest version failed again in the Senate late this week. (See below.) Mr. Obama is having his credit card pulled too—not by the bond markets, but by a voting public that sees the troubles in Europe and is telling pollsters that it doesn't want a Grecian bath.
Hence the world leader focus on DEFICITS. Kanjo is watching the US implode around him yet he stlll wants to proclaim that more big bank regulation is the answer. Okay Paul, when the savings and loan crisis hit was it big banks or small banks that caused the problem? If you restrain big banks too much what will stop the consumer or the bank executive from making small banks more attractive and cause them to take unnecessary risks??
Too big to fail...or too big to let fail?? Fannie and Freddie got a pass in this bill. Isn't that why it happened...too big to let fail....?