The King is Dead! Long Live the King!

Obama, in a keen maneuver showing how he is bringing change to Washington, proposed a radical new plan to help the economy. I’ll quote from a CNN headline: “Obama begins push for tax cuts, more spending.”

It seems he learned something from Pres. Bush and Congress after all. I like this bold new fiscal plan. Let’s bring in less money while spending more money because that will magically fix the nation’s financial problems. I understand that on a theoretical macro economic scale, it’s not a terrible plan because the goal is to stimulate the economy by freeing up liquid assets. This in turn grows the economy, bringing in more tax revenues. At this point government spending will be reduced and Poof! the economy is good again.

However, the government never seems to get to the reduced spending part. Cutting taxes and increasing spending is a very difficult way to stimulate the economy – it requires much financial acumen as well as the willingness and ability to stop the plan as soon as possible. It’s a good plan in the short-term but is not sustainable. On top of that, it’s amoral at best.

The best way to increase financial stability and to make the economy stronger in the long-term is for the government to reduce taxes and reduce spending. They don’t even have to reduce taxes at first, but they have to learn to live within their means.

The only change so far in Washington is that change the government is “borrowing” from taxpayers and the extra change the government mints to help “fund” its spending habits. I know my critique is simplistic but Obama’s “stimulus plan” basically boils down to “tax less, spend more.”

4 thoughts on “The King is Dead! Long Live the King!”

  1. The real kicker here is that the US started from a strong growth period with a deficit, didn’t pay it off, then created an even bigger deficit with the stock market crash and economic downturn, and now Obama thinks that an even bigger deficit will help the economy. What wisdom! What insight! What change!

  2. On an individual level, no. However, a business has to spend money to make money. This usually occurs by going in debt (unless the businessman already has oodles of money). Take Amazon.com as an example. They were unprofitable for the first 3-5 years as a business but the venture capitalists kept pumping in more and more money. Because Amazon’s business plan was sound, they were able to turn their “deficit spending” into profit.

    Therefore, theoretically the government should be able to do something similar and in time have increased profits (tax revenues from individuals and businesses). However, it’s very tricky to do on a governmental level. I wouldn’t recommend it and I wouldn’t do it. However, I’m not an economist so my opinions could be quite wrong (they could be quite wrong even if I were an economist). I know this method of boosting an economy is quite popular and has its merits but I think it’s the wrong way to deal with the economy in the long run.

    In general, I’m not a fan of deficit spending and I don’t think the government can spend its way out of debt. This is why I’m not a big fan of many of the fiscal policies of Congress, the current administration, and now, the incoming administration.

  3. I think when the goverment can’t even balance a budget in a good ecomony how will they make it work in a bad economy? I think this goes to show the american attitude toward debt and borrowing. I think it would be very interesting to see how many of our elected officials are able to live on a balanced budget or how many have file for bankrupsy. If their personal lives are a mess financially how do we expect them to keep the government from being a mess.
    The other thing that I think many americans don’t understand is that when the government spends money they are just spending our money not theirs. every person is responsible for part of the national debt and could be sent a ‘bill’ for it. I wish they would make it more public where all the money is spent, create a website of spending.gov.

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