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.”