Is the Obama stimulus package working?

The  $700 billion economic stimulus package signed into law  by President Obama earlier in 2009 has had minimal impact on the US economy. Evidently, it has neither saved nor created the number of jobs promised by his top economic advisors, Larry Summers and Christina Romer. With the numbers now in, both they and Obama are backing away from earlier projections and relying on 2010 to bail out their bail outs. The Fed has already intimated that they are retreating into false consciousness. The tragedy for US taxpayers is that Summers and Romer knew from the outset that their projections were false. For, until hired by Obama, both were New Keynesians, not  Old-Keynesians. The difference is really important. For the New Keynesians recognize rational expectations as the basis for understanding the macroeconomy.

Under rational expectations stimulus injections by the government are largely anticipated and neutralized by other agents in the system – consumers who reduce expenditures elsewhere, firms who reduce investments – in anticipation of increasing government expenditures. Only rigidities in the system such as staggered wage renegotiations and inflexible prices, allow any fiscal stimulus at all.  Summers and Romer helped to write that literature.

Of course, economists who enter into government are no longer professional economists. A famous Chicago and London School of Economics economist, Harry Gordon Johnson warned all his students both in the US and the UK  that if they entered government, even for one week,  he would never again write a reference for them for any position as  a professional economist.

Summers and Romer now serve political masters such as Obama who are motivated by votes and money, not by economics.  They have both sold out their  discipline for their thirty pieces of silver. Sadly,  they have truly sold out, not themselves, but the taxpayer-voters who unwisely trusted them.  If rational expectations is truly relevant, they will not be able to sell out those people out a second time.  If Obama wants a second stimulus, he will need to fire those advisors and try a new team.  That should prove to be no problem since Paul Krugman and Joe Stiglitz  and others no doubt will be more than willing to  take their place.

When the third time comes around, however, some time in 2011, no one will believe any economics team that Obama hires. The massive fist of free market ideas once again will smash through the false consciousness of Keynesian dreams, and  voters will rush to elect leaders such as Margaret Thatcher and Ronald Reagan,  capable of undoing some of the terrible economic harm that has been heaped upon them.

Obama’s Road to Economic Hell

The evidence now mounts that the economic stimulus measures adopted by the Obama  administration during the early months of his administration have failed.  Economic growth is limited and sputtering. Unemployment remains high and rising in many states. This bad outcome was entirely predicted in the book co-authored by Charles K. Rowley and Nathanael Smith and published in September 2009  by The Locke Institute in association with the Institute of Economic Affairs (available at www.amazon.com).

Obama is cynically aware that his socialist agenda of healthcare nationalization, energy disruption  through cap and trade legislation, union-empowerment through card check legislation, and trade protection through small-print clauses in the stimulus legislation, will bring the US economy down, perhaps irreversibly,  to the poor performance levels of  highly regulated France and Germany. This is an acceptable price,  in the eyes of this left-leaning ideologue, for shifting the United States economy in the direction of socialism. The years 2009-10, for Barack Obama,  are equivalent to Mao Tse Tung’s two year Long March to Socialism in China in 1934-35.

It is a sad commentary on the poor judgment of many US voters that they placed into the Presidency a person who finds capitalism and free enterprise repugnant, and who is no friend to individual liberty.  Let us hope that the Founding Fathers structured the Constitution sufficiently well as to block the political manipulations of this dangerously narcissistic Manchurian candidate who actually succeeded in misleading the electorate of this once-great nation as to his true intentions.

The Politicizing of the Federal Reserve Board

In pursuing quantitative easing by purchasing commercial securities, Ben Bernanke has seriously jeopardized the political independence of the Fed. This may prove to be irreversible.  By seeking increasing regulatory powers for the Fed, Bernanke is further jeopardizing its  political independence. Congress will not stand aside while the Fed conducts industrial policy, invading its own perceived sphere of influence. Sadly, and I am sure unwittingly, Ben Bernanke is becoming a liberal fascist in the sense defined by Johan Goldberg in his recent book. In this sense, Bernanke is becoming perhaps the single  most dangerous adversary in the United States of private property, limited government, individual liberty and the rule of law.  One wonders whether his predecessor at the Fed,  Alan Greenspan,  remembers enough from his Ayn Rand days to recognize the major break  in Fed behavior implicit in the post-August 2008 behavior of Ben Bernanke and the Federal Reserve Board that he chairs.

For further insights on this issue please read Economic Contractions in the United States:  A Failure of Government co-authored by Charles K. Rowley and Nathanael Smith. The book sells at $12.00 plus shipping from http://www.amazon.com.