President Barack Obama’s presidency hangs in the balance after another disappointing employment report. He continues to advocate new government “stimulus” programs to boost his reelection campaign. However, Washington is awash in government “stimulus,” without effect. Only productive private investment will spark economic revival.
When both financial and economic crises hit, President George W. Bush backed a $170 billion “stimulus” bill and then massive industry bail-outs—of banks, Wall Street, automakers, and the housing industry. President Obama accelerated the latter efforts while adding his own $825 billion American Recovery and Reinvestment Act in early 2009. Several smaller “stimulus” efforts costing well over $100 billion followed.
As a result, federal outlays and debts exploded. In 2008 federal red ink was “only” $479 billion. Since then Uncle Sam’s annual deficit has exceeded a trillion dollars. In addition, the Federal Reserve launched a massive “stimulus” campaign—costly bail-outs and mortgage purchases, near zero interest rates, and two rounds of “quantitative easing.” Economist Joseph Stiglitz noted earlier this year that “Beginning in 2008, the balance sheet of the Fed doubled and then rose to three times its earlier level.”
None of these efforts have spurred economic growth. In fact, unemployment soared, hitting ten percent. The jobless rate is still over eight percent despite administration promises that it would fall below six percent by last April.
Some “stimulus” advocates blame state and local spending which, they claimed, fell. However, Edward Lazear, former chairman of the President’s Council of Economic Advisers, pointed out that while real government spending was down a little in 2010 over 2009, GDP growth rates were higher. Outlays were up in 2011 while GDP growth dropped. Lazear added: “The White House forecasts that government spending in 2012 will exceed 2011 levels by 5 percent and will be 27 percent higher than it was in 2008.”