MEGATRENDS: The Obamanians Are Wrong    
 The Obamanians Are Wrong7 comments
The Government's War on Recession

by Llewellyn H. Rockwell, Jr.

The great failing of the Obama administration is that it is packed with people who show no apparent knowledge of the essential truths of liberal theory. That theory, which is the core of the American political contribution and the driving force of modernity itself, is that freedom is the foundation of and the reason for social and economic flourishing. All evidence suggests they know nothing of this.

Obamites, in contrast, hold the opposite view, the one advanced by the Pharaohs and Emperors of old all the way through the Talibans and Hugo Chavezes of our own time. It is the view that nothing is beyond the competence of the state and its great leader. Particularly in economic affairs, these people have a wildly inflated view of what the nation's chief executive can accomplish through sheer will.

Liberal theory teaches that one truism of government is that whatever it does, the results end up making the problem not better but worse. I'm thinking of the war on drugs, the war on poverty, the war on illiteracy, and the war on terror. So it is with the war on recession. Already it has given us a record of failure, for going on a year most recently but really dating back to the 1930s.

A hundred years ago, liberal theory warned against the central bank on grounds that it would create inflation and generate instability and political corruption. All that happened. Liberals warned against the attack on the gold standard in the 1930s, and were proven right again. So it was for Bretton Woods and also for Nixon's final creation of unbacked currency. They were right again.

But do Obamites learn from history? On the contrary, they are completely blind to it.

Intellectual failure is at the root of the problem. Note how the administration invokes economic theory in its defense of its policy of wholesale national looting. In this case, bad economic theory works as a cover for acts of despotism. In the end, this is how the theoretical errors of J.M. Keynes end up having utility for governments.

But one aspect of this has not received enough comment. It concerns how the state is using the excuse of stimulus to help not society but itself. The state is certainly being stimulated here but the private economy – the only real source of social wealth – is being drained in many ways.

The most direct way in which stimulus is helping the state is by transferring resources from the private economy to itself in a zero-sum game. From Moody's comes direct evidence. While the rest of the nation's economy is shrinking, the economy of Washington, DC, is growing at a 2.5% pace [link] . Northern Virginia and suburban Maryland are sharing in the glee, as government gains at the expense of everything else.

One of the great lessons of liberal theory concerns the extraordinary capacity of free exchange to create wealth. Trading makes both parties better off. Saving makes resources available for investment. Investment creates jobs that yield more products for people to purchase. Through this mechanism the West grew rich.

The economics of stimulus are not as complicated. They amount to taking from some and giving to others. There is no wealth creation at all. There is no magic "multiplier" to turn stones into bread [link] . The economics of stimulus is value-destroying, because property is pried loose from owners who are putting it to socially useful purposes, and given to government so it can pass it out to friends.

This process is costly to overall wealth production – and most of those costs are unseen. We will never know what kind of real stimulus could have taken place had the property been left in private hands. What jobs might have been created, what investments might have been made, what kind of business expansions might have taken place? We will never know.

Phony stimulus can take the form of direct transfers of wealth, or it can take place through the creation of debt that ends up smashing the value of the currency in which people keep their savings. This introduces economic chaos that no one can control once it begins. The private sector is diminished.

The public sector, on the other hand, thrives on the unjust loot. The money it gets amounts to a direct infusion. How much of the stimulus helps the public sector? If you consider the private companies that are receiving public aid, it is 100%, as formerly capitalist enterprises are nationalized through the back door. Yet because private companies are getting the money, Obama believes he has bragging rights!

This phony stimulus seriously skews the job market as well, as people turn away from private-sector employment and look to government to provide no-risk employment. Really, this stimulus plan amounts to turning the hourglass upside down, so the sand can run from one bulb to the other bulb.

Bernanke is warning us that we are in a severe contraction right now, but the warning applies not to him or the rest of the public sector. They are all quite gleeful, actually.

Government stands to win while the rest of us will lose. Even if it had the perfect cure for recession, government has no incentive to implement it. Its prescriptions for the ailing economy are no different from the rest of the public sector, which serves itself at everyone's expense.

Indeed, government loves economic downturns. For decades, the private economy has been outrunning government. The private sector has taken over most of the command posts in society, from security to communications to all forms of technological progress. This has annoyed the state to no end. Now is the time for reprisal.

Economic depression is good for the state. Even if the state knew how to end it, why do we suppose that it has the incentive to do so?

February 26, 2009

Llewellyn H. Rockwell, Jr. is founder and president of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com, and author, most recently, of The Left, The Right, and The State.

Copyright © 2009 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

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7 comments

27 Feb 2009 @ 02:04 by jmarc : blog colours
It's a boy!  


27 Feb 2009 @ 02:20 by vaxen : ♥•♥•♥
Itsa, itsa, itsa ↔§↔ Zoom, zoom, zoom! ☺∟Γ→ ○↑↨↓ φ  


27 Feb 2009 @ 04:14 by frank4zen : wrong
Social security, the minimum wage, universal healthcare, college for all are ways to guarantee freedom from want. 45 million working people who can't af An economy that drives down wages to increase investor profits creates a cheap labor trapford healthcare cannot all pull themselves up by their bootstraps,
If you work full time, you won't be in poverty. Period. Over 9 in 10 Americans agree that's how it should be.
Did FDR say, oh, it's a time of war, we can't afford to make sure all Americans have their basic needs met?
We can't afford housing, health care, decent jobs. We can't afford all that, it's too expensive, not at this time. The facts of course are, that the New Deal reduced unemployment every year, except when Roosevelt started implementing more conservative policies New Deal financial regulations provided the foundation of a recovery and a stable economic system. And millions upon millions of Americans were helped by New Deal jobs Many economists feel that the problem with the New Deal is that it didn't go far enough, in terms of spending, or else it would have been even more successful in the short term.
The right's anti-New Deal offensive is aimed at besmirching Obama's stimulus plan. FDR's New Deal got us out of the Depression took the unempoyment from 25% to 14% in 4 yrs
As usual, the conservatives have absolutely no conscience about what they did to create this mess. If they did, they'd all be holed up in their gated communities or on their private islands
As for taxes: Obama's already told us, without apologies to anyone, that he plans to raise taxes on people making over $250,000 a year
When you want to stimulate the economy, tax cuts always beat government spending hands-down.
The problem with tax cuts is that people don't spend them in ways that get the economy moving.The Wall Street Journal reports that only 10 to 20 percent of the money remanded to taxpayers in the 2008 tax rebate actually got spent.
The other 80 to 90 percent ended up in people's personal savings, were used to pay off creditors,
So the GOP is out in a fury trying to create their own self fulfilling prophesies insinuating that “the American people have doubts
We understand fully that the Republicans are between a rock and a hard place the stimulus is passed and the economy begins to turn around they will be have a lot of explaining to do next election;
FDR was elected president four times.
What does that tell you?
the American people in the 1930's experiencing first-hand what was going on? Were they not in the best position to tell if FDR's policies were working
Americans were not fooled. They knew F.D.R. was on their side in a way that Herbert Hoover and his fellow free-marketers hadn’t been They could see first-hand the good that Roosevelt’s jobs programs were doing for the Depression’s victims and the slow but unmistakable improvements in the economy.
What was WWII, but a massive government spending program?
T]he New Deal wasn’t as successful in the short run as it was in the long run. And the reason for F.D.R.’s limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious
What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs. The New Deal also gave the people hope, which was in short supply up until then.
The reason right-wingers hate FDR so much isn't because the New Deal failed, it's because it succeeded, and it's obvious to everyone.
He is not spreading the wealth around. He is talking about giving the middle class an opportunity to get back the tax breaks they used to have.
remember, all Obama's plan does, is restore the tax rates for the wealthiest Americans back to where they were under Bill Clinton, to 39.6% from 35%. Horrors!
Ever since Reagan, the tax burden has shifted to the rest of us. All Obama's plan does is shift some of the burden back where it was, and belongs

 



27 Feb 2009 @ 23:58 by a-d : Yes, let's all pray
for Universe/"G-d" to give each person of their own medicine; the medicine they have (concocted) for all others outside their own skin! Must be the very best! ...how else would somebody dream up a specific medicine ... if they don't believe in its goodness?!?.... Isn't that so? ;)  


28 Feb 2009 @ 21:07 by a-d : You think you heard it all? Not yet...
Here's some "Good News" about Ideas with "GREAT GOOD" needing a Very Special Meeting to discuss some --minor-- details on "how to put into action"!
http://www.guardian.co.uk/commentisfree/2009/feb/28/tax-avoidance-aid
(the only Question as far as my --maybe-- limited understanding of "whadddz good for the Goose is good for the Gander"-thing... that still remains to be answered to me, so that I can understand is: for WHOM & HOW in the World is this possible ???? )
I'm sure there is SOMEBODY, out there who can grasp the goodness of this... maybe frank4zen (?).If so, please, explain it to us who don't. *!*  



28 Feb 2009 @ 21:15 by vaxen : FDR-Traitor:
The Pearl Harbor Messages

http://www.crow96.20m.com/cgi-bin/framed/2027/pearlharbor.htm  



28 Feb 2009 @ 21:20 by vaxen : Heh...
On Tuesday night, 100 billionaires will gather at London's sumptuous Dorchester hotel, to watch Mr Ted Turner in conversation with Ms Carol Vorderman. Ms Joss Stone will sing, and some model or other will be in attendance. Can you guess the aim of this evening, which I trust you would cross continents to avoid in the infinitely unlikely event that you had been invited? No? Then allow me to assist. The aim is to make the government give tax breaks to the super-rich, in order to tempt them to give the same percentage of income to charity as the poorest 20% of people in this country already do.

Idea worthy of...Obama (Obonehead)...

Thanks A-d

The Aushwitz Files: ☻

http://www.crow96.20m.com/cgi-bin/framed/2027/ausch1.htm

Hope is such an empty rag. A real "ragman's" roll...

"The aim is to make the government give tax breaks to the super-rich, in order to tempt them to give the same percentage of income to charity as the poorest 20% of people in this country already do."

This is another clever wheeze to transfer the hard working middle income tax payers funds to the super rich and the Kleptocrats of the aid receiving countries. They money then ends up in arms purchase and Swiss bank accounts.

Sixty years of the economy of Aids has not helped the poor but has immensely increased the attractions for rule by corrupt dictatorships.

Like FDR's new deal and Obama's new squeal! Politicoes and their Sheeplocrats, one and the bleating same! Yucko!
Link ibid., above.  



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