ALG Editor’s Note: The following featured editorial from the Denver Post hits the nail on the head as it relates to the worldwide debate over “stimulus” spending and the impending risk of sovereign default as a result:
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More spending not the answer
As the Western world’s leaders pledged to wean themselves from government stimulus programs this past weekend, President Barack Obama continued to call for expanded spending, claiming the economy cannot recover without it.
While there was an agreement among developed nations at the Group of 20 summit to halve their annual deficits within three years, Obama continued his expansionist call for spending. Yet his solutions for the economy are mired in spending money we don’t have — running up the nation’s credit card.
The president agreed with the spirit of cutting budget deficits in half by 2013. But he took issue with the calls for a return to fiscal austerity that were the hallmark of European leaders at the gathering, arguing that governments needed to attempt to “create jobs and growth today.”
Certainly, more jobs are needed. The rate of unemployment is near 10 percent, and has been hovering there for months. But the Obama administration once predicted if Congress didn’t pass the massive $863 billion stimulus package, unemployment could climb as high as 8 percent.
The administration also claimed it would begin reining in the alarming amount of spending once the financial bailouts and allotted stimulus spending ran their course. After all, total U.S. debt, including state and local obligations, is estimated to equal the Gross Domestic Product by next year. (Every man, woman and child’s share of the debt is now $42,283.)
Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, repeated a warning last week that the mushrooming debt is the nation’s largest security threat. He noted the interest on the debt by 2012 — $571 billion — was as large as our defense budget, adding, “It is not sustainable.”
Yes, left-leaning economists, such as The New York Times’ Paul Krugman, warn that without more government spending the economy might enter a second recession or even a depression. (See his column below.) But many economists counter that greater government spending won’t help, and would cause more harm, producing unsustainable debt loads, higher interest rates and defaults.
They note that President George W. Bush’s massive tax rebates in 2008, which amounted to an average of $500 per family, didn’t spur a recovery. (And yes, the present spending splurge began with Bush.)
So far, it’s debatable whether Obama’s spending has done much more than prop up state governments and create government jobs. Economists argue that stimulus programs don’t work because they are, by nature, temporary. But deficit spending at this pace will lead to a debt this nation can’t support.
Obama would serve the economy far better by signaling to the marketplace that government spending is about to be reined in. We had hoped he would begin to take steps this year to restructure the nation’s finances and long-term obligations, such as Social Security. But these comments suggest he’s not ready.
That’s too bad. Hopefully lawmakers are hearing from those constituents who have had enough, and the purse strings soon will tighten.
We have yet to see proof that massive global spending can fuel a robust recovery. Why add more?
If this is not the time to stop, when will it be?
