Obama Spending Debate

I have had many requests to post full sections of the opinion of my liberal friend from the University of Utah so that everyone can see the insanity with their own eyes and make their own comments. So I will start at the beginning and post the most telling of his initial submissions followed by my specific rebuttal. I will then post the next communication thread on another day.

 

I hope this exercise will stimulate some dialogue… now get busy friends and tell this guy what you think. – Maurice

 

 

Maurice,

It is good to hear from, just to get things clarified I am not an Obama "maniac" like many of my peers. I just tend to agree with his policies which is generally directed towards the common "man"; he is still a politician nonetheless. Also to be noted I am doing a research paper on this topic, and when I get my results I can give you more information(My paper is what promotes economic stability). Anyways... I see your concern with Obama, like many other conservative Americans. The stimulus is a scary thought because it's creating more debt and inflation, but inflation is not always bad. If our currency is valued lower then another country's, it will promote exports from our country(because are products will be a lot more affordable on the market) which we do need badly. One of our reasons for the collapse of our economy was the trade deficit. We as a country were buying much more then selling. A good example of this was with GM, many Americans because of cost resorted to buying foreign cars. Also to add on to stimulus argument, I am a big believer in Keynesian economics. John Maynard Keyes believed that investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

 

I hope this helps explain why I am a supporter of Obama, but I only tackled the economic aspect of his policies since I figured this is of most worry to you. If you have any other concerns feel free to let me know? I love debating politics and hope to hear from you soon.

Thanks-

Also, it may seem like the stimulus is like a dead fish, but just give it time.

 

 

Thanks for the thoughtful response.

You'll have to explain who the "common man" is, because I am a little confused. I thought I was the common man. At least the common American. I'm white, Christian, in a household, live in an urban area, make an average amount of money... What could be more common?

Anyway, I wasn't really writing to you for advice. I just wanted to open up a dialogue with you to try to broaden your perspective a little. Hope you don't mind.

I am very familiar with Keynesian theory. However, don't ascribe to it. I support a free market philosophically. Locke, Smith, De Tocqueville, Max Weber, Hayek, Friedman, Sowell... My kind of guys. Are you familiar with them?

I've done some research on economic stability. Perhaps I can recommend some books for you to refer to.

Basic Economics, Thomas Sowell.
Free to Choose, Milton Friedman
The Road to Serfdom, Friedrich Hayek

If you are interested in contemporary titles which address our current economic situation, you could glean some information from these recent works:

The End of Prosperity, Arthur Laffer and Stephen Moore.
Meltdown: -- , Thomas Woods

Since you are such a big fan of Keynes, you must be prepared to defend the Keynesian policies which helped usher in this deep recession? The Fed's policy over the last 3 years, Greenspan in 2006 and now Bernanke, has been to stave off inflation by keeping interest rates low. It made everyone feel like they are Warren Buffett. Every time they lowered the lending rate, more people were encouraged to borrow and spend beyond their means. The areas of the economy that saw the most investment from this Keynesian, hands on, monetary inflation policy were capital markets and housing. Both sectors were devastated by reckless speculation with Keynesian 'free money'. If inflation was in the cards for the economy in 2006, and even before, we should have let that ride a little bit then and we wouldn't have seen such large bubbles in the economy burst all at once. That being said, who is to blame? It all starts with the Keynesians.

The trade deficit doesn't hurt the economy. So we by a lot of cheap stuff. Big deal. If even 25% are assets used in the production of more sophisticated products and technology for emerging markets the growth in GDP is sustained. So long as we continue to trade with those emerging markets. (See the Columbia Free Trade bill that has gone nowhere with this Democrat congress.) The US has assets totaling in the hundreds of trillions. That dwarfs those of our closest rivals. Its like Bill Gates buying toilet paper and pencils for Microsoft. The "tp" is cash literally thrown down the drain, but if the pencils are employed to create one groundbreaking idea... You see the analogy.

The economy was hurt by Keynesian regulation of the money supply (see argument above), socio-economic tinkering by liberal lawmakers ( (D) Barney Frank, (D) Chris Dodd etc.) and community activists who forced mortgage lenders to make a ton of risky loans to people who had no business buying houses or who bought homes beyond their means under the  community Reinvestment Act, and  reckless speculation in capital and real estate markets with the biggest risk takers being the quasi-governmental institutions of Fanny Mae and Freddy Mac (See relationships with the aforementioned (D) Barney Frank, (D) Chris Dodd etc. ) who peddled off those
self-same risky mortgages with the confidence of knowing that the taxpayer would be the ultimate guarantor.

In my opinion, this stimulus is not a good thing. You'll have to explain in detail how it will help this economy. You'll have to drill down and make a detailed argument about how you believe the economy will benefit in order to persuade me. I know that an injection of cash into the economy stimulates activity, but keep in mind activity is not growth. Growth is wealth generation. The economy needs growth. It will always need growth. Health is sustained growth. The converse is death. Activity does not, in and of itself, create your 'multiple of the original investment', in other words wealth.

I look forward to hearing your arguments.