Friday, August 17, 2012

The Failure of Stimulus, Lack of Consumer Demand

Both Obama and Romney have been promising, if elected, to create jobs. Neither of them should be making this type of promise for it will be doomed to failure. This is particularly disingenuous for Romney since the Republican Party claims to want government out of the private sector.

The video below is a CNBC interview with Henry Blodget (Businss Insider CEO) Mr.Blodget essentially repeats what I have been advocating, that stimulus efforts are failing because we are in an economic  "hangover period" and that the consumer is not buying.  I have previously expounded on this issue in several earlier posts.

As a quick summary Mr. Blodget; for the economy to grow you need three things. Entrepreneurs to create jobs, a good product, and customers. What is lacking, for economic growth, are the customers.

As an aside, what is "missing" (in the good sense) from Mr. Blodget's thesis is the use of tax policy to manipulate the economy.  Again, one of my themes has been that economic policy and tax policy need a "divorce".  The purpose of tax policy is to raise revenue to pay for government programs not to play games with the economy.  As such, the budget needs to be balanced, even if it means making difficult decisions. To borrow from Alexis de Tocqueville: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."


Natasya Katsikaris said...

Hi Steve,
This is your sister. No luck finding your telephone number on the web, but I found this blog entry. Funny we both lean toward libertarian. Please check your e-mails as I sent you my contact info. Thank you.
Natasya (Robin)

Anonymous said...

Good Articles, glad to have found this.
Economically, none of this will really matter soon. The Government has already held several meetings to monetize all retirement plans (401K, IRA,company pension, ... all of them).
Since the law established the plans under tax codes, turns out the government can do this in times of emergency.
All plans will be converted to social security (or social insecurity for some).
Basically, only the "rich" have such plans. Well, those who have over $20,000 are in a very distinct minority.
So basically, it all is magically moved by the investment industry into Social Security. The contributing citizen will just receive the same SS as others.
This will keep SS going for about another 4 years. It is a real emergency.
If you want to read the news releases on this, look into archives and current issues of ED Steer Gold and Silver Daily. Short descriptions on news articles with full cites - free.