Obama's Spending Plan

Obama is going to save the world too. Through government spending, inevitably:

"At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe,” Mr Obama said. “Only government can break the vicious cycles that are crippling our economy.”

Perhaps unsurprisingly, I'm not convinced by this idea tha spending is the way to deal with every single economic problem that comes along. In fact, I'd argue that government spending can be counter-productive. How does bringing more people onto the government payroll help? The governments of the Western world are already bloated and inefficient operations generating pure waste. And how does spending government money on propping up failed businesses help? Generally speaking, failing businesses have failed for a reason - be is inefficient business practices, obsolescent business plans of a real lack of releavance in the modern marketplace. By propping them up, government will not save these businesses. Rather, they are just putting off the inevitable.

But my real issue with this government spending is goven away in this paragraph. See if you ca spot what it is:

The “day of reckoning” had arrived, he said, and the risks of “doing too little or nothing at all” were even greater than those of allowing a federal deficit – already projected to reach the record figure of $1.2 trillion – to spiral on into the years to come.

Yep, it is that federal defecit. The one that will spiral beyond a trillion dollars. That's my big problem with this scheme.

See, the government isn't a billionnaire philanthropist; they aren't pouring their money into the economy from their own pockets. The government gets money to spend from the taxpayer. Obama will be spending the taxpayer's money on saving the economy.

Let's stop for a moment and do the Maths. There are circa 260 million people in the US. The budget defecit will top $1 trillion. It doesn't take a genius to work out that each and every US citizen isn't going to be placed in debt by their government to the tune of millions of dollars. And at some point, that massive debt will have to be paid.

And how are they going to be able to do this? Selling off the businesses the government props up or part-nationalises won't help. Those failing businesses will have been further crippled by being partly government-owned. So the only way in which the government can pay off these debts is by increasing taxation. Therefore, the future economic upturn - which will happen, at some point - is going to be stunted and restricted by a massive tax burden inflicted on the general populace to clear pointless, yet crippling, government debt. Which is going to be more than a little problematic.

The credit crunch has had a massive impact on people's perceptions, and part of that impact for many has been to make them a little more careful about their spending and much more reluctant to take on debt. Which, on balance, is probably a good thing - people seem to be understanding, as a rule, that they need to live within their means.

But like all rules there is an exception. Our frankly moronic leaders still aren't getting it. They seem perfectly happy to go on wasting money without realising that there is very little we can do to stop this recession. They are also naively not thinking about the day when all these horrific debts have to be paid back. Obama and his ilk are not that different from the would-be homeowner who took on a 125% mortgage without thinking of the consequences. Except the figures being borrowed by Obama et al are far more terrifying, and it is not just their futures they are screwing with - it is also the future of every poor sod in their countries.

And if anyone here in the UK thinks that this is only going to affect the US = think again:

A Downing Street official said: “We agree with every word of his call for action. You need to take action and you need to take action now to avoid a much deeper and longer recession."

Brown is going to waste just as much money as Obama. The big difference is that Brown lacks Obama's eloquence and charisma, meaning that (hopefully) he will encounter more resistance than Obama currently is in the States.

Both in the UK and the US, we have simply moved to the DFS approach to government spending and economic policy - buy now, pay later. And if you think the current economic climate is depressing, just wait until your tax bill starts rising in the future to pay for all of the money your government is wasting today.