In his speech yesterday Obama screamed that our economy needs a ‘jolt’. It doesn’t. The last thing we need is a jolt. Jolts go one way and then the other. What we need is slow steady solid organic growth that will stick around for a while and provide jobs for a long time, not a jolt that will be here today and gone tomorrow.
A few days ago CNN’s Alison Kosik gave a report from Wall Street in which she accidentally stated the truth. She was reporting on people upset with new fees on debit cards and said “Banks have a lot more regulations on them this year and they’re passing the cost to the consumer. They’re sticking it to the consumers.”
Getting back to the stimulus. Debt isn’t good, but is sometimes necessary. What is concerning about the US Government debt is not that we have debt and not even the specific amount, it’s how much it is relative to GDP. If our GDP was twice what it currently is the amount of our debt and spending wouldn’t be such a concern.
The problem with trying to reduce the debt through higher taxes is that you only make this ratio worse. If you tax an extra $100 billion, you’ve taken $100b out of the economy to do so. If you apply 100% of this $100b to debt reduction (something we’ve never done) you may reduce the debt by $100b, but you’ve also reduced GDP by more than $100b.