President Obama, is running on Keynesian Economic Theory to govern the country as well as European Socialism. Keynesian Economics is the belief that massive government spending infrastructure: building roads, bridges, rebuild schools, would improve the economy based on the multiplier effect meaning more spending equals more jobs.
But the Massive spending bill(a/a the American Recovery and Reinvestment Act has only 5% of spending package. ) Keynesian Economics does not work. Back in the1930’s When President Franklin D. Roosevelt created the New Deal programs which included Social Security, The National Recovery Act, created bank holidays where banks were closed briefly, created the Work Progress Administration recovery program prolonged unemployment. President Roosevelt’s Treasury Secretary Henry Morgenthau,Jr testifying to the House Ways and Means Committee in May 1939:
“We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.”
The quote was from the book New Deal, or Raw Deal by Burton Folsom, a historian and Profesor of American Hisory, Hillsdale College.
Today, many economists say the Keynesian Economic policies did not work for private industry at large based on government actions including wage and price controls. Companies that did business with the Federal(as well as state)government(s) did very well. However those business that didn’t received government business suffered. Many went out of business.
Obama is spending almost $2 trillion between The American Recovery and Reinvestment Act and the $417 billion omnibus spending bill is exploring the debate of the Keynesian philosophy and reality of Free Market capitalism. Raising taxes and massive federal spending is all ready having a effect on Wall Street; a vote of No Confidence by stock market as the Dow Jones has fallen 1500 points on the since Inauguration Day; and over 3000 points is since winning the office.
Larry Kudlow, Host of CNBC’s Kudlow Report is upset by the president’s actions and said,
He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.
He mystified by the president decision to raise taxes, and increasing spending which leads to deflation, stagnation, more job losses.
Many Americans are angry, fearful, and have many doubts about this administration actions. Many of the new taxes on the wealthy will be passed to the public at large basically killing the tax cuts the president created. Which makes no sense.
Obama needs to turn this arround or the public will blame this on him. And he will loose support.