Amidst all the gloom and doom, it should be a relief to know that you are getting richer by the day. America could, according to modern economic theory, have the largest GDP (Gross Domestic Product) ever by year’s end. I just got the good news from an economist informant of mine. As economics is taught today, government spending is part of GDP. No, not the negative part of the equation, the positive part. So the more we spend, the more we have.

It is clear that Obama and his advisors have bought into this notion that they can spend us rich, and they want us all to believe this myth, which has held up well, like the myth of bloodletting in medical science.

Here’s how it works. The GDP is generally reckoned by economists like this:

GDP = private consumption + gross investment + government spending + (exports − imports), or,
 GDP = C + I + G + (X – M)

My informant assures me:

When halting the massive drop in production with government spending (remember, GDP = G + I + C + (X-M)) and when Investment, Consumption and net exports are all falling, the only best way of avoiding a big D (for depression) is to increase G.

By this reasoning, Obama, when he decides when and how to spend those trillions, will automatically be making America fabulously wealthy.

Why am I not reassured?

Even economists, despite their detachment from the real world of natural supply and demand, understand that not all government spending can be placed on the positive side. They define it thusly:

G (government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits.

But that is dangerously simplistic. Most government expenditures do not translate into sustainable, productive jobs that will create a tax base to provide for government debt payment. And even when the  government plays Soviet Union and seizes private industry, like GM — since the United States is a country increasingly controlled by the labor unions to whom Obama is indebted — such nationalization of industry will spell high and constantly inflated production costs due to overpayment of workers (FDR made the same mistake of inflating wages), and hence, high-priced products. The government can (and will under Obama) subsidize these high-priced products, like the smart cars GM is mandated to make, and that in turn will raise government spending.

So we’ll get rich, right?

Well, Obama’s policies mirror those of FDR, who is often credited with “getting us out of the depression.” But imitating FDR bodes ill, for several reasons; far from pulling us out of the Great Depression, FDR probably prolonged it by 7 years.

Another important fact is that FDR’s only real stimulus seems to have been the war. Now Obama could try this by starting a war, say, with Venezuela. But unlike in FDR’s day, when war stimulated a U.S. economy with a strong manufacturing component, we now rely heavily on Third World countries to manufacture a very large percentage of our consumer goods.

Which leads to another factor: the different industrial layout of the U.S. economy compared to FDR’s day, when stimulating industrial production led to a surge in trade against an already positive trade balance, which went negative around the time of the Trade Act of 1974 and the granting of Most Favored Nation status to China. Let’s face it, if the Chinese had seen any potential for the United States to balance trade, they would never have lent Obama the money for his stimulus package. They know that Obama is plunging us into a trade debacle that is a bonanza for China.

Finally, the government can force GM to make smart cars but no one can force us to buy them instead of cars made in competitor countries. The administration can and will make fuel more expensive (no-drill, no new refineries), but that policy is a dead end economically, as transport costs will rise and, along with them, living costs, cutting tax collections. Unless, that is, Obama decides to break his campaign promise and raise taxes on the middle class.

In any case, the pattern of recovery seen after WWII is not going to happen.

Besides, the only way to spend more has been to either borrow or to print money, and borrowing is not a self-sustaining process. Since creditor nations like China are now so worried about U.S. solvency that even they are warning our government to cut spending, it is clear that lending will soon not be an option. That leaves printing money. I am not a Keynesian, but even John Maynard Keynes saw the problem of government inflating the money supply by printing money when he wrote in 1910:

The inflationism … of Europe has proceeded to extraordinary lengths. The various belligerent governments, …. have printed notes….  In Russia and Austria-Hungary this process has reached a point where for the purposes of foreign trade the currency is practically valueless.

If the Obama team wants to follow Keynesian stimulus policies, then they had better look at the rest of what Keynes said. He may have been out in left field, but he was not suicidal.

Whenever I debate economic theorists on stimulus plans, I always remind them that in sciences, such as medicine, when a new solution to a problem (cure) is hypothesized, the scientist clearly defines a proposed mechanism of action by which he thinks the solution will occur. I then ask by what specific mechanism the economic “stimulus” proposed by Obama can be expected to work. I have yet to get an answer to this question, and can only conclude that Obamanomics, the current distortion of Keynesianism, is more of a personality cult than a science.

Donald Hank is a former language teacher, currently operating a technical translation agency in Wrightsville, PA. He holds an undergraduate degree in French and German from Millersville State University (PA), a Master’s degree in Russian language and literature from Kutztown State College (also in PA), has studied Chinese for 3 years in Taiwan at the Mandarin Training Center, and is self-taught in other languages, having logged a total of 8 years abroad in total immersion situations. He is also the founder of Lancaster-York Non-Custodial Parents, a volunteer organization that provides Christian counseling for non-custodial parents.

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danwhitehead1 said:

	I have to say again - - - - - - that if this nation survives this current regime it will be ONLY by the grace of God.
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August 24, 2009
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Pat Henry said:

Your economy is the small group that buys and sells with you Government spending comes from: 1) taxes (which gives them what they spend), or 2) printing money (which inflates the money supply; this eventually results in higher prices; this is the same as a tax, by devaluing the money we use). No free lunch. Only production can produce wealth. By design or stupidity, the bi-partisan Congresses have been subverting the most productive economy in the world. While we work to show a tireless minority that we must change Congress by truly voting in truly alternative Representatives, we have a nuclear option meantime: Opt Out. How? Agree in small groups to use specie (silver, gold, copper, other things of intrinsic value) in your purchases. Trade in your Federal Reserve Notes for real money. Then trade this, value for value. Goods for real money, that does not lose its value over time. The Fed can inflate all they want, and you will hold something of value, outside their Monopoly money system. Here is an easy calculator to help us begin http://www.silverandgoldaremoney.com/

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August 24, 2009
Votes: +1

Thomas Paine said:

	Evil intentions or good intentions. That is the key. As our family argues politics, it all comes down to whether or not the ideas have good intentions or bad intentions. If all this spending craze was just honest effort to recover, then we can all safely say we will eventually pull out. However, if there are evil intentions: IE: NWO plan, 911 fraud, then we are in deep Sh _ _ !
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August 24, 2009
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Patriot said:

	Evi Intentions There are certainly evil intentions, so, as Mr. Whitehead said, "if this nation survives this current regime it will be ONLY by the grace of God." We're in deep Sh_ _, but I do have faith in the grace of God. We have a lot of work to do, though.
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August 24, 2009
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Arcadio Gutierrez said:

	Agent ok ok ok ok
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August 24, 2009
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