Germany Was Right About Stimulus
Jun 9, 2009 Political
Barack Obama said we needed to pass the stimulus package or things could worsen. He said we could go into a tailspin, a spiral from which we might not recover. The very fear tactics he criticized Bush for were front and center. Obama said that if we did not pass the stimulus that unemployment would be over 9% but if we did pass it unemployment would be around 8%. He got it passed and unemployment is now at 9.4%. My liberal friends dismiss this and say that these are just estimates and predictions. If this is the case and he was this wrong, why should we pay attention to any of his other predictions?
Obama tried to get Angela Merkel of Germany to pass a huge stimulus and she said NO. The Keynesian economists were not happy. Merkel took the same approach that I wanted us to take, and that was not to spend the money.
Looks like she was correct. According to the AP (via Forbes) The unemployment rate in Germany is dropping and jobs are being created or or filled (or are they being saved).
The number of jobless dropped 127,000 in May to 3.458 million for a 0.4 percentage point decline in the unemployment rate to 8.2 percent, the Nuremberg-based agency said. Forbes
The article does indicate that some of these are seasonal jobs and that there might not be a lasting recovery. The important thing to take away is that Germany did not spend huge sums of money for a stimulus and the country did not go into a tailspin and into a spiral from which it might not recover.
In other words, they are seeing some improvement that might not be sustained but that is better than ours and they did not spend a trillion dollars. As I said, the economy moves in cycles and there will be recessions. Our biggest mistake is to intervene and manipulate the economy because it eventually adds up. All the interventions of the past exploded in 2008 (along with Democratic housing market antics). If we let the economy move in its normal cycles things will get better faster.
The US will lag behind Germany in recovery because we made the same mistakes that FDR did during the Great Depression.
What makes anyone think that government can fix the problem it created? If spending were the solution we would not have a problem because government has been on a spending spree for years.
Unemployment will be in the double digits along with inflation right after we suffer the deflationary cycle. All the stimulus in the world will not help.
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Tags: depression, germany, inflation, merkel, Obama, stimulus