I was asked today how "I knew" that the Obama "stimulus" plan wasn't going to work. It was an honest question and I gave an honest answer--Japan's Lost Decade.
“It is not enough just to hire workers to dig holes and then fill them in again,” said Toshihiro Ihori, an economics professor at the University of Tokyo. “One lesson from Japan is that public works get the best results when they create something useful for the future.”In total, Japan spent $6.3 trillion on construction-related public investment between 1991 and September of last year, according to the Cabinet Office. The spending peaked in 1995 and remained high until the early 2000s, when it was cut amid growing concerns about ballooning budget deficits. More recently, the governing Liberal Democratic Party has increased spending again to revive the economy and the party’s own flagging popularity.
In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations.
A lot of people aren't going to be old enough to recall a time during the seventies and eighties where Japan was supposed to eclipse us as an economic power. Hordes of Japanese tourists, flush with cash would tour the U.S., snapping pictures of everything. Snowbird Ski resort, which has been a favorite of mine since my college days, had trail signs in Japanese and we amused ourselves watching Japanese tourists in fifteen hundred dollars of equipment and fashionable ski clothes, snow-plowing down Big Emma trail. By the early nineties they were gone--all the way gone.
The irony is that there has been virtually no controversy among economists about Japan's lost decade. The reasons for it were clear, as was the prescription, but politics intervened as their liberal Democrats imposed a politically-correct band-aid over the gaping wound. Japanese liberal Democrats borrowed nearly twice the GDP of Japan to build bridges and roads to nowhere, saddling not one but several future generations with the bill.
Those who cannot learn from history, are doomed to repeat it. Japan's experience was bad, but we are talking about a complete different scale of economic devastation if the U.S. is driven into depression to satisfy Democrat lust for an illusory permanent majority.
The U.S. represents fully 25% of the world economy, three times larger than Japan's which which is number two, and four times larger than Germany's. Its impact on the world economy is disproportionately greater than its size for two other reasons--the U.S., being richer, buys more and invests more in the world economy. It imports twice as much as Germany the next largest importer and 34% more than the entire EU combined. It represents 14% of all imports in the world. It imports four times as much as Japan, the second largest economy. The U.S. is also a major foreign investor, outflowing 1.6 trillion in investment in foreign lands, while receiving 1.4 trillion (2007 figures). Notably, Unions have tried to quash foreign investment outflows since Nixon was President, on the premise that it exports jobs. With the Democrats in power, it seems likely that they will success in strangling U.S. outflows and with it a major source of wealth creation (and sustainable jobs).
We are literally facing a perfect storm of political malfeasance designed to kill every wealth and job-creating aspect of the international economic system--and make no mistake--we will be the losers.
Democrats point out that middle class incomes have been flat for many years, but ignore the real measure of wealth which is purchasing power. The real value of the dollar has increased as even the poor are able to buy what were once considered luxuries because they have been built more cheaply overseas. Walmart, but itself, has improved the lot of the poor in this country more than any government program ever invented. There has been serious analysis that shows they they contribute 221 BILLION a year in lower prices to the poor (Retail has grown from 250 B in 1960 to 800 B in 2004, but has remained steady at 8% of GDP).
Democrats are getting ready to fix that with massive taxes on coal, gasoline and other fuels, so ask yourself if your income rose by ten percent but prices rose by twenty, would you be better off?
Yeah, I thought so.
The U.S. is the richest country in the world, and its citizens the most wealthy (the average black family has a higher standard of living that the average Swede...) because the dollar buys a lot and we are extremely productive by world standards. That productivity is a measure of wealth creation--we create a lot of wealth because we create more profit than any other country. Profit is a function of investment. At one point, the U.S. was responsible for half the profits in the world.
Socialist economies aren't much interested in profits--they are interested in jobs, which when you get right down to it, is taxing the productive to provide income for the unproductive. Obama wants to create a few million jobs with his so-called "Stimulus", but here's the math.
So what are we up to now? We are up to approximately one trillion dollars... The Congressional Budget Office yesterday said that this legislation would increase employment by the end of the 4th quarter of 2010 by 1.3 million to 3.9 million jobs... I did the math... A 1.2 trillion dollar bill, 3 million jobs, is $923,997 for each job.
When is a job not a job? When you have to pay to create it. Jobs in the market economy actually exist to create wealth. Jobs in the socialist economy consume it. The implication is that we have to keep subsidizing these million dollar jobs basically forever. Market economy jobs continue to exist as long as the contribute to wealth creation--and here's the kicker--if they disappear, its almost always a case of being replaced by a job that creates wealth more efficiently--i.e. a higher paying job. That is why your shirt is made in India and not in Georgia. Americans are doing more profitable jobs in software or the medical industry, and paying fifteen to twenty bucks for the shirt that used to cost fifty bucks.
When you voted for a Democrat, you voted to be poor, and your children as well.
Believe me now, or believe me later...its all the same to me.
