The so-called stimulus package passed by the Democratic Congress and signed by President Obama in 2009 was not the first such attempt by Washington to stimulate economic growth by spending money the government did not have. It was merely the most obscene, and the clearest evidence yet that such “stimuli” is akin to the kind people often put into their bodies.
Figuring that a $100 billion stimulus package like the kind that saw the Bush Administration send taxpayers $1,000 checks in 2008 was for small-timers, Obama convinced an all-too-willing Congress to go even bigger and balloon the deficit by $862 billion to supposedly spur economic growth.
The economy was in big trouble, so we needed to think big! Translation, spend big! If we didn’t, the president warned, unemployment would exceed 8 percent.
As we all know, the unemployment rate exceeded 10 percent after the impotent stimulus. Even now it has not been below 8 percent since it first exceeded that level, and it is currently hovering around 8.5 percent. In 2011, unable to pretend the economy was getting better, Obama asked the new Congress that now included a Republican House to give him another $400 billion stimulus. This time, he was told Congress had cut up his stimulus credit card.
Why doesn’t economic stimulus work? When it comes in the form of federal spending, it doesn’t work because it’s based on a completely wrong notion of what spurs prosperity. In that respect, it's much like a drug.
Consider the effects that a stimulant like caffeine has on your body, or even a stronger stimulant like amphetamines. These stimulants merely provide a very temporary boost to your energy – keeping you awake when you should probably be sleeping, or keeping you operating at a high level when you need rest. They make the body act in an unnatural way, and that doesn’t come without consequences.
Some artificial stimulants, such as cocaine, can really give you a short-term kick, but can also accelerate your heart rate so intensely that they can kill you. None of these stimulants have any nutritional value. They just give you energy that your body wouldn’t produce if left to its own devices, then they wear off and you either crash or take more. It’s a vicious cycle and its long-term effects are usually very bad.
When the government tries to stimulate the economy with deficit spending, it is essentially doing the same thing. Healthy sustained economic growth comes from value-added production that serves markets that want the goods and are able to pay for them. When not enough of that is happening, economic growth slows or sometimes goes backwards for a short period of time. No one likes it when that happens, but it is often a necessary correction to something that has skewed the market.
What the government then tries to do is replace the value-added, market-serving production that generates real economic growth with the gratuitous spreading-around of borrowed money.
That doesn’t work.
The economy is way past the point where the federal government can “stimulate” it back to health. That’s why Obama’s $862 billion boondoggle did not work. Real economic growth will not return unless we unleash the productive sector of the economy (which is the business sector), get out of the way of energy production, cut taxes on businesses and individuals, and stop treating everyone who makes money like a criminal. The only thing stimulus is getting us is annual deficits of $1 trillion or more, and a federal debt that’s now bigger than the size of our entire economy.
The economy on stimulus is like your brain on drugs. It’s killing us.