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The Failure of the Stimulus in One Lesson

Since the “stimulus” was enacted into law in February 2009, the economy has lost a whopping 2.6 million jobs. Despite President Obama’s promise that the so-called “stimulus” would keep the unemployment rate below 8 percent, the economically flawed policy has caused the unemployment rate to skyrocket to close to 10 percent. At the same time, President Obama who remains oblivious to the failure of the “stimulus” is pushing for yet another “stimulus” package that he calls “essential.” We hate to break it to Obama but the third time is not always the charm. Extending the provisions of the 2009 “stimulus” bill once again will have the same consequences as the previous two extensions: increased unemployment and debt.

Once again, believers in the free market must heave a sigh and say “I told you so.” It seems that we have this magical power that allows us to foresee crises before they even happen. In other words, we have a firm understanding of economics. History has repeatedly proven that government spending does not and will never solve all economic ills. Unfortunately, 64 years after Henry’s Hazlitt’s Economics in One Lesson was written, politicians still attempt to live in a fantasy world that disregards the principles of economics. As Hazlitt brilliantly exclaims,

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

All too often, we look at what can immediately be seen without analyzing the secondary consequences of a policy that may be less visible to the eye. Those fiscally irresponsible “stimulus” signs that cost taxpayers up to $10,000 are a propaganda tool that attempt to remind us that “stimulus” is supposedly “putting America to work.”  For instance, everyone is easily able to visibly see the construction worker whose pay is funded partly by the “stimulus” working to widen the highway.  Most Democrats are quick to claim that this must mean that the “stimulus” has been successful at “creating” jobs. To refute this claim, we need to think beyond what we can visibly see.

Where did the money to pay for the massive $787 billion “stimulus” come from? Taxpayers. The passage of the “stimulus” took $787 billion directly from the pockets of taxpayers. Ever wonder what those taxpayers might have bought with their own hard-earned $787 billion? Due to the passage of the “stimulus”, taxpayers lost countless items. For example, perhaps one student would have used the money to pay for his education costs, a mother would have use her money to pay for her daughter’s ballet classes and another family would have saved it with the goal of buying a safer car. Where is the compassion for these people and their losses? Unfortunately, Obama who does not know your personal preferences arrogantly believes that he can somehow spend your money better than you can.      

Wait a second. People buying more education, ballet classes, cars and numerous other items or services that they desire actually create jobs. Since the “stimulus” ultimately will take $787 billion out of the private sector through taxation whether directly or through inflation, less people are able to pay for these goods and services. As a result, businesses lose massive amounts of money and cannot afford to create jobs by hiring new employees. Therefore, for every single job that the “stimulus” supposedly “created”, at least one private sector job was never created.  In fact, research reveals that 10 million jobs were not created that otherwise would have been without the “stimulus.” We just cannot visibly see the jobs and opportunities that were not created because of the indirect consequences of the "stimulus."  We must train ourselves to consider the effects of the “stimulus” on all individuals—not just a select few.

Henry Hazlitt's one lesson is timeless.  Government through any "stimulus" program cannot recovery the economy. Instead, private sector growth is the only key to economic recovery. Evidently, lowering the tax burden on individuals and businesses is essential to private sector growth. Remember, every cent that “belongs” to the government was first coercively taken away from a taxpayer.  To quote Thomas Sowell, "The only person toward whom there is no compassion is the taxpayer." It's time to put an end to these flawed "stimulus" programs that harm taxpayers while destroying potential jobs in the private sector.