At the opening of the Obama Administration, Vice President Joe Biden famously told an AARP audience “We have to go spend money to keep from going bankrupt.” This off-handed comment has, as it turns out, served as a nice summation of the Obama Administration’s economic policy and America’s present economic predicament. The Vice President’s absurd assertion reveals his, the President’s, and the Left’s economic philosophy; they truly believe that government spending, not private investment is responsible for job and economic growth in America. They believe that government spending spurs the private sector, not that the private sector pays the price for public spending.
Common sense confirms that this whole notion is absolutely backward; the inverse is actually true: the private sector, made-up of millions of free people, small businesses, corporations and enterprises, fuel America’s economic engine, and create the millions of new jobs needed to sustain the American middle class. Excess government spending hampers these individuals and enterprises, by sucking wealth out of the private sector to pay for public spending. For this reason, Vice President Biden’s assertion back in 2009 that we “have to go spend money to keep from going bankrupt” is not only absurd, but impossible. A financial crisis created by too much spending and too much debt cannot be reversed by yet more spending and yet more debt. In fact, more spending and more debt will ensure that the nation goes bankrupt all the faster, and that we bleed good paying jobs in the process.
We need look no further than the financial crisis faced by Japan in the late 1980s and early 1990s as an example. Japan faced a similar financial crisis like America faced in 2008; they experienced a market meltdown fueled by government spending and intervention, which led to persistently high levels of unemployment. In an effort to stimulate their economy, or, in the words of Vice President Biden “to keep from going bankrupt,” they rapidly increased government spending. Following the same “logic” that the American left is now employing, the Japanese government tried stimulus package after stimulus package; they increased government spending in “shovel ready jobs” projects, and they tried to “invest” in pet projects like energy and infrastructure. Instead of creating new jobs and expanding the economy, this increase in spending led to higher levels of public debt, which meant that taxes increased at the same time as inflation.
The one-two punch of increased taxes and inflation meant less private sector activity, which led Japan into a decades-long economic and job stagnation that persists to this day. Economists the world over have since lamented the “lost decade” in Japan. The result of more spending and debt on top of already high levels of public spending and debt has created a financial “death spiral” in the Japanese economy. Millions are trapped in dependency, the nation’s economic future is less bright, and their national debt is now bigger than their national economy. The United States government is now pursuing the same set of policies that trapped an entire Japanese generation in stagnation, and it is having the same effect here in America. Unemployment is stubbornly high, particularly among new high school and college graduates. Economic growth is historically low, while families’ take-home pay has steadily decreased and costs of living have steadily increased. This has been going on for over six years now in our country, with no end in sight.
If America doesn’t soon adopt measures to slow and reduce government spending and debt, our lost decade will be written about as a warning for future generations. Our national debt has doubled six times since World War II, increasing from $258 billion in the years immediately after WWII to over $17 trillion in 2013. This level of debt simply cannot be maintained, and it will be the undoing of the American Dream if we don’t reverse the trend. The economy cannot grow, or Americans prosper, until we unleash this nation’s economic engine, which remains the private sector.