Larry Kudlow lays out some possibilities – all of them bad:
…Already there are rumors of an August surprise (to use the phrase of business columnist Jimmy Pethokoukis) where Fannie Mae and Freddie Mac forgive underwater mortgages held by millions of Americans. And with state and local government jobs having fallen 169,000 year-to-date, perhaps the Democratic Congress and the White House will seek an even bigger spending plan for teachers and Medicaid workers — on top of the $26 billion plan that just passed the Senate.
Or maybe the Democrats will come up with a new infrastructure-spending bill, perhaps for green technologies and whatnot. Or maybe they’ll extend unemployment benefits even more. My liberal friend Robert Reich is even talking up the New Deal’s Works Progress Administration (WPA), where the government employed millions during the 1930s…
All of which is possible for two reasons:
1. Democrats haven’t figured out that the Keynesian economic model is flat wrong. It doesn’t work – it can’t work; you can’t print, borrow and spend your way in to wealth. But, Democrats remain wedded to it.
2. Democrats don’t conceive of any policy move which doesn’t have them dispensing taxpayer money in return for votes. If there isn’t an immediate and direct benefit to Democrats, why do it?
So, the sort of policies which would save the day – even at this late a date – simply won’t be tried. And thus we’re stuck with the very real prospect of the Democrats doing all or some of what is listed above – and all of that would simply make matters worse.
Fundamentally, only a change of government can allow us to start the economic recovery – Step One in that comes in November, but it must be kept in mind that the actual levers of power will remain in Obama’s hands until at least January 20th, 2013. This could get very ugly.
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