Massive Gov't Spending Does Not Help the Economy -- Part 1,000,006

As if history were not enough to understand that massive spending by government does not help pull its country out of recession, we have some actual reporting that proves the point (odd that we didn't hear this story from January trumpeted by Katie Couric or MSNBC.

According to the Associated Press:

Ten months into President Barack Obama’s first economic stimulus plan, a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry, an Associated Press analysis has found.

Spend a lot or spend nothing at all, it didn’t matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out

Yet, despite the failure of the first spending burst to do anything for the economy, Obama now tells us that we need more infrastructure spending. Massive federal spending didn't work then; it hasn't worked ever; it won't work now.

Think of it this way. Assume there are 150 million people and couples who pay income tax. What is the best way to allow the people's money to kick start the economy:

• Obama's Way: You can -- as Obama and the Liberals did -- take money from each of these people (we'll disregard the fact that Obama borrowed the money for the "stimulus" from places like China) and distribute that money to a relatively small number of people who are doing things that you approve of.
• The other way: On the other hand, you give real tax rate cuts that would allow all of those 150-200 million people keep more of their own money (yes, the "rich," too) allowing all of them to spend their money in every city and town in all 50 states on every sector of the economy. The extra cash in their pockets will increase their consumer confidence to spend even more instead of hording cash into a rainy day fund, as many Americans are doing. The sudden increase in economic activity will increase force business to meet the surprise demand, requiring more jobs. In turn, people with those new jobs will join into the economic explosion.

Oh sure, you Liberals argue, Obama's chosen few will spend the money on other economic sectors, who in turn will spend that money in yet other sectors, and eventually -- maybe -- all sectors will be touched. Eventually.

Of course it helps if the tax cuts are substantial enough that people should realize they actually got one.

Officials estimated (Obama's tax credits) would mean about $13 a week more in people's paychecks this year when withholding tables are adjusted in late spring. Next year, the measure could yield workers about $8 a week. Critics say that's unlikely to do much to boost consumption.

Liberals may cite The New Deal, President Roosevelt's massive spending and public works campaign after the Great Depression. Surely, that pulled the country out of its doldrums, right? Well, not exactly. While FDRs management of things in the 1930s help chop away at the 25% unemployment in 1933, the massive spending binge still left us with an staggering unemployment rate of 14% in 1940. The New Deal was little more than a band-aid that stopped the bleeding but did nothing to salve the wound.

For those of you who favor the Obama spend-and-tax-your-way-to-health method, consider this interesting graph from the Heritage Foundation that shows the greater effect of the Reagan tax cuts over the Obama "stimulus." Under Obama, we have seen unemployment increase since the declared end of the recession; under Reagan, unemployment dropped three percentage points in the same span.

At this stage of the Reagan recovery from the last deep recession in the early 1980s, the economy had created almost 4 million jobs, or 6 million jobs when adjusting for the size of the labor force. In contrast, under Obama the economy has lost nearly a half million jobs since the recovery began...

But, you say, didn't Reagan's tax cuts massively increase the deficit? While it is certainly true that Reagan's tax and ramped-up military spending, combined with the Democrat legislature's increased social spending increased the national debt, Obama's stimulus spent nearly 50% the debt that Reagan and Congress accrued in eight years ($800 billion vs 1.5 trillion). However, Reagan's plan actually worked.

You are the president, you make the call Which do you think will get things moving more quickly? The tax-cut method which has worked in the US in the 1920s, 1940s, 1960s, 1980s, 1990s, and the 2000s; or the "stimulus" method that has never worked in any country at any time.