So exactly what are some of the things that Barack Obama and the Federal Reserve have been doing that are boosting the economy in the short-term but that are destructive to our economy in the long-term?
Well, the following are just a few examples....
#1 Out Of Control Government Spending
More government spending always stimulates the economy. When the government borrows and spends more money, that puts more cash into the hands of the people and it spurs economic activity.
This is what all of the "stimulus packages" were all about. This is also what the record-setting deficits are all about. If the U.S. government had not wildly spent massive amounts of money over the last couple of years our economic downturn would have been a lot worse.
So if all of this wild borrowing and spending is so good for the economy, then why don't we do it all the time?
Well, that is what Keynesian economics is all about. Keynesian economics postulates that the government should borrow and spend extra money during economic downturns in order to stimulate the economy.
Unfortunately, over the years our political leaders decided that it was always a good time to stimulate the economy with extra spending and so now we have accumulated the biggest mountain of debt in the history of the world.
Every single penny of debt makes our long-term economic future worse. Every dollar that we borrow and spend now is a dollar that future generations have to pay back later (with interest). We keep running up our national credit card to benefit our short-term economic situation, but now we have reached the point where our long-term economic outlook is absolutely nightmarish.
Right now, our national debt is $14,099,823,671,305.06, and it continues to increase by about 4 billion dollars a day...
#2 Tax Cuts
Tax cuts almost always stimulate the economy. They put more cash into the hands of individuals and businesses and this tends to spur economic activity.
Many were surprised when Barack Obama agreed to a tax cut deal with the Republicans, but it all makes sense when you understand what Barack Obama wants.
Barack Obama wants to get re-elected in 2012.
Obama also knows (or should know) that tax cuts will help to stimulate the economy in the short-term.
Unwittingly, the Republicans have actually helped Obama's chances in 2012 by agreeing to this tax cut deal. Lower taxes can only help the short-term economic situation.
The funny thing about the tax cut deal that Obama and the Republicans agreed to is that most of the tax cuts are to last for only two years.
Yes, just long enough to provide a short-term economic boost through the 2012 presidential campaign.
Of course George W. Bush did the same kind of thing many times.
But aren't tax cuts good?
Well, yes they generally are. The truth is that the U.S. government already receives far, far, far more money than it should ever need.
But the problem is these tax cuts are not being paid for. Instead, taxes are being cut at a time when all kinds of new government spending is also going on. This is going to lead to a lot more debt, which as we talked about above is a long-term economic problem that threatens to destroy our economy.
#3 Super Low Interest Rates
The U.S. Federal Reserve has slashed interest rates to the floor and the folks over at the Fed have kept them there for an extended period of time.
In the past, whenever the Federal Reserve has wanted to stimulate the economy, they have cut interest rates. Well, at this point rates have been shoved all the way to the pavement and they have no way to go lower...
#4 Quantitative Easing
Another way that the Federal Reserve is seeking to stimulate the economy in the short-term is through something called "quantitative easing". Essentially what the Federal Reserve is doing is that they are creating lots of new money out of thin air and they are pumping it into the financial markets.
This has helped big Wall Street banks to recover. It has also fueled booms in the stock market and in various agricultural commodities.
When the Fed makes money out of nothing and puts it into the hands of bankers that is supposed to stimulate lending. The idea is that more lending will stimulate more economic activity. So far it is not working that well, but that is the idea.
So what is the downside?
Well, the downside is that all of this new money could create a tremendous amount of inflation...
Read more:
http://endoftheamericandream.com/archives/4-ways-barack-obama-and-the-federal-reserve-are-destroying-our-long-term-economic-future-for-their-short-term-gain
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