So what has been the government’s response in the current crisis? Besides spending stimulus, it was tax incentives for new home buyers and cash for clunkers if you bought a new car. All three are programs for borrowing output, homes and cars from future production and sales. Using subsidies to pump up home sales beyond what people could afford was the problem that led to the crisis. Now the problem is touted as the solution.
Undaunted by its record of failure, the Obama Administration recently persuaded the Senate to approve borrowing even more money, billions more, to bail out public employee unions, and subsidize bloated and mismanaged school systems. The House is expected to pass the measure soon.
Months ago, the Congressional Budget Office already estimated that Obama’s polices would add $9.7 trillion to the national debt.
Earlier, another Nobel Prize winning economist, Gary Becker, said that Obama’s policies were delaying an economic recovery.