Saturday, October 9, 2010

The Recession Is Officially Over! So why does it still hurt?

Okay, I'm reflecting on the events of the past 18 months and trying to make sense of the administrations claim that their stimulus measures have kept the hounds at bay and saved us from plunging deep into a depression. Here's what I recall...correct me if I'm wrong.

When Obama took over the oval office, he told us that we needed to spend the stimulus dollars to get us out of the recession and that, if we did, unemployment would not go beyond 8%. He stated quite clearly that "all the economic experts agree" with him. The following day, 220 experts on economic matters, many from academia and the business world, stated their strong objection in a full page Wall Street Journal ad. Entitled "Mr. President, You're Not Telling The Truth", the full page spread included the signatures of all
220 descenters.

This campaign season we're being fed a constant diet of "if the democrats hadn't passed the stimulus we'd be sunk".

Fast forward to last week when The National Bureau for Economic Research stated that we're officially out of the recession. The Obama administration considered this good news. In fact, the NBER stated we've been out of the recession since June 2009. Okay, the NEBR is very careful and waits until there is clearly enough information for it to comfortably say with conviction that the recession has ended, so the year delay in proclaiming we're in recovery should not throw up any red flags. But wait a minute! That means the recession ended before a single dollar of the stimulus money was spent!

The stimulus failed on two levels. Firstly, it appears to have been unnecessary. That is not to say that it did no good, but the same money would have been better spent through tax breaks for small and medium business, who are by their very nature much more efficient at creating jobs. It also failed to keep the unemployment rate below 8%. It now stands at 9.7% and doesn't appear headed down any time soon.

According the the NEBR's own conclusions, the stimulus was completely unnecessary.

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