Government does not create wealth. Government can transfer wealth, but it rarely does so in a way to help the economy. Check out the chart below from a PowerLineBlog post title “Repent! The End of Keynesian Economics Is At Hand!”

Notice that government spending stayed pretty even from 1998 to 2008. During that time we had period of job growth and job decline. Since 2008, government spending has increased dramatically. Some jobs may have been saved but overall the numbers are WAY down.

The Obama stimulus borrowed money from investors to “save jobs”. What he and his progressive advisers refuse to acknowledge is that they crowded out private investment. The money that investors would have put into wealth creation instead went to government programs designed to save jobs. In essence, the markets said we needed a correction but the geniuses over ruled and chose the status quo…or worse…they chose to divert the money to economically challenged “green” project.

The skeptic of this position might point to the stock market to say I am wrong. The stock market is doing well versus the dollar, but the dollar has been devalued by “quantitative easing”. When you compare the S&P500 to gold, you see a dismal record.

Since 2005, gold has gone from $400 per ounce to over $1400 per ounce. The S&P has gone from 1180 to about 1400. When you use gold as the standard, the S&P500 is about a third of what is was in 2005. If you pick 2009 (when the stimulus was passed) the data paints an even worse picture.

 

 

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