Democrats and Republicans – Their Radically Different Growth Agendas

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One of the “growth agenda” items bandied about by the Obama administration has been planned and controlled inflation. For the time being, Bernanke said there is no inflation and won’t be. Some economists, however, are predicting a tsunami of inflation coming our way over the next few years.

Paul Krugman expressed support for planned inflation recently when writing about the EU economy. In his NY Times op-ed piece [Apocalypse Fairly Soon], he wrote that the euro is facing an apocalypse because of the failure of austerity. Part of the problem, he believes, lies with having economic union (socialism) without political union (communism). [Huh?]

His solution? Several years of 3-4% inflation!

That will certainly bring down the EU debt as they pay it off with cheap money, but is it even ethical to deliberately pay off creditors and investors with devalued money? It doesn’t do much for savers and retirees either. It essentially becomes a “tax,” usually on those who can least afford it.

Additionally, Krugman wants more stimulus or, as he calls it, open-ended financing.

Krugman writes –

 …Once again the European Central Bank would have to choose whether to provide open-ended financing; if it were to say no, the euro as a whole would blow up.

Yet financing isn’t enough. Italy and, in particular, Spain must be offered hope — an economic environment in which they have some reasonable prospect of emerging from austerity and depression. Realistically, the only way to provide such an environment would be for the central bank to drop its obsession with price stability, to accept and indeed encourage several years of 3 percent or 4 percent inflation in Europe (and more than that in Germany)…

The Democratic and Republican growth agendas are radically different – as different as tax & spend from cut back & save.

Larry Kudlow, in his May 17th article on National Review Online, praises John Boehner for his courageous early stand on the Bush tax cuts [which are really the Clinton tax hikes]. Kudlow cites the numbers of businesses already threatening wage and job freezes if they have to face this large increase in taxes next January.

It is hard to make a case for the success of the tax & spend approach in the United States though anal socialists like Krugman would  simply say we didn’t spend enough of our borrowed money.

Kudlow writes –

We have a “..subpar 2 percent forecast that is way too slow to spark faster job creation.

Bizarrely, some 25 million people have vanished from the labor force — from unemployment, underemployment, or simply dropping out all together. And half of U.S. households are now on some form of federal-transfer-payment assistance. So as we pay so many people not to work, we’re sapping the vitality of the economy.”….

The following BLS chart shows the continued decline of the work force participation rate which ultimately results in the lowering of the unemployment rate they report to the public –

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2002 66.5 66.8 66.6 66.7 66.7 66.6 66.5 66.6 66.7 66.6 66.4 66.3
2003 66.4 66.4 66.3 66.4 66.4 66.5 66.2 66.1 66.1 66.1 66.1 65.9
2004 66.1 66 66 65.9 66 66.1 66.1 66 65.8 65.9 66 65.9
2005 65.8 65.9 65.9 66.1 66.1 66.1 66.1 66.2 66.1 66.1 66 66
2006 66 66.1 66.2 66.1 66.1 66.2 66.1 66.2 66.1 66.2 66.3 66.4
2007 66.4 66.3 66.2 65.9 66 66 66 65.8 66 65.8 66 66
2008 66.2 66 66.1 65.9 66.1 66.1 66.1 66.1 65.9 66 65.8 65.8
2009 65.7 65.8 65.6 65.6 65.7 65.7 65.5 65.4 65.1 65 65 64.6
2010 64.8 64.9 64.9 65.1 64.9 64.6 64.6 64.7 64.6 64.4 64.5 64.3
2011 64.2 64.2 64.2 64.2 64.2 64.1 64 64.1 64.1 64.1 64 64
2012 63.7 63.9 63.8 63.6

How can this possibly be good for our economy or our culture? The unemployment numbers may be going down, but it’s not for the right reasons.

In the United States, we have gone from providing safety nets for those in need to providing welfare for the middle class.

Many of the people who are now out of the work force are on disability. SSDI showed an increase of 22% last month alone. Instead of growing jobs, we are growing entitlements

As I said, how can this be good for our culture?

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