An Ol' Broad's Ramblings

Liberalism/Socialism Doesn’t Work! Never Has, Never Will!

26 August 2010, 8:16 am. 3 Comments. Filed under Economy, Massive Stupidity, Opinion, Socialism.

Liberalism is Failing
The Foundry

On Tuesday, the National Association of Realtors reported that July sales of existing homes fell by 27% from June of this year and by 25.5% compared to July 2009. This annual sales rate of 3.83 million homes was the lowest since NAR began keeping track of sales in 1999. Then yesterday, the Commerce Department reported that July sales of new homes fell 12.4% from June and by 32.4% compared to July 2009. This annual rate of 276,000 new units sold is the lowest since 1963, when government records were first kept. The source of the plunge is no secret: July’s numbers reflect the first month when existing home sales received no boost from the home buyer tax credit.

Americans have seen this movie before. Last fall after the Obama administration’s Cash for Clunkers program dried up, new automobile sales plummeted. General Motors’ sales plunged 36 percent in September 2009 compared with August. Ford plummeted 37 percent. Chrysler dove 33 percent. And Americans are still feeling the hangover from the original car spending binge. Thanks to the destruction of traded-in cars mandated by President Obama, used car prices have soared this year. This means that the most cash-strapped Americans who are already dealing with 9.5% unemployment now are finding it harder to find an affordable car, all thanks to government intervention in the marketplace.

The problem with both of these liberal programs is the same: there is no such thing as a free lunch. In both cases the additional government spending did not create any new demand; it only shifted the time at which American consumers were going to make a purchase they had decided to make anyway. Instead of ensuring an environment where market participants could ascertain the true prices of the goods they want to purchase, these government interventions added uncertainty into the economy by making it harder for existing businesses and entrepreneurs to plan their next move. These government interventions, paid for with borrowed dollars, did not create new wealth. They just diverted capital and resources from the other places where markets would have invested it spontaneously absent government action.

This is the same problem with President Obama’s failed stimulus. Government spending does not stimulate economic growth. All it does is move resources away from one sector of the economy to another. And government has a horrible track record at efficiently allocating resources. All that really happens is that, on net, jobs get destroyed in the transfer process. But the left refuses to recognize this reality.

In February 2009, at a House Democratic retreat in Williamsburg, Va., President Obama pressed for passage of his stimulus plan, reasoning: “This is not something that we’re just doing to grow government. We’re doing this because this is what the best minds tell us needs to be done.” But what if the people who President Obama believes have “the best minds” are just wrong? Forty-five years earlier, then-Gov. Ronald Reagan told the American people: “Anytime you and I question the schemes of the do-gooders, we’re denounced as being against their humanitarian goals. They say we’re always “against” things—we’re never “for” anything. Well, the trouble with our liberal friends is not that they’re ignorant; it’s just that they know so much that isn’t so.”

Last week a group of economic bloggers met with some Treasury officials, including Secretary Timothy Geithner. When pressed on the failure of President Obama’s Home Affordable Modification Program to help homeowners avoid foreclosure, the Obama officials explained that they judged “HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock.” Shocked at the admission that HAMP was meant to bail out banks and not help owners, Media Matters fellow Duncan Black wrote: “When Liberalism Doesn’t Work It Discredits Liberalism.” Liberalism is not working. We’ll find out in the coming months just how discredited it is in the eyes of the American people.

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  1. Allen. 26 August 2010, 7:33 pm

    No OB!
    If we turn our freedom over to the leaders of the coming egalitarian collective they’ll take care of us! This time I’m sure they’ll get it right.
    Trust them, cuz people like Obama, Barney Frank and Nancy Pelosi know what’s best for us.

    (i think i just urped in my mouth a little)

  2. Gary K.. 27 August 2010, 12:04 pm

    “As Milton Friedman often explained, the real issue is not how you pay for government spending — debt or taxes — but the spending itself. In other words: Don’t just look at the deficit, look at why we have a deficit. And the reason we have a deficit is pretty simple: Government spends too much.”

    There are quite a number of people that feel that the govt is Santa Claus; but, adults know that the gifts that Santa gives always have to be paid for by someone.

  3. olbroad. 28 August 2010, 6:15 am

    Jeeez, Allen….I haven’t even had my coffee yet!  :?

    That’s the problem Gary, there are actually supposed grown ups who DON’T know,  ‘gonna get themselves some of that Obama money’!