Shock! Big Government Spending Programs Having Opposite Effect on Economy
What a shock!
Maybe you can’t spend your way out of a recession after all?
The massive spending by Team Obama and the democrats is having the exact opposite effect on the economy.
The US has seen a record spike in unemployment under Obama. Government reports have shown the economy has lost more than 1.6 million jobs since Congress approved the Stimulus bill in February.
In fact, the economy clearly has gotten substantially worse from the initial predictions a couple of months ago.
The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford…
The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year – more than four times last year’s all-time high.
“The bond market is calling the Federal Reserve out,” said Mike Larson, a real estate analyst at Weiss Research Inc. in Jupiter, Fla. “Investors are saying that the Fed can’t just print money out of thin air to finance a massive deficit.”
Fed Chairman Ben Bernanke acknowledged Wednesday in congressional testimony that large budget deficits could threaten financial stability by eventually eroding investor confidence and endangering the economy’s prospects for long-term health.
Obama will quadruple the budget deficit in his first year in office.