New Deal

January 9, 2009 - 8:58am

OP/ED

Barack Obama: Let's spend like there is no tomorrow

By Murray Sabrin

Yesterday President-elect Barack Obama outlined his American Recovery and Reinvestment Plan in a speech at George Mason University. Obama said we need to take "dramatic action" ASAP. He asserted that if nothing is done, "this recession could linger for years." On the contrary, Obama's spending plan guarantees that the economy will not recover because the federal government will spend additional trillions of dollars that must be borrowed to finance one trillion dollar annual deficits for many years.

The United States economy is in a widespread correction, known as a recession or depression, depending on your point of view. This correction is occurring because interest rates were driven down to levels by the Federal Reserve igniting an orgy of speculation in real estate, especially housing, where easy credit sparked a massive buying spree by marginal (subprime) buyers, among others. The housing bubble is unwinding, which means that housing prices are falling to find their equilibrium level, and the sooner this process is completed, the sooner the economy will recover.

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