Consequences of stupid governance

"Dear Mr. President:

What if government spending can’t turn things around? What if the banks continue hoarding TARP funds, and deny loans to deserving companies and individuals? Now think: what would happen if after years of monstrous fiscal deficits the U.S. is still mired in unemployment and slow growth?

The last time that happened—in the 1930s – the outcome was…. Well, you know how that played out. But even without Smoot-Hawley and beggar–thy-neighbor policy mistakes, the U.S. could face a similar fate today.

Consider this: Two to three percent GDP growth is needed just to absorb new entrants to the labor force.

In times of buoyant demand, this is no problem. In times of collapsing private spending, as now—it is a huge one. Even unbelievably large fiscal deficits — 10 percent of GDP or more – will not stimulate enough growth to prevent unemployment from continuing to rise through the next two years. [Choices made in 2009 will shape the globe’s destiny, By Martin Wolf, Financial Times, January 7, 2009.]

One reason for our predicament: immigration is swelling the U.S. labor force beyond the ability of fiscal policy to generate jobs."

http://www.vdare.com/rubenstein/090127_nd.htm