Joe Levi:
a cross-discipline, multi-dimensional problem solver who thinks outside the box – but within reality™

Is Obama Turning Japanese?

Look at any publically or privately held company in the United States, you’ll find most (if not all) are freezing capital expenditures, have put in freezes on hiring and raises/bonuses, and are cutting down inventories and scaling back production. Even City, State, and County Governments are doing the same.

But what’s the Federal Government doing? They’re looking to spend $850 Billion to $1.3 Trillion under the guise of “Economic Stimulus.” That doesn’t sound right, does it? Let’s see what the New York Times says about the same sort of problem that plagued Japan not that long ago:

“Japan’s rural areas have been paved over and filled in with roads, dams and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s.”

Sound familiar?

“During [that time], Japan accumulated the largest public debt in the developed world — totaling 180 percent of its $5.5 trillion economy — while failing to generate a convincing recovery.”

Wait, what was that? “… failing to generate a … recovery”?!

“In total, Japan spent $6.3 trillion on construction-related public investment between 1991 and September of last year, according to the Cabinet Office.”

Isn’t that Obama’s plan? Make jobs by investing in the country’s infrastructure?

“The spending peaked in 1995 and remained high until the early 2000s, when it was cut amid growing concerns about ballooning budget deficits.”

So Japan did the same thing Obama et. al. are advocating, which will run for how long? One term? Two? Until someone says “holy crap, look at our ballooning budget deficit!” But at least we’ll have gotten out of the economic slump, just like Japan did, right?

Wait a minute, is that what got Japan out of their economic slump?

“In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade.”

But if it was a cleanup of Japan’s banking system and increased exports that “fixed” Japan’s problems, what did their Economic Stimulus Plan really accomplish?

“This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations. […] Dr. Ihori of the University of Tokyo did a survey of public works in the 1990s, concluding that the spending created almost no additional economic growth. Instead of spreading beneficial ripple effects across the economy, he found that the spending actually led to declines in business investment by driving out private investors. He also said job creation was too narrowly focused in the construction industry in rural areas to give much benefit to the overall economy."

But surely The People had a fair say in how Japan’s government was squandering their tax dollars, didn’t they?

“Critics also said decisions on how to spend the money were made behind closed doors by bureaucrats, politicians and the construction industry, and often reflected political considerations more than economic.”

How much debate and public input was sought for President Bush’s “Bail Out Bill”? Almost none.

How much debate and public input is being sought for President Obama’s “Economic Stimulus Bill”? Almost none.

Does that sound like the “change” that Obama promised?

Greg Ransom made a comment I’d like you to consider:

19th century doctor: “The bleeding hasn’t worked. The patient is still failing”

<p>Keynesian: “You haven't bled the patient enough or fast enough. We have to get the bad spirits out of the patient.”</p> 

In other words, in Keynesian Economics, the solution to this problem is to throw more money at the same places that caused the problem in the first place.

Oh, and by the way, the patient in Greg Ransom’s analogy died. The Keynesian explained that they didn’t bled the patient enough… and didn’t act soon enough.


You may also like...

2 Responses

  1. Wesley says:

    Thank you for this!

  2. Angela says:

    Excellent post! I love what you found on the Japanese economy, and how closely it mirrors what is happening in the U.S. right now. Now you just need to get the people making the decisions to read this 🙂

Leave a Reply