The economy today resembles that in 1933 and it is due to the uncertainty created by the Obama Administration policies. Robert Higgs referred to the situation as regime uncertainty. In essence, neither individuals nor business are certain that their private property will not be confiscated -- tax rates are due to increase the end of this year -- a VAT is being seriously considered -- Democrats are strategizing over how to implement their policies of confiscation during the lame duck session following the November elections. No one wants to invest in this environment. Mortgage rates are at a many decades low and yet people are not buying houses. Banks are earning more money keeping deposits at the Fed than they would be lending, so lending is very low. The economy can not improve in this environment. What is needed is a dramatic cut in taxes, particularly corporate taxes. Moreover, the Democrat policies of the last year and a half need to be reversed or at least stopped. The huge spending increases by government do not stimulate the economy; they mean future higher taxes, future high inflation, or bankruptcy. These are not views that lead to increased private investment and spending.
How can Paul Krugman continue calling for increased government spending? It is beyond me.
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