Learning Our Economic Lesson the Hard Way

When the government put out trillions of dollars of stimulus out there, it was a mask for what was really going on in the economy. As I have spoken about before, this is just like the Obama Home Buying Tax Credit that everyone thought would stabilize the market, but once it had expired, it showed that home prices would still need to fall a bit more.

The stimulus didn’t solve the long term problem of weak demand because of the lack of jobs. No doubt we would still have negative growth had the stimulus not happened and we would be worse off than we are now, but I don’t know if learning our lesson still isn’t the right thing that needs to happen. We may need to swallow the pill and go through the lumps and bumps on the road to a longer and more stable economy down the road.

Yes, it’s not what we want to hear now, but it’s like the person who is addicted to credit cards and has massive debt. Sometimes they need to lose their job for a bit of time to learn the hard way that their spending isn’t going to work long term. This is no surprise that the economy isn’t as good as we thought during this recovery. The underlying problems of overspending and lack of jobs are still lingering. We have to get back to the fundamentals of saving 10% of our nationwide income, which will hurt consumer spending short term for sure, but it will help the long term growth of the economy for decades to come.

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