The Source of the Problem Ain’t Inadequate Aggregate Demand

Great Post by Don Boudreaux of "Cafe Hayek."

"Neal Phenes sent me this item from The Daily Ticker.

Mr. Task and his interviewees should check the data before concluding that the problem with today’s economy is inadequate demand – that is, before concluding that what today’s economy needs above all is “demand stimulation.”

Inflation-adjusted personal consumption expenditures in the U.S. today are higher than they were in the third quarter of 2007 (the quarter before the recession began). True, these expenditures are only about one-percent above their pre-recession level, but higher they nevertheless are – a fact that requires some twisting of Keynesian dogma in order to continue making a case for more government ‘stimulus’ spending.

The problem isn’t that consumers aren’t spending; it’s that businesses aren’t investing. And businesses aren’t investing because Congress and, especially, the administration exhibit a ceaseless fetish for top-down, command-and-control, debt-financed ‘governance’ of the economy – an enterprise-quashing recipe made only more poisonous by Mr. Obama’s soak-the-rich speechifying."