See this headline?

ABC Warns G-20's Rejection of Obama-Spendanomics ‘Could Plunge World Into a Second Recession’

Actually it wasn't "ABC" giving this warning. Nope. Rather, the warning came from a single reporter, alarmed with the fact that Obama's economic pleadings were roundly rejected at the G-8 and, more recently, the G-20.

This same warning was put out last week by Democrat leadership.

It is all about positioning. If "deficit spending" is not allowed AND the nation goes into a second recession, the Democrats and that one reporter will say, "We told you so."

Some will be fooled, not asking "why." But the question deserves an answer. Why? Why has deficit spending not worked? Understand that the policy (embedded in the concept known as Keynesian economics) has been in practice since the early '30's and a national obsession since Bush 43. Keynesian economics attempts to nationalize or centralize the management of the many individual influences and forces driving a free market economy. Midknight Review does not believe a free market system needs "management." Management - no. Regulation against fraud, greed and monopolies -- yes. Legislation preventing business failures; institutionalized bail-out programs -- no. entrepreneurship ? Yes. Fear of failure? No.

But, again, why has deficit spending failed ? Because getting one's self out of a hole by continued digging is just the wrong thing to do. Spending a nation into prosperity only creates a national debt that [eventually] becomes unmanageable. Look, when one appears to be prosperous because credit/debt allows him to buy new product - a new car, a new house, new clothes and new stuff - this does not mean that he is, in fact, prosperous. Ditto for a nation. If our GDP does not supply all the income needed for a sound national policy, that policy is eventually doomed. Obama does not believe that GDP has anything to do with determining political policy. If that policy demands the expense of money, we believe that GDP has everything to do with the determination of policy. The principles of financial soundness are as old as rain. Keynesian economics has been around for only 90 years and has brought us to the point of financial collapse, on the international scene (i.e. the G-8 and G-20) as well as the national theater. Understand that borrowing money to solve a short-term cash flow problem is fine if that debt is immediately paid back. But we never get to the point of paying back our debt and therein is the problem. Eventually debt management, the scheduled payment of principle and interest - gets so high that it hinders growth and renewal.

Know this: public debt is not the only debt we, as a nation, have incurred. We owe 38 trillion to Social Security, taking the monies coming from pay check deductions and spending it on national programs rather than using it for its original purpose - funding Social Security payouts. We have grown Medicaid faster than the rate of monies collected and owe that fund 37 trillion. And then there is healthcare. We are already realizing that it was grossly misrepresented in terms of its cost.

In this morning's CBO commentary, we have these words: All told, CBO projects, the aging of the population and the rising cost of health care will cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 16 percent of GDP 25 years from now if current laws are not changed. (By comparison, spending on all of the federal government’s programs and activities, excluding interest payments on debt, has averaged 18.5 percent of GDP over the past 40 years.) READ MORE AT THE CBO's blog for today, June 30 >>>>> Note: interest on the national debt and scheduled principle payments in the form of T-Bond maturity payouts is now around 11% of GDP. When that sum equals 14%, our national credit rating will be decreased from AAA to AA+ and the interest we will have to pay lenders will go from around 3.8% to a nominal 8% . Disaster on a national scale follows this eventuality. It is critical that our credit rating not be reduced. We hope that the Administration agrees but we do not know that it does, tragically.
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