Some factories have begun to increase production, and many companies are reporting higher profits. These developments have spurred the recent uptick in the stock market.
Note, however, that these changes have nothing to do with President Obama’s stimulus plan, of which only a small portion of funds has been expended. Rather they reflect the normal, self-regulating pattern of a free-market (or, in our case, a partially free-market) economy: businesses lay off unneeded workers and cut other costs until they can again produce profitably at the lower prices their customers will now pay.
But the upsurge of consumer spending forecast by Keynesian economics has signally failed to appear. Businesses are still reporting declining sales, their profits reflecting only cost-cutting.
The stimulus program, particularly idiotic side-measures like cash-for-clunkers, interfere with the normal market process. Cash-for-clunkers diverted demand from some products into demand for automobiles, while leading over-extended consumers to pile on more personal debt. Similarly, the stimulus program pulls spending away from basic industry and diverts it to liberal-progressives’ quixotic quest for a “green” world.
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