The Obama Democrats' February 2009 stimulus package doled out one-third of its $787 billion to state and local governments so that public-sector employees (and union members) would not lose their jobs, as so many private-sector employees were. That worked for a while but did not prevent painful cuts and layoffs later.
Then there were the various mortgage forbearance programs, designed to prevent foreclosures. Precious few homeowners took advantage of them, and many who did ended up losing their houses anyway.
And of course there was cash for clunkers, which increased car sales in the summer only to see them decline in the fall. Hundreds of millions were spent, but with no permanent effect except to increase used-car prices because clunkers traded in had to be junked.
Decision-makers have responded as if they were facing liquidity crises (we don't have enough cash to pay off debts immediately) instead of solvency crises (we will never be able to pay off these debts). Too often pain has not been prevented, but just postponed -- and prolonged.
In retrospect, much of the pain could not be avoided. As economist Tyler Cowen has put it, we were not as rich as we thought we were. Housing bubble prices did not turn out to be real wealth, unless you sold out at the peak and moved to a cave.
Trying to put everyone back in the position they once thought they were in simply won't work. But it does sound attractive politically. People can remember what life was like in the past.
We don't, however, know what it will be like in the future. Republicans want less government spending and more leeway for entrepreneurs to create new businesses and jobs. No one knows what innovative products and services will emerge.
That's the beauty of free enterprise, but it also makes it a hard sell politically -- unless voters have figured out no amount of government spending is going to restore the old status quo.
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