The very policies of government-subsidized spending, borrowing and unsound gambling that inflated the market bubble and increased our federal debt have been used by Obama to “stimulate” the nation out of the downturn. Despite the federal government’s unsustainable fiscal trajectory, he and the Pelosi-Reid Congress poured more fuel onto the fire...

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The recession that began almost two years ago appears to be finally petering out, as American recessions eventually always do. 

Sure enough, as predictably as the sun rising over the eastern horizon, Barack Obama hustled before his teleprompter this week to inform us that “the steps we’ve taken have made a difference.” 

If that’s so, then why are the prospects for continued recovery so gloomy?  Usually, the end of a recession triggers upbeat expectations and opportunities for growth, so why not now? 

The simple answer is that the Obama Administration’s economic policies constitute a fleeting “hair of the dog” remedy, not a recipe for lasting growth.  His agenda of more government regulation, higher taxation, inflationary borrowing and reorganization of almost every conceivable portion of the American economy are stifling the animal instincts needed to expand and innovate. 

For those unfamiliar with the term “hair of the dog,” it refers to the ancient belief that the remedy to treat a rabid dog’s bite is to place some of its hair onto the wound.  This was obviously false, but the phrase later came to refer to one type of hangover treatment.  Namely, that the way to overcome a nasty hangover is to drink the very same alcoholic beverage that caused the hangover in the first instance. 

Similarly, Barack Obama is supposedly “healing” the recession using the same methods that caused it. 

Specifically, the very policies of government-subsidized spending, borrowing and unsound gambling that inflated the market bubble and increased our federal debt have been used by Obama to “stimulate” the nation out of the downturn.  Despite the federal government’s unsustainable fiscal trajectory, he and the Pelosi-Reid Congress poured more fuel onto the fire by spending even more trillions that we don’t have toward favored special interests such as government projects, union-dominated industries and things like “cash for clunkers.” 

Thus, his policies may have provided a “hair of the dog” temporary jolt, but only at the expense of longer-term economic prosperity. 

The Commerce Department reported this week that the nation’s economy grew 3.5%, fueled primarily by federal spending on homes and automobiles.  As acknowledged even by the Associated Press (AP), “the jump largely reflected car purchases spurred by the government’s Cash for Clunkers program,” and “the government’s $8,000 tax credit for first-time home buyers supported the housing rebound.” 

As ominously summarized by the AP, “a top concern is whether the economy can continue to stand on its own feet after the government supports are gone.  Many economists predict economic activity won’t grow in the months ahead as the bracing impact of President Barack Obama’s $787 billion package of increased government spending and tax cuts fades.” 

When that occurs, we’re going to have to figure out a way to pay for Obama’s additional borrowing and spending. 

Even White House economic advisor Christina Romer admitted that Obama’s supposed “stimulus” already had its largest impact, and probably won’t add to substantial growth in the coming year. 

Meanwhile, economic forecasters expect unemployment to keep rising from its current 9.8% rate.  This despite Obama’s careless promise that it wouldn’t exceed 8% if he got his “stimulus” bill. 

In a front-page story this week, The Wall Street Journal explored these sobering realities in an article aptly entitled “Political Uncertainty Puts Freeze on Small Businesses.”  According to the entrepreneurs interviewed, fear of the Obama Administration’s agenda of higher taxes, healthcare regulation, financial regulation and carbon cap-and-tax legislation are undermining incentives to expand and hire new employees. 

According to interviewed auto-part store owner W. Michael Brown, “there’s so much trepidation out there.  The thing I’m struggling with is how the potential government takeover of healthcare coupled with impending taxes will impact my company.”  The article adds that “more business owners are planning to contract than expand,” and that “political uncertainty is a substantial factor.”  Wharton School of Business Professor Raffi Amit notes that Obama’s attempt to increase banking regulations creates another headwind, adding, “obviously, people are worried about what healthcare costs are going to be.  Nobody knows.  Taxes, who knows?” 

As long as that fear persists, the American economy won’t accelerate toward lasting growth. 

The last time America faced an economic downturn of this magnitude was 1982.  Back then, however, Ronald Reagan triggered an unprecedented three-decade expansion through reduced regulation, lower taxes and a strong dollar. 

Today, in contrast, Obama is offering more regulation, higher taxes and a weaker dollar. Consequently, although the recession seems to be flattening out of its own weight, reasons for gloom remain.  Until he, Harry Reid and Nancy Pelosi learn the simple lessons of the Reagan Revolution, the prospects for healthy recovery that follow most recessions will remain depressingly dim.