Guest Voice: Nate Apathy, Business senior

Without a doubt, the theme of January’s State of the Union Address was President Obama’s consistent calls to U.S. citizens to “win the future.” President Obama spoke in broad strokes about American ingenuity and this country’s ability to innovate, along with our competitive advantage in entrepreneurial activity and new ventures. These are the ways by which our country is going to “win the future,” according to the Obama administration.

Unfortunately, this goal of “winning the future” is completely inconsistent with the administration’s last two years of fiscal policy decisions, including the banking and auto industry bailouts and the 2009 stimulus package. These have only guaranteed future setbacks stemming from their shortsighted rationales.

These fiscal policy actions, as we all have heard, fall into the school of Keynesian economic thinking, which argues that increased amounts of government spending (like bailouts and stimulus plans) can be utilized in times of depressed aggregate demand in order to get the economy back on track. On the surface, this policy paradigm looks great: simply use the strong credit rating of the U.S. Treasury to borrow until consumers can prop themselves up in the long term.

However, many pundits who rationalize recent government spending via this school of economic thought seem to ignore a critical underpinning of the Keynesian school: the lack of a long term, or future. John Maynard Keynes consistently ignored the long-term effects of his fiscal policy conclusions and is even quoted as saying, “In the long run, we’re all dead.” A cute quote, surely, but it ignores future generations who are burdened with the byproduct of our Keynesian-style government spending.

So, how exactly does this government spending ignore the long-term ramifications? In the most basic sense, the government spends more than it brings in with tax revenue and therefore has to borrow the rest of the money to finance that excess spending. This budget deficit continues to expand at an increasing rate (as it has in almost every country around the world throughout the recession), and eventually — in the long term — will be unsustainable.

The only way to avoid a long-term government debt crisis is to rely on Keynes’ “governmental spending multiplier,” which is basically a theory stating that as the government spending trickles down into the pockets of individual consumers, we increase our demand for goods and services. By spending more, we make each dollar of government expenditure exponentially more useful each time that dollar changes hands. This activity is supposed to bring the economy back from the doldrums.

Once again, the multiplier is a common rationale for the last two years of fiscal policy spending, and once again the reality of that theory is completely ignored by most who tout it. Keynes devised the multiplier concept during the heart of the Great Depression, an economic calamity that effectively halted international trade and brought the world economy to a standstill. Countries were responsible for their own recoveries and could do that with government spending, because very little money crossed international borders. The multiplier was internalized in the 1930s.

But that is not the case today. Our Great Recession did not halt international commerce, nor did it bring the entire world to an economic stalemate. Importing and exporting continued, albeit at lower rates, and those dollars spent in the bailouts and stimulus plan went overseas to trading partners, who then benefited from our “multiplier.”

Economic pundits are always quick to recognize our current globalized economy for the benefits it has given us, but many refuse to accept the simple fact that the same globalization makes this fiscal policy scheme ineffective.

Adding to the damaging effects of this spending, to finance the debt, the Treasury Department issues bonds at low prices and correspondingly high interest rates. These yields pull investors away from the private sector and into the government bond market, where their investment is “guaranteed” and can make more money. This incentive is especially salient in down markets, because of the uncertainty inherent in recessed economies.

How can President Obama expect us to exercise our ability to innovate, create and invent when his own fiscal policies remove money directly from the pockets of those innovators, creators and inventors whom a free capitalist market demand? It is futile for us to try to “win the future” when the administration has ripped the rug out from underneath those who can offer the most to the recovery effort.