Like Obama, like Buhari: An Analysis of the Economy – Part 2

Like Obama, like Buhari: An Analysis of the Economy - Part 2

The economic concept behind stimulus package was proposed by John Maynard Keynes many decades ago.

Here is the concept in a nutshell: economic shock leaves demand below potential supply.

As people stop spending money, businesses pull back production, and circle of falling demand and production shrinks the economy.

The concept further hopes that if governments can boost consumption, then companies will produce and the economy will bounce back.

Spending-stimulus advocates believe that if NASS injects new money into the economy, jobs will be created. Minister of Finance, Kemi Adeosun is seriously pushing for this.

This raises a clear question: From where will government get the money it intends to inject into the economy?

Every kobo Buhari intends to inject into the economy must either be taxed, borrowed or gotten from government businesses.

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We don’t have it and that’s why the economy slumped into recession.

NASS does not have a safe where money is stored. The reserve we have is in sharp decline.

If they borrow the money from foreigners, the balance of payments will readjust itself.

Taunting Donald Trump, President Obama said, “Anyone claiming that America’s economy is in decline is peddling fiction.

“We’re in the middle of the longest streak of private-sector job creation in history.

“More than 14 million new jobs and the strongest two years of job growth since the 1990s.”

Depending from which angle you look at Barack’s statistics, he may be correct per se, or is he?

In reality, the United States did not add any job. In the period Obama ‘created’ these jobs, working age population grew by 15.8 million.

In that respect, No jobs were actually created. From this perspective, Obama is pretty far behind the job creation of both Reagan and Clinton.

Read Col. Umar Dangiwa’s shocking message to PMB

Hence his claim of ‘longest streak of private job creation in history’ is not entirely true.

This is the model President Buhari’s team wants to replicate in Nigeria.

But a fact the government cannot run away from is this: every kobo Buhari spends must come from somewhere else.

The logic simple: Removing water from one end of a swimming pool and pouring it in the other end will not raise the overall water level.

Similarly, taking money from one part of the economy and distributing it to another part of the economy will not expand the economy.

If the Government borrows money from foreign donors, you and I or your children, will have to pay it back in future.

We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both.

Buhari’s plan is weak and will not rejig the economy. It will worsen our problems.

It happened in American and Japan. There is no guarantee it will not happen here. They have to think harder and come up with a better plan.