The federal government Cash for Clunkers program and the falling unemployment rate are two major economic events in the news. The expert economists and the Obama administration are elated about these stories.

1. The federal government Cash for Clunkers program ended up costing the U.S. taxpayer $3 billion. The Obama administration, auto dealers, and auto companies (including those outside the United States) are jumping up and down. According to them, this was a rousing success. But was it really?

In my opinion, the program was a failure in everything except for adding to the federal government debt.

Did it increase car sales long term? No. It simply moved long term car sales into a 2 month period when the program was operating.

On a long term basis, it did not stimulate consumer spending. Instead, the consumer cut back on other spending and put his money into a new car.

But probably many of those who took advantage of the federal government Cash for Clunkers program were driving the clunker for a reason. They could not afford the cost of a new car.

So they are taking on more debt – something many could not afford to do. This is even though their loan is less than if there was no government subsidy.

But they should not worry. When they start defaulting on their auto loans, the federal government will probably swoop down and offer them a bailout.

2. The unemployment rate fell to 9.4% in July. It would be great if unemployment numbers had hit a bottom and would quickly recover.

But if you look more closely at the numbers, they are not as rosy as they may appear on the surface.

Our economy lost 247,000 jobs in July. This is a lower number than what was expected and what we have seen in the last several months. This is certainly good news.

But the reduction in the unemployment rate was caused by the fact that 422,000 people gave up and stopped looking for work.

If you look at the Job Opportunity and Labor Turnover survey conducted by the Bureau of Labor and Statistics, only 2.9% of workers found or switched jobs in July, a record low.

Here is my take on the overall U.S. economy.

I expect to see an expansion in the Gross Domestic Product (growth in the economy) in the 3rd quarter. This would end several quarters of negative growth.

This growth might continue into subsequent quarters. But I feel that much of this growth is being caused by the artificial government programs such as the federal government Cash for Clunkers program and the tax credit given to first time homebuyers.

When these programs end, we will see a major decline in growth in those industries. In other words, this growth in the 3rd quarter has little to do with long term growth in the auto and housing industries.

I feel that the economy will see some growth in the coming months. The massive spending by the Obama administration will have a lot to do with this. There is no way that we can throw trillions of dollars at the economy without some economic boost.

But my feeling is that there is “no free lunch.” This is very important.

We are spending money we don’t have. At some point, we must pay the price for this spending. When this occurs, we will have a major contraction in the economy and the stock market.

This massive spending is causing major budget deficits.

There are only a few ways to cover these deficits. They must be covered in order that our country pay its bills.

Borrow the money. A major portion of the money we borrow comes from foreign countries such as China, Japan, and countries in Europe. Already some of these countries are starting to baulk at loaning us money. The result will be rising interest rates. This will have a devastating effect on the U.S. consumer and business.

We can increase taxes. The Democrats want to “tax the rich.” However, there is absolutely no way that this group can pay for all these deficits. Increased taxes will affect most Americans. The result of any major tax increase will be a downward pressure on consumer spending. This will have a very negative impact on the economy.

Print money to pay for the deficits. The result will be hyper-inflation. This will have a negative impact on all Americans, especially those living on a fixed income or investments.

Scott Hubbard has retired from 25 years as a Chief Financial Officer in Corporate America. He now enjoys teaching corporate professionals and network marketers how to apply attraction marketing online and how to generate free qualified leads on the internet.

You can reach him toll-free at 877-878-4036 or by email at Scott@ScottHubbard-Consulting.com. You can learn more about his primary business by visiting your guide to abundant wealth.