BIG GOVERNMENT:: 3 Lies They Tell Us About Budget Deficits – RCM
By MB Snow at January 5, 2012 | 12:13 am | Print
Thanks to an explosion of Keynesian deficit spending around the world, an explosion that has predictably correlated with weak economic output, major ink is being spilled about the economic crack-up unfolding before our eyes. To state the obvious, wasteful, capital destroying governments can only spend what they first extract from the private sector.
In the above sense government spending is always and everywhere an economic retardant. That’s the case because governments by definition are not disciplined by profit, thus explaining spending that merely consumes capital. Conversely, a private sector that is burdened by profit demands must as much as possible deploy capital with an eye on creating more of it.
Put simply, capital placed in the hands of politicians disappears, while capital placed in the hands of private actors frequently leads to innovations that allow the proverbial impoverished shoemaker to purchase equipment that expands his shoe output. Whether governments are in deficit or surplus mode, their spending nearly always weighs on economic output.
All of which brings us to the first lie we’re regularly told about budget deficits. Supposedly the latter are bad, but looked at through a basic economic prism, would we prefer a balanced budget in the U.S. that coincides with $3 trillion in annual spending, or an annual budget deficit of $500 billion occurring in concert with spending of $1 trillion? Economic logic says we’d much prefer deficit spending that coincides with much lower spending in total. Once again, governments destroy capital, while private actors seek to expand it. Governments that spend less necessarily leave more capital in the hands of the productive, so for commentators to bemoan deficits while ignoring the bigger problem of spending is for them to engage in an act of willful blindness.
Another lie we’re told by the well-meaning in our midst is that “we can’t afford it.” We can’t afford troops around the world and the various military adventures that heavily deployed troops lead to, we can’t afford more entitlement spending, and we can’t afford government subsidization of home ownership.
via RealClearMarkets – 3 Lies They Tell Us About Budget Deficits.