The Roots of Our Economic Trouble
Ever since the election, most of the talk in the nation has been about the “fiscal cliff.” Listening to it, you would think that whether the economy gets better or goes off the cliff and crashes depends on small adjustments in tax rates and a minimal change in our enormous annual budget deficit.
The fact is that no matter what the politicians do about tax rates and the size of the deficit, it won’t have any effect on the roots of our economic trouble. As long as the federal government’s mammoth size and appetite for wealth are suffocating the economy, growth will remain slow and unemployment high.
To understand why, we need to get down to some economic fundamentals.
Goods and services that we want do not miraculously appear. They have to be produced. How much we can produce depends on how well we use the limited resources available to us — land, labor, capital. Robinson Crusoe on his island had to figure out how to best allocate his time and energy, how best to use the land, and how best to employ the tools he managed to salvage. He knew that if he wasted his time, made bad use of the land, or let his tools rust away, he would suffer the consequences by having less to eat, less to wear, less shelter, less security, and so on.
Thus, his standard of living depended on making the optimal use of his limited resources.
Things are no different when we are talking about a collection of people, even a huge nation. The standard of living depends on how well or how poorly the people use the resources available to them. In countries where the people are left free to decide on the best uses of their resources, they will prosper. Hong Kong is a good current example. America of the 19th century was another. Government absorbed and directed very little of the resources. It interfered hardly at all with people’s incentives to produce.
On the contrary, in nations where the government absorbs and directs a lot of the resources and interferes widely with people’s incentives, the standard of living will necessarily be lower than otherwise. Rulers (elected or not) will use land, labor, and capital for their purposes. The more they do so, the poorer the people will be, because political decisions tend to be short-sighted and if they turn out badly, the loss falls on the taxpayers, not on them.
Growing government means more people working at government jobs, often producing little or no value, except to the politicians and special interest groups. Growing government means more land used (or often kept from use) according to the wishes of the politicians. Growing government means that more capital is siphoned away from the competitive process and allocated according to political pull.
Growing government also means that people will put more of their efforts into trying to obtain favors through lobbying or bribery.
In many ways, government undermines productivity.
The problem is that this cost of government is unseen. The great French economist and philosopher Frederic Bastiat famously said that the difference between a good economist and a bad one is that the good economist considers not just the immediate and visible results of an action, but also the long-run and often hidden results. Americans would be far better off, wealthier but also less fractious, if it weren’t for the relentless expansion of the federal government over the last century, but few of them ever think about the production (and innovation) that has not happened because government obstructed it. The lost benefits are unseen.
We are like a drunkard who has been boozing it up for so long that he has no idea how much better he would feel if he had remained sober. Big government is our perpetual hangover that we’ve come to accept as normal.
Modern “liberals” constantly extol our federal leviathan and want to increase its size and power, but if you go back in time, you find that liberals (true liberals — people who wanted more liberty) understood that government was the enemy of prosperity. French liberals of the 18th century knew that the lavish spending of their monarchs did not stimulate the economy, but merely transferred wealth produced by the farmers, artisans, and businessmen into the maw of the state, where aristocrats and their hangers-on mostly squandered it. French liberals did not think there was some “multiplier” when Louis XIV built palaces and paid his bureaucrats. They knew that the state was enriching a few at the expense of the many, and making the whole society poorer.
Unfortunately, later liberals figured out that they could control the state and thereby enjoy power and wealth. That was when they turned from liberals into authoritarians and began an ongoing campaign to hoodwink people into believing that government was their friend and protector. That campaign has been extremely successful. Millions of Americans have been conditioned to focus solely on the crumbs the state hands them and never to think that they would live better if it weren’t a millstone around the neck of productive people.
The higher taxes Obama demands that “the rich” pay will mean that they will have less to spend, invest, or donate to charity as they think best. Instead, federal officials will get to decide how to use the funds. Will that trade-off help to restore economic vitality? No. It will further depress it as more resources will be wasted and incentives to produce take a battering.
The Democrats bank on the majority of the people not comprehending how much damage the government does to their prospects for a more prosperous life. Sadly, very few Republicans are any good at explaining that to them.
Rulers (elected or not) will use land, labor, and capital for their purposes. The more they do so, the poorer the people will be, because political decisions tend to be short-sighted and if they turn out badly, the loss falls on the taxpayers, not on them.
I am convinced that the current No Actual Growth Plans, Substitution of Well-being of All instead of GDP Emphasis the various UN agencies are pushing around the concept of Sustainability are ultimately in recognition of that Inevitable Reality of a State Directed Economy. In this case globally. If the cost of Interventionism is No Growth, use the education monopoly and friends in the media and cultural producers of music, TV, and movies to sell this as a Necessary Adjustment. Create the mindset that tolerates such meddling and is ignorant of alternatives.
The Low Carbon/Dirigiste/Export-Oriented/Planned Future Economy is not based on what Consumers want to buy. We are to be back to Mercantilism. What do the Protected, Connected Crony Businesses wish to produce? The World of Solyndra and Fisker.
A world of Students and then adults trained from an Early Age to Feel rather than Know. A world where Self-Interest and Individuality instead of a Common Good, Community first orientation may be the only future “sins” anyone complains about anymore.
I think Mark Steyn said it well. “A society of children cannot survive, no matter how all-embracing the government nanny.” In order to gain power, the government had to infantilize the voters. Now that push to gain an electoral majority is catching up with us politically, socially, and economically.
And the Fiscal Cliff rhetoric is that reality looking for a culprit to make the symbol of decline.
I live in an area dominated by the Democrats. Their voters will often agree that we do too much from DC. But they believe that if we are going to run everything from DC they would rather the Democrats do it. They think the Republicans will simply favor a different set of players at the table. Watching the establishment Republicans operate, it is hard to argue they are wrong.
Sad part is that even if we go off this so-called “fiscal cliff” it will still barely make a dent in our massive Federal debt and deficit. That is how huge and how terrible our problem really is. Washington is just tinkering around the margins here. Unless we really do something about all of the many benefits and entitlements this nations doles out on an annual basis, we WILL become Greece by 2016. Then how will the far-left deal with the civil unrest that follows our fianacial collapse? Not very well, I would imagine.
In 1931 Al Capone was sent to prison and FDR was starting his run for the White House. Of the two, Capone was the more honorable criminal. The Founding Fathers understood that government was inherently corrupt. They lived in a world where a ruler had absolute power. They saw first-hand the corruption of well-placed flunkies and they knew that corruption could not be stopped but it could be contained. If you limit the power then you limit the opportunity for corruption. Fortunately, we’re a lot smarter now. We don’t need those pesky checks on power.
A wise old dead white slave owner guy once answered a question as to what kind of government we have.
His answer was “A republic, if you can keep it.”
Sadly, we didn’t keep it – so what do we do now? That which has been let loose will never willingly allow itself to be subdued again.
Do we continue to push back against what now seem overwhelming odds when even our neighbors wholeheartedly support its aims?
Do we resign ourselves and our children to a future wherein what once was servant ever more gradually reveals itself as our new master, even as millions of our fellow countrymen clamor for more of the same perceived benevolence from this beast and call us fools in the process for rejecting it?
Or do we “go Galt”, and simply step aside from public interaction in the belief that the system will inevitably collapse?
If the last option is chosen, what if – utilizing the full resources of the power it has decreed to itself and the ability to ceaselessly plunder the vast wealth of the nation at every level – this same former servant manages to eek out a continued existence and stave off collapse for decades long past our lifetimes?
After all, the Supreme Court has legitimized under the mandated health care ruling that this former servant now commands the very money in our wallet as to how we are to spend it, and that government can literally take our businesses and homes away and give that property which was once ours to another who is sufficiently politically connected.
What other options are there?
The basic problem is that this government, created as a creature of the states and tasked with certain basic, enumerated and limited responsibilities, has now grown far beyond it’s bounds and its self-acquired authority now vastly exceeds that of the states which created it – and the states have become powerless to do anything about it.
I’m feeling particularly pessimistic today….perhaps that other wise old dead slave owning white guy named Jefferson did provide the optimal advice as to course of action when he suggested we simply do our best to profit somehow when our fellow citizens indulge in foolishness.
I just wish I could determine how best to so.
“A wise old dead white slave owner guy once answered a question as to what kind of government we have.”
I believe that quote came from Ben Franklin who was certainly wise but not a slave owner.
Actually, Franklin did apparently own slaves at one point, but later freed them and joined the abolitionist movement.
I was very careful to double check that fact before posting.
I share a good deal of your pessimism, but I believe it was Benjamin Franklin who made the comment, ‘A republic, if you can keep it.’
Please do something about the ‘You are posting comments too quickly. Slow Down!’ error page. This is my first comment. Just like the government: take a simple process and make it difficult and frustrating!
If I could do something about the slow down error message, I certainly would! I’ve given up a lot of posts actually in irritation over that message.
One thing that seems to work is to type your message, copy it, and when you hit submit if the error message comes up you simply get out of that page, go back in, and paste your saved text.
Actually there are countless areas of “resistance.” For instance:
– Avoid the public schools and let them wither. I live close to British Columbia and our population has one of the highest ratios of home schoolers. We were sufficiently blessed for our daughter to attend a boarding school in Canada – one of the smarter things we’ve done.
– A a successful construction contractor years ago, we avoided public work, we did not employ union shop sub contractors, etc.
– To trhe extent practical, treat those that are public servants as they should be: socially as the lowest of the low.
– Avoid professional and personal pursuits that require bureaucartic approvals, certifications, permits, and so forth.
– Actively participate a la John Galt as a capatilist.
The federal government today has become a tax-supported business for the benefit of the participants. Notice that in the “fiscal cliff” debate not one of those participants has suggested that we abolish a single one of the myriad of governmental functions. If the premise is that EVERYTHING that government does is vital, nothing can change. The role of the federal government is now defined by the participants for the participants’ needs and desires, not by the people for the people.
Good piece by George Leef, who is on target. And Philadelphia’s comment is spot on. Government has grown ever bigger–but not more effective–since the 1930s. It is now a bloated, slovenly behemoth dedicated to its own perpetuation. A great part of our problem lies with the 535 elected representatives, who are above all self-interested careerists focused almost exclusively on their own reelection. They are now the most dangerous interest group in Washington, D.C. Absent term limits, the only rational course is to vote against incumbents, no matter the party.
A very large and mostly unseen commodity is computer generated information about all of us. Google yourself. We are in the age of social networking which if not only volunteered is mandated and exploited by big government. Data mining is big business. The last election was won by best use of social networking. On line privacy issues are null. The control and exploitation of the terabytes of information on each citizen is the age in which we live.
Government drags on the economy. The amount of drag is the NPV of government spending.
Paying for government through taxes, debt, or inflation is a secondary consideration – important only that it may change behavior. Whatever combination of the three we choose, the government drains the same amount of wealth out of the economy.
Only less spending will stop the government from crushing the economy.
It’s amazing how much the left loves and worships money. They think it has magical powers and can do anything and will always be there when you call upon it.
Government is close to 100% overhead, but that overhead is multiplied in the impact it has on a country’s productivity.
Some overhead is necessary, when is is effectively managing resources. Businesses don’t organically manage themselves; they require people dedicated to hiring, firing, allocating resources, accounting, and strategizing. But governments do about 1% of that and about 99% of useless crap. Other than the military and emergency services, almost all government does is to tell private business not to do stuff or to do stuff that businesses don’t want or need to do.
In the few cases other than public safety in which government actually provides necessary services (like the Post Office and public education), it is invariably the absolute worst provider imaginable. Even when the intent of the employees is good, by nature, government HAS to hire to the lowest standards, and has NO incentive to provide the services efficiently. This is blatantaly obvious and proven in case after case after case: education, the Post Office, Amtrak, th ridiculously redundant management of government resources, the corrupt and evil “measurements” that are imbedded in every unnecessary government function, the criminal accounting practices, everything, all the time.
If any business in the world dedicated 90% of its energy toward propaganidizing the success of its managers, it would go out of business in short order. But that is exactly what government does. Any politician who isn’t actively seeking to reduce government is a criminal and should be incarcerated immediately.
Let’s face it. Around 50% of human beings are inherently lazy. The democrats have found the ideal avenue to power is to reward sloth. This is an extremely difficult, if not impossible, condition to correct without some real pain. The government cannot guarantee equality of outcomes in life and we are seeing what happens when they try. Let’s get over it, admit we’ve already breached the fiscal cliff and start the healing. I’m convinced that any “deal” coming out of congress will only prolong the suffering.
I think this article is terrible, along with many others on the same subject – not because of the content but because it targets the cerebral, those who not swayed by emotions but by intelligent thought. It does nothing to help the cerebral to communicate this in a visual way for the majority who are moved by emotional pleas. There is not even a single graph or picture.
see http://news.investors.com/ibd-editorials-perspective/113012-635352-bush-tax-cuts-did-not-cause-deficits.htm
I have just listened to an interview on Fox News where the “expert” was just saying the opposite of what this graph illustrates but he was not taken to task for his misleading information. Republicans deserve to lose as long as they keep up with their cerebral approach while they often have much stronger points than the Democrats who only go with the emotional appeals.
#9 Bill Lawrence: “It’s amazing how much the left loves and worships money…….” It’s not just the left. Conservative Senator Rand Paul (R-KY) proposed, several months ago, that it is time to audit the Pentagon. I’d hope that all good government proponents would hop onto his bandwagon. Medicaid pork isn’t the only problem.
There is no such thing as a “Good Government Proponent” still in government.
http://online.wsj.com/article/SB10001424127887323353204578127374039087636.html
It is just a matter of time before economic chaos and when I think that Ted Kennedy and Robert Byrd had to be wheeled out of congress on stretchers, it can’t come soon enough.
I dare everybody to read that article by 2 former congressmen who did a good job and then left the cess pool.
By “good government proponents,” I mean citizens who believe in good government, not politicians. There are still some out there.
As for politicians, many of the Dems are for keeping spending high; many Repubs assign more importance to their pledge to Grover Norquist than they do to their oaths of office.
“The Democrats bank on the majority of the people not comprehending how much damage the government does to their prospects for a more prosperous life. Sadly, very few Republicans are any good at explaining that to them.”
Paul Ryan tried to explain that–and you all saw the reaction that he got. He’s not the Vice President-elect, is he.
It’s easy for the GOP to handwave about “Cutting government spending.” But notice how they never seem to compile a list of which government programs they intend to cut. Never. Such a list has never appeared in any GOP platform in my lifetime. You would think that after so many decades, they would know which programs they want to get rid of? Or are they just afraid to tell us?
As Americans everywhere are struggling along to make ends meet our president – usually ensconced in luxury at every turn is also struggling – having to make do with only 54 Christmas trees! Good God! When will it hit these morons? The optics alone are terrible. If it were G.W. Bush were doing such a thing in the WH we’d hear no end of it from the frothing-at-the-mouth MSM.
54 Christmas trees in and of themselves won’t make or break a multi-trillion dollar budget but it would be a great start to have ONE tree at the WH as an example of government thrift. Instead we get 54 trees! I doubt there is any home anywhere in the world with so many Christmas trees. This government spends way too much money. Opulence in government offices is so prevalent these days you’d think it were law that mid level drones MUST spend thousands on a desk – thousands on chairs etc etc.
And last time I checked Obummer hasn’t established his dictatorship yet and privatized the WH. Its still public property. Where the hell is all the atheists with their usual complaints about being so offended – where’s the separation of church and state??? Too busy making asses of themselves in some flyover town in The Hunt For The Last Nativity Scene on public property in Podunk USA I suppose. Its so easy to overlook the outrage such symbols create in the atheist when its someone you otherwise agree with politically isn’t it?
Not all government waste and restrictions are caused by the big-G Government. Any power can become strong enough to restrain trade in order to direct the profits its way, which suppresses the economy. Any powerful enough industry can dump its literal waste in streams or directly on the land of another, in a way that harms crop production. In sour times, employers can coerce employees into non-compete clauses that reduce the employee’s potential productivity if the employee leaves that job. In the absence of the big-G Government, the financial powers are the government.
A well-functioning big-G Government is necessary to force open the closed market, forbid the practices that cause more harm than benefit to society, and ensure a fair legal environment for all participants. Ours is not a well-functioning big-G Government.
I argue that the root of our economic trouble is the thirty years of capital flight caused by cheaper shipping, OPEC, overreaching by unions, executive fiat, and idiotic federal policies encouraging it. It has gotten to the point that Congress ought to start asking Third World economists what they did to get out of their capital flight situations, what worked and what did not. Our economists are mainly theorists. The ones in South America have field experience.
THIS IS INSANE. OBAMA’S NOW BORROWED MORE THAN ALL PRESIDENTS FROM WASHINGTON TO W. BUSH. President Barack Obama and former President George W. Bush. The federal government has now borrowed more money during Barack Obama’s time as president than it did in the period lasting from the time President George Washington took the oath office until July 2, 2001, more than five months into … READ MORE: http://bwcentral.org/2012/12/obamas-now-borrowed-more-than-all-presidents-from-washington-to-w-bush/
Published on Aug 23, 2012
William Binney is among a group of N.S.A. whistle-blowers, including Thomas A. Drake, who have each risked everything — their freedom, livelihoods and personal relationships — to warn Americans about the dangers of N.S.A. domestic spying; A top-secret program he says is broadly collecting Americans’ personal data.
http://www.youtube.com/watch?v=OemwW60VxDY&feature=plcp
I guess if we hadn’t wasted money on stupid government schemes like the Erie canal, the transcontinental railroad, rural electrification, the basic research behind the Internet, and the Interstate highway system, we’d be much wealthier now, just like Somalia.
You lot don’t argue to conclusions. You argue from conclusions. That government spending is wasteful is an axiom for you. Which is why your ideas are so worthless from an intellectual point of view.
You just don’t get it. All those things ( and some were ), could be financed by private industry.
The Little Red Hen
(Quoted from Wikipedia)
In the tale, The Little Red Hen finds a grain of wheat, and asks for help from the other farmyard animals to plant it. However, no animal will volunteer to help her.
At each further stage (harvest, threshing, milling the wheat into flour, and baking the flour into bread), the hen again asks for help from the other animals, but again she gets no assistance.
Finally, the hen has completed her task, and asks who will help her eat the bread. This time, all the previous non-participants eagerly volunteer. However, she declines their help, stating that no one aided her in the preparation work, and eats it with her chicks, leaving none for anyone else.
The moral of this story is that those who show no willingness to contribute to an end product do not deserve to enjoy the end product: “if any man will not work, neither let him eat.”
–
Don’t they still teach this in 1 st grade ?
We should promote – The Little Red Hen , children s book
It is amazing that people cant understand that book anymore.