Wednesday, January 2, 2013

From the Fiscal Cliff to the Debt Ceiling "Talks" ... Government Spending and Prosperity


The government created fiscal cliff has been averted with tax increases on the minions, including a little talked about payroll tax across the board increase of $1,000 to $2,000 (2% of earnings) on all minions. Even the ones we're trying to save.

And as for the government designated "millionaires and billionaires," we nailed them good. "Fairness" for all means more money for the government aristocrats to spend.

And who better than government bureaucrats to decide what's the fair thing to do with the minions' MOM?

Now the government created debt ceiling will take center stage in the political theater of Washington. In other words, the aristocrats will now debate whether to pay the bills they've run up on the minions' behalf. Pure entertainment.

So while this political circus may be interesting to watch for some of my fellow minions (it's sickening to me), it's a strong indicator of the absolutely deplorable condition of our dysfunctional government knows best aristocracy. OPM is leading MOM by a bunch at halftime, to put it in sports terms. But it ain't over yet. Not by a long shot.

In the meantime, putting more money in the hands of the aristocrats will mean more OPM money spent by the aristocrats and less MOM available to the minions to be invested and spent by them, including individual minions.

Our elected aristocrats have deemed that We the Minions are not fit to be "free to choose" what to do with more and more of MOM. That's why government leaders have graciously consented to make those choices on our behalf. At least that's what's happening now.

After the halftime intermission, the minions need to implement a totally new and different game plan if we are to win or at least make it a close game. We have to get aggressive and take it to the bureaucrats. Run it down their throats, in simple words.

The fact is that there will never be enough money to satisfy the neverending urge of the bureaucrats to take our money instead of leaving the decision of what to do with it up to us. But their intention isn't the salvation of the represented "middle class" --- it's to preserve and enhance their own aristocratic political power.

They're actually in the process of destroying the middle class, but that's another story for another time.


So now let's take a quick look at the ways government spends minions' money collected in taxes on "investment," economic "stimulus" and other ways for the bureaucrats to take from some minions and then keep some for themselves, give some to their friends, give some to their fellow public sector workers and then redistribute the rest to other voting minions.

Does more government stimulus spending help the economy? No.

Or does it simply put us deeper in debt and therefore do more harm? Yes.

And if the so-called stimulus is paid for with increased taxes, what happens then? Nothing good.

These issues have been debated for many decades now and are reflected in the views of the Keynesians (government stimulus helps) and the Hayeks and Friedman followers (limit the role of government and let the free market sort things out).

In these days of the latest idiotic behavior by the aristocrats in Washington concerning the fiscal cliff negotiations, Notable & Quotable is worth reflecting upon:

"Economist Russ Roberts writing at Café, Dec. 20:

When I was younger, everyone knew that the New Deal had saved the US economy from the ravages of the Great Depression. Everyone knew that Keynes was right—look what had happened when Roosevelt implemented his ideas—the Great Depression ended! Eventually, everyone knew that story was false. The New Deal wasn't that big and the Great Depression didn't really end when the New Deal was implemented.

Now everyone knows that World War II ended the Great Depression. Of course, private consumption fell during WWII and the vaunted Keynesian multiplier seemed to only work for the defense industry. Someday, perhaps, people will understand that when a war takes over most of the industrial sector, you don't get much stimulus. And it's not hard to reduce unemployment when you force a huge chunk of the male working-age population into the army.

When the war ended, all the Keynesians predicted disaster and a horrible depression because of the cuts in government spending and men coming home from Europe and the Pacific. Well, when that didn't happen, people should have known that there isn't a simple relationship between government spending and prosperity. But somehow, people didn't learn that lesson."

Summing Up

The lesson is still there to be learned. The market works to grow the economy and government growth and needless intervention doesn't.

Feeding the aristocratic government beast is a bad idea. So is not tackling our propensity to spend money we don't have to spend. Borrowing 40 cents of every dollar spent by government is not the route to financial health and "middle class" prosperity.

But the plain fact is that far too many of We the People, including most aristocratic politicians, still haven't learned the lesson about the upside down relationship of added government spending to the nation's general level of prosperity.

The point is simple. Government spending is pretty much useless to economic growth. In fact, it's harmful.

So in case there's any doubt, I'm definitely not in the Keynesian camp. Not even close.

In fact, the actions of politicians passing the "free lunches" all around for the past several decades are exactly how we arrived at today's sorry state of our nation's ongoing trillion dollar deficits.

It has to end, and so it will. But how and when? I wish I knew.

Thanks. Bob.

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