Excellent article, valid points for both in and out of the box thinking.
_________
"RAHN: Obama's fiscal fantasyland
Only true Keynesians still think we can spend our way to prosperity
By Richard W. Rahn
5:52 p.m., Tuesday, June 29, 2010
Source The Washington Times
"Irresponsible" refers to Congress and the Obama administration - and here's why. For thousands of years, businesses, organizations, governments and even individuals have relied on a basic tool to make sure they do not spend or borrow more than they can service - it is called a budget. Yet, for the first time since 1974, when the current rules were put into effect, the U.S. House of Representatives does not intend to pass a budget resolution. The main purpose of the budget resolution is to set discretionary spending caps for the coming fiscal year.
Without a budget resolution, members of Congress are, in essence, able to spend as much money as they wish, subject only to the limitation of getting half plus one of the other members to go along with the spending proposal. The budget procedure was put in place to make sure members of Congress would not spend money as irresponsibly as many teenagers might if they were given unlimited credit cards. If teenagers were in charge of the federal budget, we might end up with a $1.5 trillion deficit this year. Ah, but we are going to have a $1.5 trillion deficit this year - and who's in charge?
In the face of the unprecedented congressional spending binge, President Obama has been asking Congress to spend even more. Not content with actively promoting the eventual bankruptcy of the United States, Mr. Obama is urging foreign leaders also to increase their government spending - which is truly bizarre. Look at the facts. All of the major European countries have been increasing government spending and deficits at unsustainable rates. The talk for the past couple of months has been about which countries would follow Greece in going over the financial cliff. Responsible economists, financial leaders and, most important, the markets have been telling European leaders they must cut government spending. Over the past couple of weeks, a number of those leaders have responsibly and courageously come forth with real spending-reduction programs. Britain's new government, despite being a coalition government, has proposed a 25 percent cut in most government departments. Can you imagine the howls from Congress and the U.S. news media if a U.S. president proposed even a 5 percent cut, though a far larger one is needed?
Mr. Obama increasingly appears to be living in a fiscal fantasyland. In his letter to the Group of 20 on June 18, the president wrote: "My administration will cut the budget deficit we inherited in half by FY 2013 and work to reduce our fiscal deficit to 3 percent of [gross domestic product] by FY 2015...." The president already has put forward two budgets, including projections for the next decade, but they contain no specifics for reaching such a goal. Without laying out which programs he proposes to reduce, the words are nothing more than hollow rhetoric. (Please see accompanying graph.)
The president still seems to believe in the imaginary world of spending multipliers - whereby each dollar of additional spending results in something in the order of $1.40 in additional output. Proponents of such ideas normally refer to themselves as Keynesians (followers of the ideas of John Maynard Keynes, 1883-1946). A careful reading of Keynes will show that his prescriptive "spending stimulus" ideas were much more limited than what many of his followers now advocate.
The Keynesians and socialists have run hundreds of experiments around the world for the past 70 years, inducing governments to try to spend themselves into prosperity. It doesn't work. In the 1970s, Keynesian prescriptions led to "stagflation" in the U.S. and many other countries. It was only when Ronald Reagan, Margaret Thatcher and eventually many other leaders (using the ideas of F.A. Hayek and Milton Friedman) reversed course by cutting tax rates and curtailing spending growth that their economies began to grow rapidly without inflation.
Mr. Obama seems to have never learned these lessons, and some of his advisers, who once understood what works and what doesn't, seem to have forgotten. By nature, people like to spend other people's money, and too many in Congress loved what was billed as Keynesian economic theory because it gave them a rationale to be irresponsible spenders.
If you are confused about whom to believe, just think for a minute. If increasing government spending really could lead to increased prosperity, why limit government spending at all? From your own observations, do governments spend your money as wisely as you do? And do government workers on average work harder, and are they more productive than workers you observe in the private sector? Finally, where does government get all of that extra money to spend? If it's from taxes, does that not mean taxpayers will have less incentive to work, save and invest? If it is from borrowing more money, does that not mean everyone will have to pay more taxes in the future and hence will be worse off? And, if the government just prints the additional money, won't it be worth less, and won't workers and savers be worse off?
Responsible people, whether they are national leaders or average citizens, understand that both in their personal and public lives they cannot spend themselves into prosperity."
Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.
http://www.washingtontimes.com/news/2010/jun/29/obamas-fiscal-fantasyland/
April 2024 March 2024 February 2024 January 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 June 2023 May 2023 April 2023 March 2023 February 2023 January 2023 December 2022 November 2022 October 2022 September 2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February 2022 January 2022 December 2021 November 2021 October 2021 September 2021 August 2021 July 2021 June 2021 May 2021 April 2021 March 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 January 2013 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 March 2011 January 2011 December 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 March 2005 November 2004 October 2004