Monday, August 8, 2011

Budget Cuts Are Capital Increases

Even over a weekend it’s difficult to get away from economy talk; I expect the phrase “It’s the economy, stupid!” to make a resurgence any day. I know it’s on our minds as four people in the Spherical Model household are actively job hunting. Anyway, I saw PJTV’s Front Page with Alan Barton, with guests Terry Jones of Investor’s Business Daily and Alex Epstein of the Ayn Rand Center. 
They were discussing an August 1st piece by former Bush speech writer David Frum. I found the original here, but the way they worded their summary is below: 

I see some things I don’t believe in:
  • Forcing the United States to the verge of default.
  • Shrugging off the needs and concerns of millions of unemployed.
  • Protecting every single loophole, giveaway, and boondoggle in the tax code….
  • Massive government budget cuts in the midst of the worst recession since World War II.
Much of the debate about last week’s debt ceiling raise was, as you are aware, between more and less conservative Republicans. All the Democrats were about more government spending without limits, so any actual discussion had to be among their opponents, and the degree to which they would oppose further harm to the economy. So Frum is, I’m surmising, from the camp that thinks, “Sure, spending cuts might work sometimes, but not at a time like this when government is really needed.” In other words, conservatives—and anyone who actually understands basic economics—would likely disagree with him.  

In the Front Page discussion they more or less address each of Frum’s points. Of course conservatives didn’t want the government to default; they wanted government to control spending so that we wouldn’t lose our credit rating. It was Obama who insisted that without spending increases beyond the doubling of spending he’d already frittered away in his first three years in office, that the government would have no choice but to default. That was simply disingenuous—along with claiming military pay and payments to fixed-income seniors would be immediately curtailed; what Obama meant was, “My priority is to hold these payments hostage and blame Republicans for it, which I will get away with because of help from the fawning media.” [Yes, a direct quote from Obama’s mind, because I have that scary ability; it’s a blessing and a curse.] 

As for the assumption that government budget cuts are cruel to the unemployed and everyone during the recession, Alex Epstein said this: 

Two things: He talks about how these budget cuts are cruel. We should think of budget cuts as capital increases in the economy, because the less money government is taking from people, the more they have to do productive things. [I love this line; it’s the reason I went back to the interview for today’s blog post.] 

The second thing is, if you want to make life better for the unemployed, why don’t you make life possible, or easier, for the employers…. Liberate the energy industry [the industry Epstein studies], and liberate the other industries, and jobs will follow. 

Terry Jones adds some comments about the parties, insisting that he has plenty to complain about with both parties, but: 

The GOP in speaking out on behalf of capital increases is actually speaking out on behalf of the poor, because capital, when it’s effectively deployed, creates jobs. It creates places for people to go and earn incomes, and it takes them off the dole, and it lets them lead productive and happy lives. And when government stands between capital and its ultimate profitable usage, it destroys jobs, and destroys that potential for happy, productive lives. Democrats…to the extent that they want to tax businesses higher, want to tax the wealthy higher, want to tax anyone who’s successful at a higher rate, are doing their darndest it seems to destroy the success of our economy. 

Common sense well stated is a beautiful thing.  

Do we know how to solve the current unemployment problem? Yes, get government out of the way of businesses, and they will be delighted to hire people who will help them produce more wealth. 

Do we know how to solve the debt problem? Yes, return to carefully spending only on what is allowed in the Constitution. Do it incrementally if necessary, but do it. 
Do we know how to get our elected government officials to do what is necessary? There’s the tough question. I’m assuming immediate brain transplants are impossible, so we will have to wait for a large number of full-body transplants come election day 2012—followed by regular common-sense therapy applied by those of us who recognize ourselves as “We the People.”

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