The economic situation continues to deteriorate this week as past and future bailouts were discussed on Capitol Hill. The debate was over the accountability of already disbursed TARP money, and on whether or not to release remaining funds. Banks that had already been bailed out before are looking for more money to fill the black holes that are their balance sheets, warning that they are simply too big to fail. However, whatever ‘devastating’ consequences these banks are dreaming up and pushing on Capitol Hill regarding their own collapse will be nothing compared to the collapse of our currency if we keep debasing it through these foolish bailouts. It should be that they are too big to bailout. The world will not come to an end without this or that bank. The most troubling thing to me is this rhetoric that only government can save the economy, and must act. This is so counter-productive.
We must ask ourselves what strengthens this country, and what weakens it.
Government is a monumental drag on this economy. Government at all levels currently absorbs about 35-40 percent of GDP, which is still not enough for its voracious appetite. While productivity is already overtaxed, the government routinely spends more than it takes in and makes up for the shortfall by constantly borrowing or debasing our dollars through inflation. It pains me to think of all the opportunities for productive economic growth we have given up simply because our government is super-sized instead of Constitution-sized. There are just a few constitutionally sanctioned activities for government to engage in, but it is so overstretched with unconstitutional encroachments that what it is legitimately supposed to do, it does very badly. And yet we are to believe the solution to our problems is to make government bigger. On the contrary, government makes our problems bigger. The central bank’s meddling with monetary policy led to overheated lending, and now massive defaults. The government used manipulative tax policy to distort the housing market which has had many unintended consequences, and here we are. Government is quick to enact and slow to correct bad policy. Yet in spite of government’s failures, it flourishes and grows, thanks to the continual bailouts from the unwitting taxpayer.
Big government has been tried and has failed miserably. What we need now is small government, and freedom. We need the freedom to pull ourselves up by our own bootstraps again, as we traditionally do in this country. But try to start a business or charity today, and you will understand how little economic freedom we really have left. Freedom, not government, made this the land of opportunity. Freedom laid the foundation that catapulted us to becoming the strongest economic power in the world. The American people are strong and capable. We can pull ourselves out of this mess. All we need is for the nanny-state to get out of the way and allow us to do it. Freedom is our strength, government is our weakness. Only by recognizing this and unleashing our strengths will we solve the problems we face today.
Monday
STIMULATING OUR WAY TO ROCK BOTTOM
With attention turning to the next big economic stimulus package, questions are still swirling about our economic troubles. How did we get here? How do we get out? As usual, Washington has all the wrong answers. According to many politicians, we got here by not spending enough, not consuming enough, and not regulating enough. Now government, like some mythical white knight, is going to ride in to save the day by blanketing the economy with dollars, hiring an army of new bureaucrats, creating make-work jobs, and sending everyone some form of a bailout check. The debate seems to focus on whether this will cost enough to save the economy, or if this is just a “down payment” with much more government spending to come. Talk like that would be comical, if the results weren’t going to be so tragic.
The results will be worsening economic woes until we learn our lesson. But instead Congress is behaving like drug addicts who must hit rock bottom before they are ready to face reality. They are playing foolish games with the economy now because they are thinking only of political expedience. This talk of job creation is a perfect example.
Contrary to the belief of many, the goal of the economy is not job creation. Jobs can be a sign of a healthy economy, as a high energy level can be a sign of a healthy body. But just as unhealthy substances can artificially give the addict that burst of energy that has nothing to do with health, artificially created jobs just exacerbate our problems. The goal of a healthy economy is productivity. Jobs are a positive outcome of that. A “job” could be to dig a hole one day, and fill it back up the next, or perhaps the equivalent at a desk. This does no one any good. But the value in that paycheck ultimately has to come from taxing someone productive. Some think this round-robin type of economic model is supposed to get us somewhere.
Politicians and bureaucrats have already done their fair share to ensure that jobs in the private sector are prohibitively complicated and expensive to create. They are now shocked that the economy is shedding jobs, and want to simply create hundreds of thousands of jobs to make up for the job losses, through another so-called economic stimulus package. The private sector must be permitted to do that, but instead they are massively burdened with taxes and webs of red tape and regulation. Washington’s bandaids will only prolong this agony. The Austrian school of economics teaches that only a free market economy, unencumbered by onerous government controls, creates long-term prosperity. Politicians, however, tend to be notoriously short-sighted.
I am left with these questions – who is going to be left standing, to tax in the private sector, to pay for all these public sector make-work jobs? Is Washington really to be considered some sort of savior for creating unproductive jobs in place of the productive jobs they eliminated?
We are at an economic dead-end and those in power are in denial. The truth is our economic problems are due to loose monetary policy, central economic planning, and the parasitic expenses of government. Unless we assess these problems honestly, we unfortunately have a long way to go until, like the junkie, we hit rock bottom.
The results will be worsening economic woes until we learn our lesson. But instead Congress is behaving like drug addicts who must hit rock bottom before they are ready to face reality. They are playing foolish games with the economy now because they are thinking only of political expedience. This talk of job creation is a perfect example.
Contrary to the belief of many, the goal of the economy is not job creation. Jobs can be a sign of a healthy economy, as a high energy level can be a sign of a healthy body. But just as unhealthy substances can artificially give the addict that burst of energy that has nothing to do with health, artificially created jobs just exacerbate our problems. The goal of a healthy economy is productivity. Jobs are a positive outcome of that. A “job” could be to dig a hole one day, and fill it back up the next, or perhaps the equivalent at a desk. This does no one any good. But the value in that paycheck ultimately has to come from taxing someone productive. Some think this round-robin type of economic model is supposed to get us somewhere.
Politicians and bureaucrats have already done their fair share to ensure that jobs in the private sector are prohibitively complicated and expensive to create. They are now shocked that the economy is shedding jobs, and want to simply create hundreds of thousands of jobs to make up for the job losses, through another so-called economic stimulus package. The private sector must be permitted to do that, but instead they are massively burdened with taxes and webs of red tape and regulation. Washington’s bandaids will only prolong this agony. The Austrian school of economics teaches that only a free market economy, unencumbered by onerous government controls, creates long-term prosperity. Politicians, however, tend to be notoriously short-sighted.
I am left with these questions – who is going to be left standing, to tax in the private sector, to pay for all these public sector make-work jobs? Is Washington really to be considered some sort of savior for creating unproductive jobs in place of the productive jobs they eliminated?
We are at an economic dead-end and those in power are in denial. The truth is our economic problems are due to loose monetary policy, central economic planning, and the parasitic expenses of government. Unless we assess these problems honestly, we unfortunately have a long way to go until, like the junkie, we hit rock bottom.
Tuesday
OPPORTUNITIES FOR PEACE AND NONINTERVENTION
Our interventionist foreign policy stands ready to be put on a new course with the new administration. Unfortunately, it seems the new administration is likely to continue the mistakes of the past. I've often discussed interventionist foreign policy and the resulting blowback. The current administration's foreign policy, I'm afraid, has created a huge impetus for blowback against the United States. However, I truly believe much of the world stands ready to look beyond our nation's recent blunders if the new administration proves to be heading in a more reasonable direction.
Other nations around the world find our interference in their affairs condescending, and it is very dangerous for us. We may think we have much to gain by inserting ourselves in these complex situations, but on the contrary we suffer from many consequences. Other countries have their problems, to be sure. But how would we feel if China or Russia came to our soil and tried to depose our problematic leaders or correct our policies for us? Our problems are ours to solve, and we need to give other countries that respect as well. Instead, we have been turning alleged, phantom threats into real, actual threats.
We should follow the foreign policy advice of the Founders – friendship and commerce with all nations. One positive step would be to end our destructive embargo of Cuba, which deprives our farmers of a market just 90 miles from US shores while strengthening the Communist regime. We've seen 50 years of statist restrictions not accomplish anything. A change is needed. Other countries should decide how to govern themselves. Even if we don't necessarily approve, it's none of our business. If other people foolishly choose to live under statist experimental regimes, they need to fail in their own right, and not have us as a scapegoat. We need to focus on our own affairs.
However, the pressures exerted on our leadership from the military industrial complex and big business is not in favor of peace or freedom, or especially nonintervention. Intervention is big business. Defense contracts topped $300 billion last year, and total spending on war and our overseas empire is up to $1 trillion per year. That represents a lot of people earning a living off of war and conquest. But rather than adding to our economy, all of this money is taken from the economy in order to wage war and destruction. Imagine if those resources were put to creative, productive use here at home!
We need to rein in our overseas empire, as quickly as possible. We need to bring our troops home, and get our economy back into the business of production, not destruction. The smartest thing we could do is admit we don't know all the answers to all the world's problems. If the new administration can take a closer look at real free trade and no entangling alliances, we would be much better off for it. Economically – we could save hundreds of billions of dollars each year! The new leadership has the opportunity and the political capital to do this. But unfortunately, it is not likely to happen.
Other nations around the world find our interference in their affairs condescending, and it is very dangerous for us. We may think we have much to gain by inserting ourselves in these complex situations, but on the contrary we suffer from many consequences. Other countries have their problems, to be sure. But how would we feel if China or Russia came to our soil and tried to depose our problematic leaders or correct our policies for us? Our problems are ours to solve, and we need to give other countries that respect as well. Instead, we have been turning alleged, phantom threats into real, actual threats.
We should follow the foreign policy advice of the Founders – friendship and commerce with all nations. One positive step would be to end our destructive embargo of Cuba, which deprives our farmers of a market just 90 miles from US shores while strengthening the Communist regime. We've seen 50 years of statist restrictions not accomplish anything. A change is needed. Other countries should decide how to govern themselves. Even if we don't necessarily approve, it's none of our business. If other people foolishly choose to live under statist experimental regimes, they need to fail in their own right, and not have us as a scapegoat. We need to focus on our own affairs.
However, the pressures exerted on our leadership from the military industrial complex and big business is not in favor of peace or freedom, or especially nonintervention. Intervention is big business. Defense contracts topped $300 billion last year, and total spending on war and our overseas empire is up to $1 trillion per year. That represents a lot of people earning a living off of war and conquest. But rather than adding to our economy, all of this money is taken from the economy in order to wage war and destruction. Imagine if those resources were put to creative, productive use here at home!
We need to rein in our overseas empire, as quickly as possible. We need to bring our troops home, and get our economy back into the business of production, not destruction. The smartest thing we could do is admit we don't know all the answers to all the world's problems. If the new administration can take a closer look at real free trade and no entangling alliances, we would be much better off for it. Economically – we could save hundreds of billions of dollars each year! The new leadership has the opportunity and the political capital to do this. But unfortunately, it is not likely to happen.
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