Keynesians, the Left’s economic leper colony of choice, having been banished from planet Earth during the prosperous Reagan years, have de-orbited and once again control the nation’s economic levers. Readers may not remember their name, but they are certainly familiar with their otherworldly theories, such as the idea that rising unemployment will lower inflation. This pearl, tested during the Carter years, produced a brand-new dictionary term: “stagflation.” Unfortunately, as The Wall Street Journal’s George Melloan highlights, a related Paleozoic idea from the Left’s intellectual crypt is now being dragged out and dusted off — the notion that the government can “stimulate” an economy by shoveling massive amounts of paper into it.
The problem with Keynesian paper-pumping theories is that value doesn’t derive from money (i.e., paper), but rather, from the intrinsic worth of products or services exchanged. This worth is measured, in the aggregate, as a nation’s Gross Domestic Product. For a given GDP and a specified supply of money in circulation, an increase in money supply simply dilutes the value of the base currency — in this case, the U.S. dollar.
That dollar is about to become a lot weaker, too. Just this week President-elect Obama asked Congress to release the second half of the enormous $700 billion bailout package known as TRAP — er, TARP. Both houses quickly obliged, and Obama pledged to use as much as $100 billion to help homeowners facing foreclosure. Conservative estimates now put total bailout costs at roughly $2 trillion. Where does all that money come from? Well, it’s simply printed up — really. So how much is a trillion dollars? Well, one trillion dollars laid out end-to-end would stretch from the earth to the sun (roughly 93 million miles), with four million miles in spare change; a fighter flying at the speed of sound would take almost 15 years to span that distance. That’s a lot of paper.
All of this is to point out that we have been down this road before, and we should reflect on the costly lesson the Carter era taught us: “loose money,” while temporarily easing the pain, is nowhere near worth the ultimate suffering it brings.
~snip~
In alarming conjunction with recent headlines reporting that the global influence of the United States has slipped dramatically due to the dereliction of government regulators largely responsible for triggering the current recession, the 15th annual Index of Economic Freedom published jointly by The Wall Street Journal and The Heritage Foundation reveals the U.S. saw a corresponding slip in its rankings to sixth place. Hong Kong is tops again, followed by Singapore, Australia, Ireland and New Zealand to round out the top five.
Evaluating numerous criteria relating to economic freedom, the study again shows an affirmative correlation between economic freedom and national income. Freer countries enjoy per capita incomes more than 10 times higher than those in “repressed” countries occupying the bottom of the rankings. In a chilling highlight, it was repressed nations that turned to deficit spending, government seizure of land and resources, and government support of favored enterprises, eventually devastating their economies even further with government mismanagement. Not to suggest that our government’s current bailout debacle bears a striking resemblance to government mismanagement that landed many of the repressed countries at the bottom of the rankings, but as Founding Father John Adams once said, “Facts are stubborn things.”
When the engines of capitalism occasionally backfire, socialists sing their siren song that only government can save the economy. What these same 19th-century thinkers never can explain is how an entity responsible for today’s recession through sheer incompetence is supposed to solve the debacle by taking even more money away from the productive segment of society. Yet the audacity of big government arrogance will only grow worse beginning next week.
Conservative Libertarian Outpost 