Yet Another Reason Additional “Stimulus” Spending Is A Bad Idea

While the government spends lavishly, people who are actually held accountable for their actions are holding on to their money.  Why? 

The truth is, nobody knows [what is going to happen with the economy]. And when you don’t know, you proceed with caution. It is not a coincidence that American corporations are adding rapidly to their cash reserves at the same moment that the American government is adding rapidly to its debts. Which course of action seems more prudent?

The question answers itself. 

If the government does more of the same — piling on the “stimulus spending, along with taxes, regulation, and government intervention in various  industries — corporations will also do more of the same and hoard their cash until the dust settles.  Therefore, more government spending in this environment is self-defeating.  As the government spends more, private industry spends less. 

What we need to do is loosen the reigns, decrease the burdens on private industry, and let American corporations do what they do best — create new, innovative products and services that people want to buy.  That is the only real engine of growth.  Government spending just moves money around; private enterprise creates new wealth.

I love this quote Kevin Williamson borrows from F. A. Hayek:  “The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.”   Williamson thinks these words should be engraved on the Federal Reserve building and the U.S. Treasury. 

Actually, I suggest a modest change and posting the words on just about every government building —  “The curious task of government is to demonstrate to men how little they know about what they imagine they can design.”  The government is seriously lacking in humility these days, as an Administration full of people who have never held a private sector job imagine that they can design, for example, the healthcare and financial sectors of the economy.  We are already seeing the impacts of these designs, and I have a sinking feeling that we ain’t seen nothing yet.

From Professor Reynolds.

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Published in: on July 22, 2010 at 12:35 pm  Leave a Comment  

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