Monday, February 16, 2009

Cut Taxes?

Yes, if we do it the right way and for the right reasons.

Robert P. Murphy says,
In their zeal to oppose the lunacy of the so-called "stimulus" plan, many radio talk show hosts and other pundits have fallen into the Keynesian trap. Rather than the politicians spending nearly a trillion dollars, they argue, it would provide much more stimulus if the government gave massive tax cuts. This would "put money back in the pockets of average Americans" and they would go to the mall and "get that money into circulation and boost the economy." Read the article here.
More spending than we're already doing can't happen unless we produce more first. That's true in spades for spending financed by more credit. In your heart, you know it's true.

2 comments:

J Kendall said...

So, more spending can't happen unless we produce more. (Or is it that we can't produce more unless we spend more?) Sounds like a chicken-and-egg problem or Catch-22. How do we do produce More without More of something else we need...? (What is IT exactly that we need? More money?... or is it More resources?... or is it More credit? How do we produce more in a receding economy? (I am sure there are some basic economic principles). I think I understand the idea of letting bad institutions fail and 'good' institutions rise to the occasion – is this simply all we need?

Truly,
Trying-to-wrap-my-head-around-it-but-realize-not-worth-it-since-the-Fed-and-politicos-upper-echelon-will-always-have-upper-hand-anyway-apathetic-but-enjoy-your-wisdom-anyhow

DLK said...

Although it seems like a chicken-egg deal and a Catch-22, it's not really. Suppose we didn't use money to transact exchange in our economy. We would still have production and exchange, but we'd have to barter (i.e., trade goods and services directly in kind; some of that goes on all the time, even thought we do have money).

With barter only, it becomes very clear that you have to produce something FIRST to have something to trade to someone else. Without production first, you have nothings to "spend." Production of real goods and services is what generates "income," regardless of whether we use money to exchange or not. Money is a very convenient "medium of exchange," but it is not itself income.

Borrowing allows consumption before production. That's a problem if the borrower never produces. Moreover, the borrower must produce more than what was borrowed, since the borrower must pay interest.

The Congress and the Fed have permitted and enabled borrowing beyond production---well beyond. Now the only question that remains is who is going to take it in the neck. Will it be the borrowers, or will it be the tax payers. See if you can guess.

What do we need to get the economy moving again? It's really quite simple. We need the government to get its hands out of markets and let people voluntarily produce and exchange with one another.

I know this sounds ideological and doctrinaire, but it isn't. I say this in "cold blood." I say it as a scientist. I say it without caring whether anyone listens. I say it because I am persuaded by the whole of history that it is so. I say it because I am persuaded by logic that it is so.

Unlike the new administration, I don't even think about whether I like it or whether it's fair. It's just what works.

"We the sheeple" are not really apathetic; we are frustrated. We recognize the difficulty, if not impossibility, of overcoming the "upper echelon" types, as you put it. Will it take armed revolution yet again to overthrow our oppressors? I understand there has been a run on ammo at Wal-Mart, so much so that you can't buy it right now; they are out. See if you can figure out why.