scribblings from a deist transhumanist libertarian minarchist citizen soldier

Economic voodoo in the land of made up money

Posted by Trevor in under other on Jan 23rd, 2009 | View Comments |

We are entering a great depression and all I hear is economic voodoo.

In a TV interview last month, Vice President Joe Biden said the following:

Every economist, as I’ve said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs.

That statement is clearly false. As I have documented on this blog in recent weeks, skeptics about a spending stimulus include quite a few well-known economists, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales–and I am sure there many others as well.

I am not a fan of big government, as anyone who has visited this blog more than once probably knows. Yet I try to digest and process all of the various solutions to economic failure that are being thrust into my brain like a nail driven by a hammer. Will government investment in infrastructure fix the problem? I don’t think so. The problem is a spending driven economy of instant gratification. Or am I wrong?

If we just keep throwing made up money at the problem how will that fix it? Won’t that just make it worse for future generations? Someone please explain how a spending problem will be fixed by spending more. It is quite possible I will be jobless in the near future. I don’t see how going further into debt would alleviate my situation and I don’t see how the U.S. government thinks that it can just continue spending its way out of basic irresponsibility.

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T F Stern

The best suggestion I've heard came in the form of a radical tax break to all workers. Instead of the government taking income tax out of employee paychecks, that money would be left to the employee to spend; no rebate, no stimulus checks, just leave the money at the source. The program could be run for two, three or more months with the result being lots of spending money hitting the retail outlets, lots of demand for production and solid repairs to the now unstable market place. The government would still print gobs of money to make up for the lost income taxes; however, the end result would be an economy which would stimulate real jobs, real production and lasting results which would make the workers realize how badly they are being fleeced by this invisible thing called withholding tax out of each paycheck. Gross pay and Net pay would become much closer and those in congress would have to arm themselves to re-install such a theft program once the average worker understood what had happened.