When Conservatives Mope About Deficits, They Sound Like Liberals

When Conservatives Mope About Deficits, They Sound Like Liberals
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At a recent Halloween party in my condo building, an older neighbor recalled how relieved she was when her young son left diapers in the rear-view mirror in the early 1970s. “I felt rich,” the woman said. Back then diapers were an expense of substance, according to my neighbor a $10/week expense. Notable about this woman is that she was hardly poor. Her husband was an executive at International Paper at the time, they lived outside of New York in well-to-do Westchester County, but $10 was a lot back then.

Fast forward to the present and diapers are much cheaper in a relative sense. So much is. While the first ball-point pens cost roughly $15 each when introduced, nowadays consumers can buy a box of sixty Paper Mate 2.0 pens, the best ball points in the world according to yours truly, for $7 on Amazon. Considering wireless phones, they were so rare in the ‘80s that seeing someone with one was cause for stopping to stare in awe; by the ‘90s the use of these only-for-the-rich gadgets was parodied in movies like Clueless. Movies are escapism for many, and it was escapist for the movie-going public to see how kids in Beverly Hills lived. They had mobile phones that they actually talked on…Roaming charges? That was a worry for those not from Beverly Hills, assuming they had phones at all. Most didn’t.

The obvious punchline here is that whether it’s diapers, pens or smartphones (the “phones” from Clueless are rather dated today, now we all have supercomputers in our pockets), so much of what was dear long ago is incredibly cheap today. This is what capitalists do. They get rich by mass producing yesterday’s necessities and luxuries.

Which brings us to a recent editorial published at the website for the great conservative publication, National Review. The editors were commenting unhappily about the latest budget deficit figures. They say it's disappointing that the deficit has come in “a hair shy of a trillion.” But it’s not surprising, according to the editors. As they see it, “There is nothing easier than giving people what they want when it does not cost you anything. That is one of the basic problems of American politics.” No. That's not right. Conservatives and other self-proclaimed limited government types should never think it's a challenge to compete philosophically or rhetorically with big-spending politicians. They shouldn't simply because nothing's easier than discrediting wasteful politicians.  

Basically the editors miss the point, or more realistically they haven't thought through the accepted wisdom that correct thinkers can't compete with those offering handouts. This view is incorrect. Government spending is “giving people what they want”? How is that? What is it governments provide that the alleged dupes in the electorate want so much of? The editors don’t explain. They should have, because in trying to make an argument they instinctually know is flaweed, they probably wouldn’t have published an editorial claiming politicians can meet the needs of the people by spending more of what's taken from the people.

Indeed, it’s shooting fish in the most crowded of barrels to point out that whether the DMV, Post Office, Passport Offices or anything else, government rarely gives us what we want. Unless what we want is exasperation. Or the evisceration of our income. 

And if conservatives think the masses only want money or "free" things, they miss the point there too. No one wants money as much as they want what money can be exchanged for. Back in the ‘80s government could have handed copious sums to the indolent, but it wouldn’t have afforded them mobile phones simply because "thousands" wasn’t enough to purchase and operate a phone back then. Thousands certainly wasn’t going to buy a working computer in the 20th century either. Flat screen tvs? If they existed they cost $25,000+. People don’t want money; rather they want things.

Which is where the capitalists come in. They once again get rich by turning yesterday’s unattainable and unimaginable luxuries into common goods. They’re able to do so thanks to investment in production processes that rapidly enable creative minds to produce expensive things in abundant fashion on the way to low prices.

All of this matters simply because government spending reduces the amount of investment that relentlessly turns scarcity into abundance. In other words, government spending is a massive, economy sapping barrier to people getting what they want.

Readers and occasionally dyspeptic conservatives both might consider the unseen when it comes to a $5 trillion annual budget, along with the trillions spent over the years. Lest they forget, at one point $500,000 purchased 10% of Facebook for an intrepid investor by the name of Peter Thiel. Imagine then, all the great ideas that were never funded, and certainly not funded in the right way, because government was such a size allocator of precious resources. And still is.  

All of this is hopefully a reminder of how wasted is conservative focus on deficits. Implicit in all the handwringing is that the federal government has a revenue problem. No, explicit in its ability to run up trillion dollar annual deficits is that it collects way too much in the way of revenue, and that it will collect exponentially more in the future. Never forget that when investors buy Treasury debt, they’re buying future Treasury revenue streams. 10-year Treasury yields are under 2% today, but were 11% in 1980 despite a much smaller “deficit” in nominal terms. This is a powerful market signal; one saying that investors are confident that government revenues are on a steep path upward.

Which is hopefully a reminder that the focus should be on how much the federal government spends, not how it accesses the money. To focus on the misallocation of resources in "surplus" versus "deficit" fashion is to make a distinction without a difference. The only thing that matters is the total.

The total dollars spent by politicians signal the crucial resources that are not reaching innovators, and because they’re not, the getting of the American people is greatly reduced. Deficit talk is so pointless.

So no, politicians can’t give us what we want. Not even close. Only the profit-motivated can. Conservatives who don’t see how government spending deprives us of a better present and future should sit out this debate. The more they talk “deficits,” the more they hand the debate to the big government crowd.

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is titled They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers. Other books by Tamny include The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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