Conservatives and Libertarians Gulled Yet Again By 'Pork' and 'Deficits'
Carmen Reinhart and Kenneth Rogoff released This Time Is Different in 2009. It’s since given conservatives, liberals, and libertarians ammunition of sorts when it comes to making their simplistic cases against budget deficits and debt.
To be clear, none of what's been written so far is meant to defend government spending. The politicized allocation of precious resources always and everywhere created in the private sector suffocates economic growth. Government spending is a growth retardant. Period.
Still, the odd view that governmental borrowing in order to fund the spending is somehow more economically crippling than direct taxation is one of those beliefs that just won't die. It's as though country economies are some kind of tangible machine that deficits can gut.
Back to Reinhart and Rogoff, they gave the overly simplistic an even more simplistic number to key on too. Supposedly country economies begin to implode when country debt reaches 100% of the not terribly accurate economic measure that is GDP. Voila! Deficit hawks had their number. Shrink debt so that countries don’t implode at 100%.
Except that so much was left out of the calculation. In particular, it was left out that debt as a percentage of GDP hit 260% in Great Britain in 1815, only for that same country to ascend to the world’s richest over the next century. Debt as a percentage of GDP has long been well above 100% in the U.S., yet until four weeks ago when command-and-control was imposed, the U.S. economy was the world’s most dynamic.
Great Britain and the U.S. (plus Japan too) remind us that it’s not the debt at some arbitrary number that wrecks an economy. What always kills prosperity is a lack of economic freedom.
In that case, let’s consider freedom through the lens of federal spending in the United States. Federal debt at present is $23 trillion? Since it’s roughly that, if you the reader were given a choice over the last 50 years between $30 trillion in total federal spending on the way to $23 trillion in total debt, or a "balanced budget" over those years based on over $50 trillion in total spending, which scenario would you choose?
The logical, economic freedom and growth enhancing scenario would be the deficit scenario. Government spending is what shrinks economic freedom, not how governments get it. To focus on deficit-financed waste versus tax-financed waste with budgets in “balance” is to make a distinction without a difference. Rich countries can always borrow, which means the only number that matters to freedom is total dollars spent by politicians.
All of which brings us to the freakout over the extra, "non-stimulus" items attached by Congressmen to the $2 trillion spending bill that will not stimulate. Libertarians and economic conservatives have made lots of noise about goodies stuffed into it like $75 million for the National Foundation on the Arts and Humanities, $25 million for the Kennedy Center, $3 million for the Forest Service for something along the lines of “rangeland research,” plus there was the unsubstantiated claim for a time that Congress had voted its members a raise.
As one aghast commentator put it about the last-minute inserts, “Appropriators can sneak a lot into 880 pages.” True, but the anger – manufactured and real – misses the point. What a dream if Congress only gave itself raises, and its members only threw around money to pet causes. Think how much freer and more prosperous we would be if that's all they did.
Which brings us back to the real tragedy: after the political class on the national level helped politicians on all levels impose a business and job-crushing lockdown on the U.S. economy, these tragically inept individuals had the nerve to impose a trillion+ more worth of central planning on top of their routine waste. It came in the form of checks to millions who were gainfully employed before the lockdown, “liquidity facilities” to businesses that didn't need it before the lockdown, and aid to the very state and local politicians playing the heavies with the political class's economy-wrecking shutdown. A virus potentially threatens, so politicians set about destroying the livelihoods and dreams of millions? Non sequitur doesn't do justice to what's happened, and is happening.
Much worse is how quickly and blithely Congress raised $2 trillion. About this, wake up readers. Please. The anger is so much about the Kennedy Center getting more money, which means our alleged servants get a pass for extracting $2 trillion extra from the economy to supposedly help us, but that will just make things worse. Can’t anyone see the much bigger problem, that if politicians weren’t so powerful, that if they didn’t have so much control over our lives and production, that they couldn’t have shut so many of us down to begin with, only to then extract $2 trillion more from us. The pork that has excited the always outraged is a head fake for the real problem of politicians having too much control over us such that they can author unspeakable damage. Let’s get a sense of proportion.
Which brings us to the typical deficit and debt hand wringing that alleged libertarians and conservatives always summon. Opining about supposedly "unsustainable" budget policies that Congress has supposedly pursued for decades, an assertion discredited by decades worth of falling Treasury yields, a prominent libertarian lamented that as a consequence of the latter, our capacity to beat the Covid-19 virus is weakened. Wait, what? So if there weren’t deficits and debt, the federal government would have the means to solve a health threat? If we ignore how ludicrous is the assertion that government could fix things but for a lack of money, since when are libertarians so blasé about mission creep?
And there lies the problem. As is so typical of the well-meaning freedom crowd, they miss the point. Obsessed with deficits, debt and pork, they rant and rave while Congress and politicians commit the real damage of command-and-control, more command-and-control on top of it, and extraction of crucial wealth that, if not taken by politicians, would actually be funding recovery from their unspeakably obtuse and cruel actions. So sad, so predictable, and so ignored by the freedom crowd as they focus on "pork" and deficits. But don’t get in the way of conservative and libertarians when they’re ranting about what doesn’t matter.