Headlines can be so telling, and in being telling, can be so wrong. A front-page Washington Post headline from Monday said it all: “Federal deficit likely to double,” and then in the subhead, there was “SURGE COMES EVEN AS ECONOMY GROWS.” Books could be written, and have been written, and will be written by yours truly.
For now, the wholly-at-odds-with-reality notion that deficit spending boosts economic growth is one that just won’t die. Never forget that governments don’t increase demand with their waste as economists imagine, rather governments substitute their wasteful demand for the consumption and investment that would take place absent the federal government annually arrogating to itself trillions of private-sector fruits.
It’s all a reminder of a basic, irrefutable truth: government spending is always and everywhere a wet blanket on economic growth simply because it’s a sign of politicians substituting their central-planning for the profit-motivated resource allocation of the private sector. Central planning that fails in total fails in partial fashion too. The unseen when it comes to the economic progress not taking place thanks to government spending staggers the mind. This being true, it’s time that those in possession of mild common sense ridicule the absurdist PhD consensus that “deficit spending” only makes sense when the economy is weak. In truth, government waste is most harmful when an economy is on its back, and for obvious reasons.
Of course, there’s more that’s wrong with the aforementioned Post headline. Federal debt is expected to double “even as economy grows.” Which is a statement of the obvious. Governments can only spend insofar as the economy they have taxing power over is growing. This truth rejects the droolings of Democrats and Republicans.
On the Democratic side of the aisle, pundits claim we have deficits because we’re undertaxed. Wrong. It’s rising revenues that enable the deficits, which means we have deficits because we’re overtaxed. Simple stuff.
Republicans most often would and will nod along to the overtaxed truth, only for Republicans to act like Republicans in their efforts to “maximize revenue.” In which case Republicans “chart” how lower, but not low enough tax rates frequently result in more government revenue. Hallelujah! “Hey Dems, revenues aren’t high enough. Let us show you how to increase them!” Which is the Republican happy talker way of increasing the size and scope of government without rhetorically supporting an increase in the size and scope of government.
The simple truth is that politicians exist to spend, and spend they will so long as they have such abundant taxing power over us. Worse is that when the private sector grows, government as mentioned gets to grow too as rising revenues logically enable more borrowing on the assumption of ever-rising revenue. The Washington Post’s sub-editors create headers pregnant with surprise that surging economic growth would bring on a doubling of deficits, but anyone possessing basic understanding of bonds could explain this “phenomenon” to them with ease: entities that that have lots of money and that are expected to take in lots of money can borrow with ease.
Which is a reasonably short way of saying that as opposed to federal debt indicating the U.S. is the Titanic heading for the proverbial iceberg (the latter care of Cato’s perma-scold, Romina Boccia), the soaring debt is the surest, market-driven sign of a lack of a debt crisis. What we have is an economy-sapping spending crisis now, one born of too much tax revenue. This truth is lost on the warring ideologies, along with the reality that debt doesn’t power growth, rather it’s a consequence of it.
