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"The Wrong Economic Fix"

by Corey Cagle

In the November 7^th article titled “The Wrong Economic Fix,” the Courier-Journal has once again proven that the agenda of modern “liberals” is as economically unsound as it is politically power-hungry. It would take far too long to point out each distortion and misrepresentation in that article, several of which stray from the field of economics, so I will expose only the main points, which unfortunately are (thanks to years of state indoctrination in public schools) widely held misconceptions.

The first of these is hinted at in the sentence, “What America desperately needs is spending that pumps money into the economy…”

True to form, the author is talking about government spending, not that of private individuals. This is an important distinction, as government spending is entirely dependent on taxation, while private spending is entirely dependent on production. We must remember that all government expenditures will be paid for by the taxpayers. There is an obvious exception to this: tax breaks and refunds. However these, to be effective, must be accompanied by a net reduction in government spending. The government cannot give tax refunds and have a net increase in spending. Yet this is precisely what is being suggested: increase spending with grants and subsidies, but decrease revenues by returning money to the taxpayers. This is a recipe for economic disaster so obvious that even a Democrat should be able to see it.

The article has also taken the predictable position that such government aid should go primarily to the poor and the unemployed. If the author believes that the government has the right to rob and plunder productive individuals for the unearned benefit of others, he should have the chutzpah to say so plainly. But to claim that tax relief should be given only to the poor on the grounds that “poor and working families are likely to spend their windfalls,” is worse than economically ignorant.

If the government gives tax money back to any economic group, that money is immediately injected back into the market, even if they don’t spend it immediately. It’s not like the rich and middle class are going to bury their refund checks in the back yard. That money is going to go in the bank, where it will be loaned, or in the stock market where it will generate interest. Similarly, giving tax breaks to companies like GE and GM lowers the cost of production. Lowered cost of production allows lower prices, which is the only effective way to “soak up some of the surplus supply of retail goods.”

The wisest course of action for our current Administration is a policy of Laissez-Faire. Our markets are more fragile now than they have been in many years. The market—which is the source of our government’s funding—cannot bear excessive controls, especially now. If Mr. Bush and Congress want to stimulate the economy, they should do so by removing artificial barriers to trade, reducing and refunding taxes, and significantly reducing federal spending.