bobbyw24
03-07-2010, 10:04 AM
Fact And Comment
03.01.10, 6:00 PM ET
Bigger Budget = Smaller Economy
The late Nobel Prize-winning economist Milton Friedman once famously observed that he would prefer a federal government budget of $1 trillion (this was when a trillion bucks was real money) with a big deficit to a federal budget of $2 trillion that was balanced. His obvious point was that the bigger Washington is, the more of a burden it puts on the economy, whether it finances its spending via taxation, borrowing or printing money. So it's not President Obama's mind-numbing, from-here-to-eternity deficits that we should be worrying about but the increasing deadweight put on the rest of us by Washington's burgeoning budget bloat.
Senate Republicans were right to put the kibosh on the formation of a formal bipartisan deficit-fighting commission. Those things always end up increasing taxes while doing little to reduce spending. America's heavy tax burden is ominous enough--and it's going to get worse once all the 2003 tax cuts expire at year's end. The Administration has no conception of the damage that high tax rates wreak on sustainable growth and innovation, even when they allegedly apply to only the "rich."
We can see what big government has done to western Europe. It has stifled entrepreneurship and innovation, which are crucial for growth, and this is why French President Nicolas Sarkozy ruefully observed years ago that one of the largest French-speaking cities in the world is now London. Prior to this government-created economic crisis, Europe's unemployment rates, especially among young people, were significantly higher than ours.
Government is simply incapable of investing as astutely and flexibly as private investors. Take, for example, railways, which President Obama highlighted the other day when he took a trip to Tampa, Fla. The federal government has poured tens of billions of dollars into these kinds of projects around the country, and most all have been wasteful, financial disasters that have attracted only a fraction of their anticipated ridership.
One of the biggest economic myths since the Great Depression is that governments can ameliorate or counteract the ebbs and flows of free markets. Government spending has never worked as a trigger for sustained and vibrant economic growth. Ever. Scholarship has demonstrated that the New Deal perpetuated the Depression rather than cured it. On the eve of the Depression the U.S. had the lowest unemployment rate among developed nations. But a decade later, despite six years of FDR's New Deal, our unemployment rate was one of the highest among developed economies. Japan's serial stimulus programs over the past two decades have repeatedly underscored this truth.
The more the government takes as a proportion of the economy, the worse equity markets do and the higher the unemployment rate. The less the government takes from the real economy, the better equities perform and the lower the unemployment rate.
The best stimulus would be to implement personal and business tax rate cuts, a strong and stable dollar and a government nonaggression pact with the private sector--that is, no more attempts at nationalizing health care, gratuitously increasing energy taxes and forcing businesses to unionize.
No Edifices Needed
http://www.forbes.com/2010/02/10/fact-and-comment-opinions-steve-forbes.html?boxes=opinionschanneleditors
03.01.10, 6:00 PM ET
Bigger Budget = Smaller Economy
The late Nobel Prize-winning economist Milton Friedman once famously observed that he would prefer a federal government budget of $1 trillion (this was when a trillion bucks was real money) with a big deficit to a federal budget of $2 trillion that was balanced. His obvious point was that the bigger Washington is, the more of a burden it puts on the economy, whether it finances its spending via taxation, borrowing or printing money. So it's not President Obama's mind-numbing, from-here-to-eternity deficits that we should be worrying about but the increasing deadweight put on the rest of us by Washington's burgeoning budget bloat.
Senate Republicans were right to put the kibosh on the formation of a formal bipartisan deficit-fighting commission. Those things always end up increasing taxes while doing little to reduce spending. America's heavy tax burden is ominous enough--and it's going to get worse once all the 2003 tax cuts expire at year's end. The Administration has no conception of the damage that high tax rates wreak on sustainable growth and innovation, even when they allegedly apply to only the "rich."
We can see what big government has done to western Europe. It has stifled entrepreneurship and innovation, which are crucial for growth, and this is why French President Nicolas Sarkozy ruefully observed years ago that one of the largest French-speaking cities in the world is now London. Prior to this government-created economic crisis, Europe's unemployment rates, especially among young people, were significantly higher than ours.
Government is simply incapable of investing as astutely and flexibly as private investors. Take, for example, railways, which President Obama highlighted the other day when he took a trip to Tampa, Fla. The federal government has poured tens of billions of dollars into these kinds of projects around the country, and most all have been wasteful, financial disasters that have attracted only a fraction of their anticipated ridership.
One of the biggest economic myths since the Great Depression is that governments can ameliorate or counteract the ebbs and flows of free markets. Government spending has never worked as a trigger for sustained and vibrant economic growth. Ever. Scholarship has demonstrated that the New Deal perpetuated the Depression rather than cured it. On the eve of the Depression the U.S. had the lowest unemployment rate among developed nations. But a decade later, despite six years of FDR's New Deal, our unemployment rate was one of the highest among developed economies. Japan's serial stimulus programs over the past two decades have repeatedly underscored this truth.
The more the government takes as a proportion of the economy, the worse equity markets do and the higher the unemployment rate. The less the government takes from the real economy, the better equities perform and the lower the unemployment rate.
The best stimulus would be to implement personal and business tax rate cuts, a strong and stable dollar and a government nonaggression pact with the private sector--that is, no more attempts at nationalizing health care, gratuitously increasing energy taxes and forcing businesses to unionize.
No Edifices Needed
http://www.forbes.com/2010/02/10/fact-and-comment-opinions-steve-forbes.html?boxes=opinionschanneleditors