"ALL CAPS IN DEFENSE OF LIBERTY IS NO VICE."

Wednesday, April 27, 2005

GUNS, BUTTER, DEBT AND THE LEFT

The Left would like you to believe that the economy benefits from government intervention into the markets and when we have a lower federal debt. And the Left believes that defense spending is wasteful, and that since you cannot have "guns and butter," and because they want the butter - (and today this means federally controlled healthcare and pensions) - the Left wants to repeal Bush tax cuts and reign in our defense spending (BY CUTTING NMD, FOR EXAMPLE) and our military efforts overseas (by withdrawing from IRAQ, for example - which will have cost us about $275 billion dollars by next year, when WE DO withdraw).

THESE ASSERTIONS ARE UTTERLY FALSE.

Government regulatory intervention into the economy - through make-work projects, wage &/or price controls, and intervention onto the markets - doesn't help an economy.

AND: Federal Debt doesn't hurt an economy. Here's proof:

FACT #1: The interventionist/socialist policies of FDR's New Deal DID NOT get us out of The Great Depression, WW2 did. There is ample evidence that FDR's New Deal policies MADE THE DEPRESSION WORSE! Unemployment was higher in 1940 than in 1932! It AVERAGED 17% from 1932 to 1941!

(a) "The New Deal... deepened the Great Depression, swelled the federal government, and prevented the country from turning around quickly. ... FDR’s federal programs hurt America more than helped it... Social Security actually increased unemployment ... higher taxes undermined good businesses... labor laws threw people out of work."

"The New Deal tripled federal taxes between 1933 and 1940 — excise taxes, personal income taxes, inheritance taxes, corporate income taxes, dividend taxes, and excess profits taxes all went up — and FDR introduced an undistributed profits tax. A number of New Deal laws, including some 700 industrial cartel codes, made it more expensive for employers to hire people, and this fed unemployment." Jim Powell, author of FDR's Folly - How Roosevelt and His New Deal Prolonged the Great Depression

(b) "... without a shadow of a doubt–the New Deal hampered recovery from the contraction, prolonged and added to unemployment, and set the stage for ever more intrusive and costly government. Milton Friedman, Nobel Laureate.

(c) The idea the FDR's New Deal got us out of The Great Depression "was never pervasive among economists, and even J.M. Keynes -- a liberal icon -- criticized some of FDR's policies as hindering recovery from the depression."
Thomas Sowell, economist, author, columnist, Stanford University fellow.

(d) "Whatever it was, the New Deal was not a recovery program." Stanford University political historian David M. Kennedy: his 1999 book Freedom from Fear, winner of a Pulitzer Prize.

(e) "There is a critical and often forgotten difference between disaster and tragedy. Disasters happen to us all, no matter what we do. Tragedies are brought upon ourselves by hubris. The Depression of the 1930s would have been a brief disaster if it hadn’t been for the national tragedy of The New Deal." PJ O'Rourke.

Fact #2: By historical standards, the Federal Debt accumulated under Reagan was not great. And during his two terms the economy grew at its best historical rate even as the federal debt grew.

"The federal debt reached a peak ratio of 114 percent of GDP after World War II and declined to 26 percent by 1981, before rising again. But even with the subsequent deficits, it was still only 51 percent of GDP in 1992. " Robert Eisner was the William R. Kenan Professor of Economics at Northwestern University and a past president of the American Economic Association. He died in 1998.

Fact #3: FDR and Truman accumulated the greatest debt as a percentage of GDP. From 1946-1950 the federal debt averaged 100% of GDP. From 1950-1952 it averaged 75% of GDP. During the entire decade of the 1950's the federal debt averaged 60%. This level of federal debt did not stop the US economy from experiencing its greatest growth period EVER - in spite of the fact that the rest of the world was economically hobbled and consuming very little.

FACT #4: Under President GWBush the federal debt as a percentage of the GDP is not historically large. In 2001 it was 57.5%; in 2004 it was estimated to be 65.3%.

[ASIDE: This is despite the fact that he INHERITED A RECESSION, and INHERITED TWO DISASTEROUS BUBBLES (the telecoms bubble and the internet bubble - bubbles which were allowed to exuberantly grow unchecked by the libertine Clinton, and which burst BEFORE the election), and he INHERITED and HORRIFIC ACCOUNTING SCANDAL. These abuses (like the UN Food for Oil stealing) occurred on Clinton's watch; the abuses were discovered on Bush's watch; the perps are being punished and the rules tightened on Bush's watch.]

FACT#5 - Defense spending increased every year from 1940-1994 - and the economy grew over that period; there were recessions and there was terrible inflation in the 1970's, but overall or economy grew. It grew especially well during the Reagan years when defense spending grew at its fastest rate since WW2, and federal debt increased. IN FACT, federal debt, taxes and defense spending grew almost every year between 1950 and 2000, and it had NO EFFECT on the overall economy - which see-sawed as a result of other factors.

CONCLUSION: The assertions the Left makes that we cannot have guns and butter is false.

The argument that if left unchecked that Bush's tax cuts and defense spending and domestic spending increases are inevitably leading us to an economic disaster is false.

History proves that we can have large deficits and larges increases in the federal debt as a percentage of the GDP without throwing the economy into either a recession or a depression.

Ultimately, the growth of the economy depends on the people - earning, spending, investing and consuming - and NOT the government.

And solutions to the national security crises we face (the GWOT, nuclear weapons in Iran and North Korea, etc.) should NOT be graded by their cost or their effect on the federal debt, but by how effectively they work to make us safer.

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