Right now, almost everyone is chattering about our inflation problem. To the “progressives,” we have to somehow control the terrible outbreak of business greed that is causing prices to rise. To conservatives, the problem is the rapidly growing federal deficit, which is causing the Fed to create enormous sums of new money to finance it.
In this RealClearMarkets article, John Tamny argues that both sides miss the true point. Our economic distress is rooted in the federal government’s gargantuan spending. He writes:
The horrors of government spending aren’t just the seen whereby the Pelosis and McCarthys of the world substitute themselves for actual investors. Consider the unseen; as in how many Microsoft, Amazon, and Grail (look it up) equivalents never achieved lift-off over the years because politicians were such size consumers of precious resources. Government spending is a cruel barrier to better living standards, enhanced health, wellness, and opportunity.
Yes. Government spending removes resources from the private sector, where people tend to think carefully about the costs and benefits of their investments, purchases, and donations and transfers them into the hands of politicians, who are concerned mainly about getting reelected. Resources are taken away from people who use them productively and are given to people who often use them anti-productively — on government rules and projects that get in the way of productivity.
Contrary to the Keynesian notion that government deficit spending stimulates the economy, it restricts economic growth.
Resources are limited. The more the government consumes — for wars, for bureaucrats, for giveaways to favored groups, etc. — the less is left for the people who actually have to earn their money.