Thursday, January 01, 2009

Economic Common Sense

You couldn't articulate economic common sense any more simply than this:
Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value of those already in circulation. Something cannot be effortlessly created from nothing.

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.
Hat tip to Carpe Diem

1 comment:

Andrew Kern said...

Why can't the government create wealth if Wal-Mart can?

What if the government set up a shop on the corner and hired some people to work there. Then those people, under the government's direction, bought and sold goods. Wouldn't that be a means of wealth creation?