BY: Chris McDaniel @senatormcdaniel
The federal government, prior to 2008, had never increased the public debt by as much as $1 trillion in a single year. Since then, while experimenting with the witchcraft known as Keynesian economics, it has increased the debt by at least $1 trillion each and every fiscal year.
Although Congress has spent trillions, federal policies have resulted in faltering consumer confidence, high unemployment and disappointing job creation. Evidently, intervention in the free market is not working as advertised.
There are two primary and interrelated reasons the government’s economic plans have been ineffective.
First, politicians underestimated the psychological impact of excessive debt and government entanglement.
Certainty is a friend to investment and business growth, but it cannot be found amid discussions of cap and trade, taxpayer-funded bailouts, nationalized healthcare, tax increases, uncontrolled spending and record debt. Congressional activity – by words and deeds – has heightened uncertainty about the economic future.
The President’s economic theories, like those of Congress, are premised on the supposition that government spending will provide additional market demand, which would thereby lead to elevated prices and more private-sector hiring. It was the administration’s prediction that spending and public-works projects would help “prime the pump” until “full employment” was attained.
But it has not worked; it will not work – the administration’s desires cannot be realized because government fabricated uncertainty has clogged the so-called pump. Instability generated by government action has rendered private long-term planning speculative, so consumers feel compelled to reserve their cash and reduce investments necessary for economic growth.
Second, micromanaging a large and diverse economy from a central location (Washington, D.C.) is clumsy, inefficient and dangerous.
Centralization is, of course, less efficient than capitalism in terms of development and resource allocation. Because vast national economies like ours are complex, government agencies cannot easily correct perceived shortcomings. To control prices and the flow of money from the private sector to the public sector is virtually impossible without limitations on freedom.
The historic success of Western Civilization, generally speaking, was based on the transfer of power from the state to the individual, but with government usurping authority in an attempt to manage the impossibly complex process of economic planning, development and control, its involvement – by necessity – will negatively affect individual liberty.
Although bureaucrats – best described as well-meaning idealists – promise utopia, they often fall short of their intended objectives. The more they improvise to avoid the eventual failure of their plans, the greater the disruptions are to prosperity. And as their plans fail with predictability, one intervention inevitably leads to another, creating economic distortions which require further interventions to correct them.
The result is an unwelcome cycle of government action that robs citizens of their wealth and basic freedoms, undermining economic recoveries by altering human behavior on a large scale. Investors respond, in turn, by removing capital from the private sector. Instead of a revival of private spending and investment, increased public intervention becomes the norm as central planners seek to stimulate a sinking economy by spending more and more of the taxpayers’ money, ignoring the incontrovertible fact that not all spending is equally productive.
For an economic recovery to be successful, policies must aim to stimulate private investment, not frighten it into submission.
It must first be explained how an economy can work correctly before policymakers can enact meaningful reform designed to spur a recovery.
A good place to start is the outright rejection of Keynesian economic theory.
About Chris: Chris is an attorney, conservative commentator and a Republican politician in the Mississippi Senate who has represented the 42nd District, which encompasses part of South Mississippi, since 2008. He resides with his family in Ellisville, Mississippi.
Loved the commentary,and as usual,you were very astute in your understanding of how the economy actually works. Now why can’t your counterparts from Ms,on the Federal level,be just as smart.I would replace either one with you.
McDaniel seems to have a better grasp of economics than most everyone in Washington.
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What many in Washington seem to misunderstand is the the human mind is a fertile bed for imagination to further its own pursuits. Increasing the number of minds active to make life better for oneself and one’s family is a tried and established, and productive activity millions of times over by the American experiment called ‘free enterprise’. Constrain it at your own peril, it is a force to be reckoned with; consider the Industrial Revolution.
As we have seen with the increase in regulatory policy in this Administration, the fruit of that type of constraint produces little to no economic growth. And that is where we are.
Very well put, Laura.
While McDaniel is good with words (like most politicians), the facts run counter to some of his claims (like they do with many politicians’ claims). The unemployment rate has dropped somewhat steadily for the last two years, down to our current rate of 7.7%. We’ve created jobs every month since Oct. of 2010.
I’m sure McDaniel would be quick to say that the unemployment rate rose from when Obama took office in ’08 (5%) up to almost ten percent in ’10 (9.9%) and then slowly dropped down to its current rate (7.7%).
It’s ironic that McDaniel talks about the federal government instilling fear in the citizenry, when that is what he does in all of his posts. “The big, bad federal government’s going to come in and take everything you have!”
All the while, our personal income taxes are the lowest they’ve been in 60 some-odd years, and the unemployment rate is dropping.
Oh well. When the sky falls in, y’all can say, “I told you so.” Until then, I’ll keep looking at the facts.
You may be willing to accept 7.7% unemployment as a positive step. But when one further understands that a great many of the jobs that have been created are government jobs then one has to conclude that the real unemployment rate is much higher. History shows that government intervention prolongs crises. This one appears to be no different.