Traces of Reality Interview

Guillermo Jimenez interviewed me again on Traces of Reality, this time about the illegitimacy of the government's debt. Have a listen.

TGIF: Lysander Spooner and the National Debt

By what authority do politicians borrow in the name of the American people and presume they may use force to compel repayment of the debt? By no authority whatsoever.

Read about it.

Meanwhile on the Fiscal Front...

Here's what's going on: Congress and the government agencies incurred expenses with the intention of paying the bills with a credit card that they knew would be maxed out before payment was due unless the credit limit was raised. They could do this because of their fallback position: the threat of violence against the taxpayers. You and I can't engage in such behavior without paying a penalty.

Op-ed: Cutting Government Would Boost Economy

Budget sequestration is as modest a step toward cutting Leviathan as one can imagine. Further progress will be difficult as long as people believe that slashing the size of government conflicts with reviving the economy. Nothing could be further from the truth.

Read it here.

Government Spending Is No Cure for Recession

Mario Rizzo debunks the claim that government spending is as good economically as private spending here. Definitely worth reading.

Government Can't Stimulate the Economy

The money sluices are about to open wide on Capitol Hill. With a new Congress convened and a new president about to take office, we are likely to see record-shattering government expenditures. All inhibitions about deficit spending, as weak as they have been in recent years, are now dissolved. The motto among those in control is: Spend now!

Why? To “stimulate the economy.” Well, that’s a lousy reason. The economy doesn’t need stimulation. It needs freedom. More precisely, we need freedom — to pursue our ends through production and trade unmolested by know-nothing politicians in Washington and the 50 state capitals.

The rest of this week's op-ed, "Government Can't Stimulate the Economy," is at The Future of Freedom website.

Inflation as Income Distribution

The Federal Reserve has been pumping hundreds of billions of newly created dollars into “the economy.” Much of that money has been sent to Wall Street to bailout large, struggling firms. But that’s just the beginning. President-elect Obama says that since he needs to “stimulate the economy” we can look forward to trillion-dollar budget deficits for years to come. Even before the financial turmoil began, the deficit had approached $500 billion. (Not to worry, though–Obama says deficit spending will impose “fiscal discipline” in the future.) Of course, when the federal government spends more than it taxes, it has to get the extra money somewhere. Therein lies the treachery.

The rest of this week's TGIF, "Inflation as Income Distribution," is at the Foundation for Economic Education website.

Budget Deficits and Stimuli

It’s an article of faith that running budget deficits during the New Deal helped end the Great Depression. This myth has been demolished countless times, but it hasn’t penetrated to the pundits and pop economists who host cable news-talk shows. In fact, FDR did not run extraordinarily large budget deficits, and J.M. Keynes actually criticized FDR for this. For details see this New York Times article by Price V. Fishback of the University of Arizona and the National Bureau of Economic Research. Fishback writes, “Once we take into account the taxation during the 1930’s, we can see that the budget deficits of the 1930’s and one balanced budget were tiny relative to the size of the problem [reversing the fall in GNP since 1929]."

This point was also made by Jim Powell in FDR’s Folly: “Changes in federal budget deficits didn’t correspond with changes in gross domestic product, and in any case the federal budget deficit at its peak (1936) was only 4.4 percent of the gross domestic product, much too small for a likely cure.” (Emphasis added.)

Cross-posted at "Anything Peaceful."

It's Official. I'm Tired of Barack Obama

I tried to hold out until after inauguration day. I really did. But I can't. He promises a "fresh" approach to our economic problems -- monster "stimulus"borrowing and deficit spending is fresh? -- without ideological (read: theoretical) preconceptions. But of course that is impossible. No one looks at economic or social phenomena without theoretical preconceptions. The only question is whether one's theoretical preconceptions are sound or unsound. It's been said we're all Keynesians now, and in one respect that includes me. Keynes said, "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist."

Mr. Obama, pay attention.