Every generation in America…until this one…has endeavored to deliver a better quality of life, and an improved nation to our children. For the first time in our country’s history, we have failed in this challenge. The economic meltdown is unlike anything in most of our memories. It is the consequence of government and individuals living off of borrowed money to artificially stimulate the economy and our sense of economic well being. We reward and subsidize businesses that don’t produce anything, and that do nothing but build relationships with politicians. We develop government policies that encourage formation and immigration of dysfunctional families that are consumers of government resources and tax dollars. (Thomas Paine said, “there are two types of people: those who pay taxes and those who live on tax dollars.”)
Economist John Maynard Keynes said that we must “prime the pump” (deficit spend) during recessions to pull us out of those recessions, and we must repay that debt during the good times. He said in his later days that politicians heeded his admonition to deficit spend during recessions, but they forgot to pay back that debt during the good times. He said he hoped he wouldn’t be blamed for the natural outgrowth of those continuous deficits. It is just too hard for politicians not to spend…when it supplies them with campaign contributions and ardent followers (those who benefit from that spending).
So…the politicians who brought us this meltdown, and who love to create more government spending programs, and now being asked…even by fiscal conservatives, to ramp up that spending. They are in heaven. Taxpayers are in some sort of Hell.
President Obama is trying his best to find a way to stop this meltdown. There will be no easy answer. Our nation is no different than any other corporation or family that spent too much, is in over its head in debt, and doesn’t produce enough to save its way back to economic stability. Our nation has lived beyond its means, and now must pay the price of any bankrupt entity. There will be no easy answer, and the present stimulus bill won’t provide the long term answers that are needed. Deficit spending to get us out of this recession is required…as Keynes says…but we should be careful how we spend, because each dollar we borrow must be repaid by our children.
The best spending is in public works/jobs creation. At least this would allow us to invest in bridges and roads and dams and have assets to show for our borrowing. Unfortunately our nation lacked the foresightedness to hire engineers two years ago when we began to move into recession…to develop “shovel ready” projects. So we will take bags of money and drop them out of helicopters and hope it will provide a quick fix. We will fund more programs that will make more businesses and individuals dependent upon government…and we will exacerbate the problem.
The cause of this problem is not free enterprise or capitalism…it is excessive government and individual spending, and a lack of productivity…but free enterprise and capitalism will be blamed, and there will be calls for socialism and government intervention to “save us.”
Very very few voters have any understanding of accounting or economics, and so we elect politicians who promise free lunches for all …and who also lack understanding. If we want to salvage this great nation, economic and accounting education is necessary in our high schools to bring about more informed voters. Can you imagine how angry our young people would be if they understood the extent of the next meltdown coming in a decade as Social Security and Medicare go broke? How many incumbents would be re-elected?
Dave Cuddy has a degree in economics, is a former president of the First National Bank of Anchorage, and a former state legislator. This article was originally written in February of 2009, and is reprinted courtesy of the Alaska Policy Forum.