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Friday, July 2, 2010

If you want to claim any knowledge of the current fiscal policy debate, you must read this first. Mankiw on Fiscal Policy.


Jeffrey said...

"Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property." ~ Milton Friedman
Not only is government spending less efficient because it is someone else spending everyone else's money, but a very large part of government spending is now income redistribution and that is in direct conflict with upholding property rights and therefore it will never "stimulate" anything.

Maybe my information is somehow incorrect, but it seems perfectly clear to me, based on what history I know, that increased government spending has rarely, if ever, been a good thing for our economy. In October of 1929 the market crashed, and in 2 months unemployment hit a peak of ~9%, by June 1930 unemployment had recovered to around 6.3% and that is when the government started "helping" by passing the Smoot-Hawley Tariff Act. The tariffs damaged supply chains and increased costs as other countries retaliated. 5 months later unemployment hit double digits. The New Deal and massive redistribution kept us there and introduced us to stagflation. When you take money away from those who create the value that money is suppose to represent then it becomes worthless. The value of intelligent business models, products, and services is real, the value of money is contingent on the direction it flows, its just a score keeper. If you break the rules and give points to the loosing team, it doesn't change the fact that they actually lost the game, the points simply lose value.

Tax incentives for new hires or any other ridiculous program always have unintended outcomes. Did you get your free golfcart?

As far as healthcare goes, they just imposed multi billion $ taxes on insurance companies, pharmaceutical companies, and medical equipment manufacturers. This will only raise the cost of healthcare for everyone and curb demand for some of the more specialized equipment, medicines, and insurance coverage thus reducing the benefits that any of us can gain access to at any cost.

While I appreciate Dr. Mankiw's diplomacy in discussing these issues, I believe they are much more cut and dry than anyone has the balls to say. Please forgive my crassness, but what we need is someone with big brass balls to educate people! It worked well for Friedman, Rand, and Reagan. :)

Randall Parker said...

Jeffrey: I did not get my golf cart, alas. And from now on say "stones" or "juevos" but please don't say ba**s. This is a family-oriented web site. What do I tell our itsy-bitsy econ bloggers when they go asking mommy and daddy about such things?