Economist David Stockman has written an interesting new book. He blames the current national debt and our other economic/fiscal problems, including the $19 trillion national debt, on Federal Reserve policies going back to the 1980s, starting with Fed Chairman Alan Greenspan.
Stockman was President Ronald Reagan’s budget director in the early 1980s. Back then, he got into trouble when he criticized the Reagan policy of massively cutting taxes (a good thing for the economy) without making comparable cuts in spending. Reagan and Republicans in Congress, just like both parties today, fiddle with the numbers so as to make it look like Medicare and Social Security are sustainable when they really are not. In his book, Stockman explains in some detail why these programs, and quite frankly our whole economy, are headed for a calamity never before seen in human history. It’s not your average doomsday scenario, because it’s backed up with considerable facts and logic. While highly critical of Donald Trump for his ignorance of basic economics, Stockman makes the case that Trump, for all his errors and flaws, veers closer to the truth than the established order of Republicans and Democrats — Hillary Clinton, Barack Obama, Paul Ryan, Fed Chariman Janet Yellin, the whole rotten bunch — who will only run our economy further into the ground.
You can read Stockman’s book — suitable for laypersons as well as economists — and judge his analysis for yourself. His book highlights the mistaken thinking not just in economists’ minds, but in nearly everyone’s minds, when it comes to what’s reasonable and realistic to expect from a government.
Most people falsely assume that government manages or runs the whole economy. In reality, that’s not true. “The economy,” in actual practice, refers to the millions of actions on the part of billions of individuals every single day, not just in the United States, but world-wide. Most of what happens, especially in production, happens in spite of government, not because of it. Certain basic laws of economics, such as the law of supply and demand, cannot be repealed. Even under economically totalitarian regimes, such as Communist Cuba, such laws of nature are still in effect, although in an underground or black market context. Government does not produce a nickel. It only manipulates or redistributes what’s already there. Even if you think government should control, manage or direct the economy, it’s a delusion to assume that it really does, at least in any productive or rational way.
The roots of our economic problems are false beliefs most of us hold that authority figures can make everything right for us. When you read a book like David Stockman’s, you come to understand not only how complicated it all is, but how fragile our whole economy really is. We’re vulnerable not because the world is inherently a horrible and hostile place; but rather because we place our destiny in the hands of people with questionable, political or (in cases like Hillary Clinton) downright corrupt and overtly rotten motives.
The idea that the Federal Reserve and a handful of politically connected bankers can and will run an economy for us makes about as much sense as the false idea that a small group of people could run any aspect of your life for you. Would you hire a team of people to spend your money for you? To choose your spouse for you? To decide how many children you should have, where you should take your vacations, or what kind of career you should pursue? Would the mere fact of this small elite group having PhDs from Harvard or Princeton sway you from the reality that you’re still much better off making these decisions for yourself?
If it couldn’t happen with your own life, how are a small group of people supposed to do so for millions or billions of people? And didn’t we already try this with Communism?
Economically and psychologically, the worst mistakes in recent decades have been based on the idea that you can have something for nothing. Government can create wealth and programs out of nothing, we assume, without having any negative impact on anything else. That’s why politicians cut taxes in the 1980s without attempting to cut spending. Cutting spending means alienating voters. Voters will punish politicians if they cut spending. They will also punish politicians if they raise taxes, although not if they raise taxes on others — only if politicians raise taxes on themselves. Democrats have figured out the formula here, to only raise taxes on the top earners and then use the Federal Reserve to literally make up the rest. These facts get to the heart of why our government is bankrupt beyond the point of redemption, why our economy only grows about 1-2 percent a year, and why additional government bubbles, like the real estate bubble created by government in the 1990s and early 2000s, will inevitably pop in areas such as health care and education, as we’re already seeing.
We can blame politicians until we’re blue in the face, but the end of the line will always be ourselves. Yes, politicians are doing irrational, evasive and dishonest things. Yes, most of the people in office are corrupt. But why do we keep them there? Because we want contradictory things, and it takes corrupt, contradictory people to do contradictory things! Spending into oblivion without limit, taxing only a tiny portion of the population for all the spending while relying on unsustainable debt for the rest, are not rational, honest or decent policies. Historians, looking back on America of the early twenty-first century, will not have kind things to say. They will not call us the “greatest generation.” Nor would most of us, if we’re honest. So long as we demand that government keep raising taxes on others, and keep increasing spending on anything that sounds good (free health care, free cell phones, free disability, free college tuition, free business subsidies), then we (the majority who support the legalized plunder) are the ones to blame.
Donald Trump represents the anger of millions of Americans. Even if he does not win, he probably stands for about 45 to 50 percent of the population, at least when it comes to anger. This is a lot of anger. Some of the anger is misdirected and irrational, and some of it is entirely valid. Regardless, it’s a hell of a lot of anger. President Hillary Clinton (get ready, it could happen) will dismiss them all as “deplorables,” wishing them away with a sneer, but the anger will not go away merely because of her commands. It’s not going to get better, regardless of who wins the election. Hillary Clinton will never qualify as a healer. After four or eight years of her, assuming America even continues, there will be more anger and division than ever. Quite honestly, it’s hard to imagine the American republic surviving eight years of Hillary Clinton, although, as I’m saying, the problems run deeper than her unimportant moment in the sun.
Americans themselves have to face the valid and invalid aspects of their anger. Unless you’re part of the tiny minority who wants no government intervention in the economy at all, and no wealth redistribution at all, then you are, in fact, part of the problem. Keep that in mind as the economy worsens, because even if only 10 percent of David Stockman’s book is right, we’re headed for economic storms that make the 2007-09 upheaval seem like nothing.
The situation is not hopeless. But it’s worse than anyone seems willing to recognize. The only hope would be for millions — a majority — to change their minds, and put politicians in charge who will move us decisively in the direction of individual rights, free enterprise and freedom of association. In short, another American Revolution, although a bloodless one, utilizing our original Constitution and Bill of Rights as a guide, with the added requirement that government stay out of the economy.
Nothing less will save us.
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