You watch this financial situation unfold and about all the Republican leadership does is (1) meekly fight to spend 75% as much and (2) call for tax cuts. Republicans who believe in tax cut salvation need to get it through their head: every dollar the government spends has to be paid for somehow. If you don’t cut spending, then anything you gain in tax cuts is simply going to be inflated away. Both taxes and inflation lower your standard of living and you are still all the poorer for it (in fact, economists argue persuasively that inflation is MORE insidious than taxes).
Let’s take an example. Say dad gives his son a credit card. The son spends $5,000 a month. To the dad’s complaint about this spending, the son retorts: “I’m going to keep spending that $5,000, dad (in fact I will be increasing it as we go), but don’t worry, I called the credit card company and they agreed to halve your monthly minimum payment.” Now, is dad any richer thanks to the son’s action? He’s still going to have to pay the tab. The measure of a politician on economic matters isn’t their support for tax cuts, it’s how much they want to limit spending.
Liberals and “moderates” have long told us (disingenuously, given their complicity) that we can’t “afford” to cut taxes. This may be why we so often hear Republicans reply with the supply-side canard that says when we cut taxes, more revenues come in to the government, and thus we should focus on tax policy rather than spending policy. However, while tax cuts may spur greater revenues in the short-term, all that does is encourage a spendthrift government to spend more. And again, every dollar the government spends must be paid for. Revenue isn’t the problem; spending is. Conservatives need to ditch supply-side nonsense and cross the Danube.
The government has no pot of gold, as Peter Schiff is fond of saying. It produces no wealth. It simply redistributes and destroys it. What we need are massive spending cuts that allow us to make massive tax cuts. We need to phase out programs that can never be paid for. Above all else, we need to abolish the central bank and get rid of the pestilence of fiat currency which is the greatest enabler of Big Government.
Not gonna happen, you say? You’re probably right. But until this country resolves to live within its means, we will be be prey to these horrid downturns and tax cuts will be meaningless.
The government is currently doing its best to destroy the dollar. Remember all the survivalist talk during the Y2K nonsense? I think we’re closer than we’ve been since the Civil War in seeing a massive disruption in this country. I’m not saying that you will be buying stuff in a few years with .22 rounds and cigarettes, but it would no longer surprise me if we hit that point. I also foresee the government taking drastic steps to deal with unpayable entitlement liabilities: nationalizing (ie. stealing) 401Ks and IRAs, repudiating debts to foreign countries, sudden currency devaluations, etc. They could do the wise thing instead, but when do they ever do that?
I believe that this country will be — financially speaking — significantly poorer in a few years than it is now. Obama will be the caretaker for the depression. And, like the abysmal FDR, its nurturer.