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Walter Williams
Walter E. Williams
30 Jul 2014
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There Is No Santa

Comment

Here is what my George Mason University colleague Professor Richard Wagner wrote, which was published by Office of the House Republican Leader: "Any so-called stimulus program is a ruse. The government can increase its spending only by reducing private spending equivalently. Whether government finances its added spending by increasing taxes, by borrowing, or by inflating the currency, the added spending will be offset by reduced private spending. Furthermore, private spending is generally more efficient than the government spending that would replace it because people act more carefully when they spend their own money than when they spend other people's money." A short translation of Wagner's comment is: There is no Santa Claus or Tooth Fairy. Let's examine the ruse.

Suppose the value of all that we will produce in 2009, our gross domestic product (GDP), totals $14 trillion. There cannot be any disagreement that if Congress spends $4 trillion, of necessity there is only $10 trillion left over for us to spend privately. In other words, if Congress is going to spend $4 trillion, it must find a way to get us to spend $4 trillion less. The most open and aboveboard method to force us to spend less privately is to tax us to the tune of $4 trillion.

You might say, "Congress doesn't have to tax us $4 trillion. They could tax us $3 trillion and run a $1 trillion budget deficit." You have that wrong. There is no way for Congress to spend $4 trillion out of our 2009 $14 trillion GDP by getting us to spend only $3 trillion less privately. It has to be $4 trillion less. Another method to force us to spend less privately is to print money and inflate the currency. Rising prices reduce our ability to spend privately since each dollar we hold will not buy as much. Another way is for Congress to borrow, thereby reducing our ability to spend privately.

By the way, all of this means that in any real economic sense the federal budget is always balanced. That is, if Congress spends $4 trillion we must privately spend $4 trillion less whether it is accomplished through taxation, inflation or borrowing.

The stimulus package being discussed is politically smart but economically stupid. It's that bedeviling, omnipresent Santa Claus and Tooth Fairy problem again. Let's say that Congress taxes you $500 to put toward creating construction jobs building our infrastructure. The beneficiaries will be quite visible, namely men employed building a road. The victims of Congress are invisible and are only revealed by asking what you would have done with the $500 if it were not taxed away from you. Whatever you would have spent it on would have contributed to someone's employment. That person is invisible. Politicians love it when the victims of their policies are invisible and the beneficiaries visible. Why? Because the beneficiaries know for whom to vote and the victims do not know who is to blame for their plight.

In stimulus package language, if Congress taxes to hand out money, one person is stimulated at the expense of another, who pays the tax, who is unstimulated. A visual representation of the stimulus package is: Imagine you see a person at work taking buckets of water from the deep end of a swimming pool and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new president proposes for the economy. A far more important measure that Congress can take toward a healthy economy is to ensure that the 2003 tax cuts don't expire in 2010 as scheduled. If not, there are 15 separate taxes scheduled to rise in 2010, costing Americans $200 billion a year in increased taxes. In the face of a recession, we don't need that.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

COPYRIGHT 2009 CREATORS SYNDICATE, INC.



Comments

4 Comments | Post Comment
Can't Bill Gates afford to Spread the Wealth ...to MicroSoft 5000 pink slips?
Even as the Gates Foundation increases giving to $3.8 billion

Gar and Lew have some suggestions
Gar Alperovitz and Lew Daly, Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back. The New Press, 220 pp..
Where does wealth come from? Back in the 19th century, the classical economists thought they knew. Land, labor, and capital, they told us, drive wealth creation. They don't, not really. We actually owe our wealth, Gar Alperovitz and Lew Daly explain in this deliciously subversive new book, to what we know.
Unjust_Deserts
And we owe what we know, the two quickly add, "not to our own efforts or genius, but to the efforts and knowledge accumulation of those who came before us."
In today's deeply unequal United States, this simple observation may well rate as our society's most "inconvenient truth." We have built our entire social order on the exact reverse of what Alperovitz, a political economist at the University of Maryland, and Daly, a fellow at the Demos think tank, have to tell us.
Brilliantly smart people who work hard, we assume, create wealth. These brilliant people, consequently, deserve a major share of the wealth they create.
But "all current economic production," Alperovitz and Daly help us see, rests — overwhelmingly — "on a long, long prior history of socially created science, technology, and other knowledge."
Excerpt from Why Have-It-Alls Don't Know It All
By Sam Pizzigati [Too Much, the weekly online newsletter -NOV 2008 review.]

Please contact Connie Perry connie@monteiroandco.com
Or Celeste Balducci celeste@monteiroandco.com

Monteiro & Company, Inc.
212-832-8183
Comment: #1
Posted by: connie
Wed Jan 28, 2009 11:37 AM
Dear Sir:
Why does your example of GDP and Gov't spending have to distort the truth of the matter. In particular, you say that when the Gov't spends this money, they are taking money out of the hands of those who "earn" it. I'm am sorry sir, but this is a total distortion of what is going on. I think the real reason you try to decieve people with the bankrupt policies of supply side economics is that people no longer think much. If they did think, they would see right through the BS that you seem to be so good at providing. I feel sorry for the students of yours as they are obviously not getting a very good education in econonics.
Maybe as an exercise you should list the national debt at the end of each presidency since Carter. I don't think you will be suprised that the tax cuts of Reagan and Bush II have been borrowed against future earnings of all of us. Also, this borrowed money has not been paid back (although Clinton had a chance when he had a surplus). I hope you realize that the yearly deficit spending of the Gov't is in iteslf a stimulus to the economy. The true beneficiaries of the tax cuts have been the wealthiest amoung us, not really the poor or middle class. How many opinion columns did you write regarding that Bush II nearly doubled the debt and your horror about that? Bush II didn't get conservative fiscal ideals until the Democats took control of the Congress. magicly, he got the religion of conservative economics and vetoed spending bills as being too large.
You do the American people a dis-service when you write the simplistic examples that you have used to convince the feeble minded that you and your econmic policy ideas have any merit. Maybe if you were more truthful regarding what is going on, we would be truely educated.
I could go on about many of the things you hold dear and show, I think, that most of what you preach is crap!
Comment: #2
Posted by: Bill
Wed Jan 28, 2009 2:06 PM
How sad! Bill's understanding of economics is not an understanding at all. It is merely a liberal paen to class envy. The engine of socialism, class envy is an essential part of the liberal mentality. Of course money that the government confiscates cannot benefit the economy. The "stimulus package" is a chimera designed to placate the people who don't pay taxes, mollify them, and maintain the lock on their votes that has been in the liberal lockbox for 40 years. Additionally, besides keeping the surfs tied to the liberal feif, it will buy new votes (live ones this time instead of the dead ones provided by ACORN). As for spending cuts, the only ones that the liberal government accepts are cuts of the military, and that money will be used as pork to buy new votes. One wonders what these self-aggrandizing criminals will do when everybody is on the plantation and the plantation can no longer feed and clothe them. I don't know what kind of an education Bill has, but I do know that the only way to get our economy out of the miasma of liberal swampwater it is in now is to CUT TAX RATES and CUT GOVERNMENT SPENDING. If Bill cannot see this, he is one of Saint Paul's " those who will not see". Oh, and by the way, Bush spent on our defense, not on a charity program to the 30 to 35 percent of Americans who pay NO FEDERAL INCOME TAX. His spending was not designed to BUY VOTES as is the spending of the congress.
Comment: #3
Posted by: Jobe
Tue Feb 3, 2009 8:06 AM
Bravo Walter E. Williams!
Comment: #4
Posted by: Mary
Thu Feb 5, 2009 8:40 PM
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