Friday, July 2, 2010

My Letter to the NY Times re: Government Spending is NOT Stimulative!

From: Patrick Barron (
Sent: Fri 7/02/10 9:23 AM
To: NY Times (
Re: Pulling Back, Amid Echoes of the 1930s

Dear Sirs:
In his above-the-fold, front page "economic scene" commentary on June 30th Mr. David Leonhardt repeats your paper's oft stated misunderstanding of the effect of government spending and taxing. He takes to task those G-20 nations who will reduce spending and increase taxes in order to balance their nation's budgets. He treats both spending cuts and tax increases as anti-stimulus and, therefore, as threatening to a nascent recovery. Spending cuts and tax increases are very different things. Government spending MUST deprive the private sector of resources, for, to paraphrase Frederick Bastiat from over a century and a half ago, the government can spend only what it has already taken from the people. Therefore, REDUCING government spending is STIMULATIVE to the private, real economy. Next, prior to the age of fiat paper money, it was clear to the people that government can pay for its spending from only two sources--by taxing the people or borrowing from them. Taxing is the most politically risky, and borrowing drives up interest rates. Thusly, both methods were abhorrent. However, in this age of fiat paper money, governments now PRINT the money that they spend, just as would any counterfeiter and with the same result as any counterfeiter. The taxation on the people is conducted in a stealthy manner, but the people are robbed nevertheless. The most misunderstood and, therefore, the most damaging economic fallacy that underlies governments' so-called stimulative efforts today is that government spending PROVIDES the people with resources rather than TAKING resources from them. The source of this misunderstanding is Keynesian economic theory. To learn why this is fallacious I recommend chapter five of Hans Hermann Hoppe's book The Economics and Ethics of Private Property. (Click on the link for a free PDF download.) For the Cliff's Notes version read my brief essay on titled "C + I + G = Baloney".

Patrick Barron

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