Subject: Colmes needs basic lesson in economics
Date: Tue, 4 Sep 2012 10:40:19 -0400
Re: How Democrats Made America Exceptional, by Alan Colmes
In his defense of the interventionist welfare state, Alan Colmes violated some very basic facts of economic reality, best articulated by Henry Hazlitt in his 1948 classic Economics in One Lesson. There are two parts to the "one lesson". In the first part Mr. Hazlitt reminds us that all economics is a trade off and that one must look not just at who benefits but also at the effect of an economic policy or intervention on the rest of society. It is not enough to cite, as does Mr. Colmes, a litany of the beneficiaries of government programs. One must look at the costs, also. The second part of the lesson is that one must look at the long term effects. No government program can be classified as an investment, for example, because an investment generates a return that pays for itself and needs no further cash injections from investors. Food stamps and unemployment benefits are not investments, because these programs need a constant flow of new tax dollars in order to survive. They are transfer payments to support consumer spending, pure and simple. What the US economy needs now, as it did in the 1930s, is not the so-called stimulus of spending, but capital accumulation through increased savings. What is spent cannot be invested. Government must cut its spending just as ordinary households must in order to accumulated capital to provide the foundation for a real recovery. This means more savings not more spending.