Dick Armey on Keynes and Hayek

This is a great piece in The Wall Street Journal written by Dick Armey. He shows great understanding of the field of Economics and how to apply it to the real world. Below I will put some of my favorite excerpts and you should read the rest:

“A father of public choice economics, Nobel laureate James Buchanan, argues that the great flaw in Keynesianism is that it ignores the obvious, self-interested incentives of government actors implementing fiscal policy and creates intellectual cover for what would otherwise be viewed as self-serving and irresponsible behavior by politicians. It is also very difficult to turn off the spigot in better economic times, and Keynes blithely ignored the long-term effects of financing an expanded deficit.

It’s clear why Keynes’s popularity endures in Congress. Intellectual cover for a spending spree will always be appreciated there. But it’s harder to see any justification for the perverse form of fiscal child abuse that heaps massive debts on future generations.

….

What everyone should agree on is that the money has to come from somewhere, either through higher taxes, borrowing or printing.

If the government borrows the money for the stimulus, then it will either have to print money later or raise taxes to pay it back. If the government raises taxes to pay for the stimulus, it will, in effect, be robbing Peter to pay Paul. If the government prints the money, it will increase inflation, which will decrease the value of the dollar. That would, in effect, rob Paul to pay Paul back with devalued currency.”

I couldn’t have said it any better. These are the exact things I have been saying all along. Of course, one person saying them a few times isn’t enough. We need people to continue and carry this message. A fiscal stimulus will always be popular for politicians so what we need is to educate the populous of all of this.

The rest is here.

~PCCapitalist

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