Government intervention into a nation’s economy is both foolish and destructive. But that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions.
Taxes. Transfer payments. Subsidies. Tariffs. Deficit spending. Defense. Social programs. Vax mandates. Emission targets. You name it. The opportunities to intervene are vaster than the Pacific Ocean.
The United States government, like most governments in the 21st century, pursues them with relentless enthusiasm. But that’s not all. Many state and local governments also have a highly visible hand in the mix.
Over the years, layers and layers of interference by various federal, state, and local agencies have built up like grime on a kitchen window. The grease shines and smells of corruption and waste. The layers of government grime also ooze into every crack and crevice of the economy.
These days, for example, it’s impossible to carry out a simple private transaction with your barber or barista without some form of government interference. Has your barber obtained the required license and paid the obligatory fees to legally taper your neckline? Has your barista’s espresso bean grinder passed the state or county health inspection?
Is the hot cup of joe served in a paper cup of appropriate recycled material composition? Did the hot beverage exceed the legally accepted temperature standard? Did state and local governments receive their tax exaction upon payment?
When it comes to more complicated matters, where greater opportunities for grift are available, government interference has pushed costs to an extreme. Did you know that it costs over 5 times more to have cardiac bypass surgery in the United States than in Mexico? Is the procedure really 5 times better in Los Estados Unidos?
Bucks without Bang
Certainly, we’re not telling you something you don’t already know. Governments have been regulating and impressing their fingerprints all over commerce since civilization first granted its leaders the authority.
People are so accustomed to it that they accept government intervention as necessary to better living. There’s a wide belief that without all the erected guard rails in place the entire economy would suddenly crash into a ditch and explode.
When it comes to price fixing, wage controls, and dictating resource production, things get exceptionally messy. This is because prices, wages, and resources have their own independent relationships beyond what can be legislated.
When the price of a certain good or commodity is artificially fixed below its free market cost, scarcity and shortages follow. In other words, when the price of a loaf of bread is decreed below the cost of the wheat that goes into it, bakers go fishing.
There’s also intervention through fiscal stimulus. In fact, fiscal stimulus via infrastructure and defense spending is something both Democrats and Republicans can agree on. It’s only how the money is spent that is questioned, not that it should be spent in the first place.
Democrats want green subsidies and commuter rail. Republicans want interstate oil and gas pipelines and highways. They both want more weapons.
In the 2023 fiscal year, the U.S. government spent $821 billion on national defense. This, without question, factored into the $1.7 trillion deficit. Did Washington get much bang for its buck?
In terms of a productivity bang, the promises of fiscal spending are a giant dud. Deficit based fiscal spending succeeds in accelerating malinvestment. This is ultimately a program of capital destruction. Money poured down the rathole.
Blundering Along
Perhaps our focus is too narrow. Maybe some economic interventions are better than others. As opposed to direct transfer payments, like stimmy checks, doesn’t infrastructure and defense spending at least produce something of some value?
Having tanks and bridges to show for the spending makes it worthwhile, doesn’t it?
In many instances, the only things fiscal spending produces are big fat boondoggles. The late economist and author Murray N. Rothbard explains:
“Deprived of a free price system and profit and-loss criteria, the government can only blunder along, blindly “investing” without being able to invest properly in the right fields, the right products, or the right places. A beautiful subway will be built, but no wheels will be available for the trains; a giant dam, but no copper for transmission lines, etc. These sudden surpluses and shortages, so characteristic of government planning, are the result of massive malinvestment by the government.”
Even a blind squirrel finds an acorn now and again. But by and large, without the clear guidance that only free market prices can provide, capital is deployed using guesswork and ego. The best central planners are rewarded with train stations or airports in their name.
Any perceived economic growth from government directed fiscal stimulus flames out like a cardboard matchstick. More and more debt and deficit-based spending is needed to keep the illusion of prosperity alive.
Save the political class and the connected elites, the average man or woman sees little benefit. Any jobs that are created are a distraction from more useful pursuits. What growth the deficit spending provokes, the corresponding inflation cancels out. The debt, on the other hand, remains.
The Hollow Returns of Government Intervention
At best, spending more than one makes, like smoking or swearing, is a bad habit. But when governments spend more than they tax with no intention to pay it back they’re stealing from the future.
What’s more, running up untenable levels of government debt with the implied intent of inflating it away at the expense of the citizenry is downright evil. Not only does it rob people of their money. It robs them of the time they spent to earn it. By design, it robs people of their life.
According to the U.S. government’s own inflation calculator, the dollar has lost 88 percent of its value since Neil Armstrong first stepped foot on the moon. In other words, it takes $1 today to buy what you could get with $0.12 in 1969. No doubt, incomes have failed to keep pace with inflation. And this has many unpleasant consequences.
Through policies of mass money debasement, not only has the government successfully debased the dollar. It has also successfully debased the middle class. You can witness its disappearance and disfigured replacement in the crumbling concrete and broken glass of cities and towns across the nation.
The soaring graffiti index is one important measurement of a declining middle class. The vast expanse of urban blight is another. Burgeoning suicide rates. A brutal epidemic of licit and illicit drug overdoses.
Of course, these are just several data points – among many – signifying the great middle-class debasement into an uglier, more barbaric, world. These also demonstrate the hollow returns of decades upon decades of extreme intervention, with a $33.9 trillion national debt to boot.
Government issued economic intervention – including fiscal stimulus – isn’t the solution. It’s the problem. And, alas, there’s much, much more of it on the way…courtesy of your representatives in Washington.
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Sincerely,
MN Gordon
for Economic Prism
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