The View From 1776
Friday, January 25, 2008
Lunch Is Still Not Free
Liberals believe that, so long as they take from “the rich” and distribute to the voting masses, there is no cost to society.
George Melloan’s Hillary and Say’s Law in the January 23, 2008, edition of the Wall Street Journal makes us wonder about liberal-progressive-socialist politicians. Are they stupid? Are they ignorant? Or are they just cynical propagandists?
“But this stimulus shouldn’t be paid for,” Hillary Clinton said to Tim Russert in a recent interview, when he reminded her that she’d omitted a price tag somewhere. Shouldn’t be?
Say hello to that old ghost from the past we thought banished by Ronald Reagan in the 1980s. It’s called “Keynesian Economics.”
...Some Democrats still think that government stimulation of demand is an antidote to a slowing economy. Yet economics has certain iron laws that the government violates at its peril. One of them has been called Say’s Law, because it was first enunciated by the late 18th-century Frenchman Jean-Baptiste Say. He said “products are paid for with products.” Or to rephrase the point, “a society can’t consume if it doesn’t produce.” Hillary’s assertion that her “stimulus” package shouldn’t be paid for denies reality. Somebody has to pay for it. One man’s consumption must be paid for by his own or someone else’s production…
Keynesianism crashed in the 1970s, when the U.S. suffered slow economic growth and high inflation: “stagflation.” There was nothing in Keynesianism to explain this phenomenon. But there was an easy explanation available in classical economics, the simple principles that Ronald Reagan—who learned at an early age that he had to work to eat—understood very well. The so-called “supply-side” movement was nothing less or more than a return to these simple principles.
The explanation was this: If a government hampers production through heavy taxes and economic regulation—or by inflating the currency—production will slow down and there will be less to consume. To revive production, government must reduce the tax and regulatory burden and kill inflation—which Reagan did to such good effect. Tossing dollars from planes doesn’t do it; neither did Hoover’s attempts to help farmers through protectionism, which proved disastrous, nor FDR’s unconstitutional scheme to help producers with price-fixing cartels.