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Friday, December 09, 2005

Study Economics Or Play The Fool

For us budding economists and/or educated citizens, Alan Reynolds provides his suggested readings in economics. I have read 3 of the 20 or so books on his list (Sowell's "Basic Economics", Hazlitt's Economics In One Lesson" and Friedman's "Free To Choose"). No mathematics required. Just an open-mind.

You can begin to understand the waste of resources and human potential from government programs, tax policies, labor policies and entitlements.

And by beginning the study of economics you avoid making comments like this:

"The federal government will be bankrupt in less than ten years- be interesting to see where we go from there."

The writer of this comment cannot be correct because the federal government can always print more money.

However, there is a truth of sorts in the message in that the government's successive deficits can stunt the long-term growth for the economy. I would like to see Congress make massive cuts in their spending programs- energy, transportation, entitlements, education, Katrina and many others.

Economics is trade-offs. For now, I'll belatedly accept the current level of growth that reduces the effect of the deficit rather than the low growth (with smaller deficits) of the socialist powerhouses in Europe.

Responds Mike Taylor, Skip March and Joe Kenner:

Mike:

... that deficits have two causes: 1. not enough tax revenues and 2. too much spending.

"Can we agree to stop spending on pork barrel projects, prescription drug giveaways, unnecessary projects/programs...?"


Usually, liberals do not even acknowledge that spending contributes to the deficit. So you may just have to shake your head and walk away.

I remember very clearly something that George Stigler (Nobel in Economics - 1981) said in class about twenty years ago:

"Politicians will spend whatever they feel they can get away with. Tax revenues to the treasury have almost no correlation with federal spending. Only public opinion will hold down political spending..."

And I believe that applies to Republicans as well these days, much to my disappointment.

Skip:

Do I recall one of the tank members providing stats that shows there is no relationship between government revenues and the ratio of deficit of debt to GDP? If so this means that the solution is with spending.... And yes, mike is right that both Dems and Republicans are guilty of irresponsibility on this.

Joe:

The politicians in both parties spend money like drunken sailors regardless of what the revenues are. We run deficits and they spend and we run surpluses and they spend.

I find it funny in 2000 the liberals and John McCain said that we can't cut taxes because the surplus did not exist since was based on a 10 year projections (the economy was pretty good at the time). Now they say that George Bush spent the surplus.

2 Comments:

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