It Is Dangerous to Be Right When the Government Is Wrong - Andrew P. Napolitano [135]
A final criticism of debt is offered by the economist Henry Hazlitt in his masterpiece Economics in One Lesson. Essential to this criticism is the distinction between two possible uses of money—consumption and savings. With both uses, money is being injected into the economy. (If it is saved in a bank, it will be loaned out to businesses and other consumers. Very little money is actually saved as cash “under a mattress” nowadays.) Moreover, both will increase employment. The practical difference relates to the fact that money which is saved is, in the words of Hazlitt, “turned over to someone else to spend on means to increase production”; in other words, it is invested. For any given economy there will be some optimal combination of savings and consumption spending which maximizes total consumption in the long run (we would be poor if we never invested in new technology, or by contrast, never bought the goods which those investments developed).
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The government often contends, particularly in times of economic crisis, that it is justified in issuing debt to stimulate consumption and restore the economy to its pre-crisis state. Such was the contention during the Great Depression, and such is the contention during the current financial crisis. The government argues that savings are excessively high, and thus it is proper for the government to convert those savings into consumption spending. There are, however, a number of reasons to reject this claim. The two inescapable effects will be an increase in the price of goods and services by shifting money toward consumption, and a long-term reduction in production levels by shifting money away from investments. Moreover, although banks may be refusing to loan in the midst of a crisis, there is no reason whatsoever to believe that temporary, government-induced consumption spending will be able to restore liquidity. If such were the case, then the economy would be well on the path to recovery at the time of this book’s writing. President Obama’s explanation of the failure of spending to correct the economy? “We simply haven’t spent enough yet!” Perhaps he should have read these words spoken by Henry Morgenthau Jr., FDR’s secretary of the treasury, in 1939: “We have tried spending money. We are spending more than we have ever spent before and it does not work. . . . [We] have just as much unemployment as when we started . . . and an enormous debt to boot!”
Before we move on to the next section, I leave you with some food for thought. We are now reaching unprecedented levels of public debt. Government may soon begin issuing bonds just to keep up with its interest payments. Sound familiar? It should. It’s a Ponzi scheme, and it can land you a lifetime in prison, like Bernard Madoff, or make you a hero, like FDR.
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Conclusion
The real evil of public finance is that it enables government to commit all of its atrocities against the individual. It is its lifeblood. Chodorov writes,
When you examine any species of government intervention you find that it is made possible by revenues. A government is as strong as its income. Contrariwise, the independence of the people is in direct proportion to the amount of their wealth they can enjoy.
Although I have argued that taxation itself is inherently evil in that it is nothing more than institutionalized theft, it is of course possible that government can spend those tax revenues on good causes which really do benefit the public. However, whether or not we are to trust government with money reverts back to the more essential question of whether we can trust government at all to handle power responsibly. If there is any lesson to be gotten from this book, it is that we cannot, and money is the most essential, brutally effective kind of power we the people could ever vest in the government. If we do so, then we sow the seeds of our own slavery. Although one may argue that the public necessity requires taxation,