More Silly Economic Thinking in the ‘Burgh

According to the Post- Gazette followers of Paul Krugman’s school of incoherent economics, the cause of our country’s slow economic growth is inadequate government spending and the unwillingness to levy higher taxes. Their silliness is encapsulated in the assertion that cutting spending will cost some Federal government workers their jobs, thereby worsening the nation’s jobs picture. Apparently, the geniuses who came up with that gem have never noticed that the bigger the Federal civilian payroll the weaker the nation’s private sector ability to create activity and new jobs.

Here is the sad truth. The U.S. has been under the whip hand of massive deficit spending for three years as well as the most "stimulative" monetary policy imaginable. And still the economy languishes with subpar growth and ongoing large layoff announcements. Granted, the housing collapse and the attendant financial crisis of 2008 meant recovery would take longer and be more difficult than a typical recession.

However, the President and the Democrat controlled House and Senate opted to begin piling huge new regulations on the economy through constitutionally questionable Obamacare, the EPA and the NLRB that, taken together, have acted as a massive anchor on the economy. The administration’s fealty to organized labor was demonstrated through the terms of the auto company bailouts, support for Card Check, refusal to denounce the goonish tactics of labor unions in Madison Wisconsin, and more recently the insanely destructive NLRB ruling on the Boeing Company’s plans to open a manufacturing facility in South Carolina. Regardless of how the courts eventually rule, this NLRB-and by definition Obama supported-action has cast a pall over the nation’s free enterprise system. Nothing can be more chilling to business investment than the prospect of government agencies telling companies they cannot locate legally in a state of their choosing.

The unwillingness of proponents of ever more spending and taxes to realize the damage already being done by that approach and their inability to link the heavy handedness of government regulators and burdensome regulations to the increasing caution of business people to invest or hire new workers or retain existing workers speaks to an ideological blindness of monumental proportions. Sadly, decades of programs that have made a large fraction of Americans dependent on government or the beneficiaries of government regulations, along with the fact that 50 percent of citizens pay no income tax, have created a huge voting bloc who are completely vested in keeping government growing in size and scope.

As noted in a blog last week, handout and entitlement programs can be sustained only by having a growing private sector economy capable of producing adequate tax revenues at low tax rates that do not threaten after tax rates of return on investment. Failure to recognize the need to strengthen and encourage the free enterprise system through a better set of tax and regulatory policies will inevitably be the nation’s undoing as a republic of free people.