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Conventional wisdom on both the right and the left says that because the “stimulus” package is being financed by deficit spending - that is, borrowing now, taxing later - the government is forcing future generations to pay for our problems. As the story goes, we are shifting the costs of this massive spending scheme to our children. While this sounds accurate, it is in fact impossible to shift costs this way. Neither the government nor anyone else can spend future dollars. In reality all current spending must come from current revenues and can use only existing resources. Every dollar the government spends, even if borrowed, has to come out of some existing person’s pocket and therefore preempts the use of that dollar somewhere else in the economy - not in the future, but here and now.

The government can obtain its borrowed money by selling Treasury bonds to either American citizens or foreigners. If it borrows from domestic sources, it is getting money that Americans would have either invested somewhere in the economy or spent on goods and services. Government borrowing simply diverts the cash from other uses, just as if its spending were financed by taxation. Economists call this the “crowding out effect.” A typical response is that most of the government borrowing will be from foreigners and that the Obama deficit won’t crowd out economic activity in the United States. Thus we are said to be mortgaging our children’s future to people in other countries. The first thing to notice is that we can’t know who the bondholders will be in the future when the loans come due. Treasuries are sold and resold many times over. This is also true of debt originally issued to Americans.

The real problem has nothing to do with who holds the note at the time of repayment. A good economist asks what else these foreigners would be doing with their dollars. Because they are lending dollars, as opposed to euros or yen, this money would ultimately be either spent on American goods, thereby increasing exports, or invested in the U.S. economy. We reach the same conclusion regardless of who lends the government the money. The real costs of government spending, no matter how it is financed, are experienced here and now. Also, regardless of where the money comes from - taxation, borrowing, or printing press - government spending always preempts other spending in the economy. Those who get the borrowed money have purchasing power transferred to them that will increase the demand for these resources. That will increase the cost of resources to others. Government spending thus always competes with private-sector spending for scarce resources and preempts growth.

This is not to argue that deficit spending is the same as tax-financed spending. It is not. Deficit spending creates the occasion for coercive wealth transfers from future taxpayers to future government bondholders. When the bills come due, most of our children and grandchildren will have part of their incomes coercively transferred through higher taxes to those who hold the Treasury notes. Government debt makes our children less free. Furthermore, deficit spending obfuscates the true cost of government, not only in lost liberty but also in lost productivity and wealth. Deficit spending is dishonest because it leads people to believe they are getting something for nothing while in reality their wealth is diminished just as if the spending were covered by taxation. But that cost is not seen in the tax bill. This is why politicians find deficit spending so appealing. It is a tool for pulling the wool over our eyes while rewarding special-interests and expanding the state’s control.

Ultimately, the real choice is not between deficit-financed and tax-financed spending. The moral question is whether we should have more spending and bigger government with less liberty or less spending with a smaller government and more liberty. The hand-wringing on the left and right about passing the cost of “stimulating” our economy onto future generations is misplaced. No matter how it’s financed, Obama’s new spending has the potential to stimulate only one thing: the size, scope, and power of government.

Dit artikel van Roy Cordato verscheen ook in "The Freeman", bij de "John Locke Foundation" en op de metablog "In Flanders Fields".

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3 Reacties:

At 10:15 Geert said...

Puur kapitalisme is zeker geen goed systeem, kijk naar de VS. Het blijft nog altijd een systeem waar er altijd op de kap van iemand wordt gezeten. Een gecontroleerde economie door de staat lijkt mij nog altijd de beste optie, en die moet nog veel minder geprivatiseerd zijn dan nu. Geen neo-Keynesiaans beleid dus, maar pure Keynes. Je mag mij gerust een communist noemen, dat ben ik ook, maar aan dit soort intellectueel gewauwel heb ik lak.

At 14:13 DrNomad said...

Vincent, volgens mij is het "hypotheek op onze kinderen" argument achterhaald. Dat argument stelt, "wij" lenen, "onze kinderen" betalen. Mijns inziens zijn de schulden op dit moment zo hoog, dat we kunnen veronderstellen dat die schulden nooit worden terugbetaald.

Ik ben de artikelen helaas nooit tegengekomen. Bestaan er artikelen die het niet terugbetalen van schulden veronderstelt en het scenario beschrijft van wat er dan gebeurt?

At 14:51 Markus said...

@ Dr. Noman

Na wat Googlen is het deze discussiethread die mij het meeste informatie verschafte over uw vraag:


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