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McDaniel – Intervention in the...

McDaniel – Intervention in the free market is not working as advertised

By: Magnolia Tribune - July 27, 2012

The federal government, prior to 2008, had never increased the public debt by as much as $1 trillion in a single year. Since then, while experimenting with the witchcraft known as Keynesian economics, it has increased the debt by at least $1 trillion each and every fiscal year.

Although Congress has spent trillions, federal policies have resulted in faltering consumer confidence, high unemployment and disappointing job creation. Evidently, intervention in the free market is not working as advertised.

There are two primary and interrelated reasons the government’s economic plans have been ineffective.

First, politicians underestimated the psychological impact of excessive debt and government entanglement.

Certainty is a friend to investment and business growth, but it cannot be found amid discussions of cap and trade, taxpayer-funded bailouts, nationalized healthcare, tax increases, uncontrolled spending and record debt. Congressional activity – by words and deeds – has heightened uncertainty about the economic future.

The President’s economic theories, like those of Congress, are premised on the supposition that government spending will provide additional market demand, which would thereby lead to elevated prices and more private-sector hiring. It was the administration’s prediction that spending and public-works projects would help “prime the pump” until “full employment” was attained.

But it has not worked; it will not work – the administration’s desires cannot be realized because government fabricated uncertainty has clogged the so-called pump. Instability generated by government action has rendered private long-term planning speculative, so consumers feel compelled to reserve their cash and reduce investments necessary for economic growth.

Second, micromanaging a large and diverse economy from a central location (Washington, D.C.) is clumsy, inefficient and dangerous.

Centralization is, of course, less efficient than capitalism in terms of development and resource allocation. Because vast national economies like ours are complex, government agencies cannot easily correct perceived shortcomings. To control prices and the flow of money from the private sector to the public sector is virtually impossible without limitations on freedom.

The historic success of Western Civilization, generally speaking, was based on the transfer of power from the state to the individual, but with government usurping authority in an attempt to manage the impossibly complex process of economic planning, development and control, its involvement – by necessity – will negatively affect individual liberty.

Although bureaucrats – best described as well-meaning idealists – promise utopia, they often fall short of their intended objectives. The more they improvise to avoid the eventual failure of their plans, the greater the disruptions are to prosperity. And as their plans fail with predictability, one intervention inevitably leads to another, creating economic distortions which require further interventions to correct them.

The result is an unwelcome cycle of government action that robs citizens of their wealth and basic freedoms, undermining economic recoveries by altering human behavior on a large scale. Investors respond, in turn, by removing capital from the private sector. Instead of a revival of private spending and investment, increased public intervention becomes the norm as central planners seek to stimulate a sinking economy by spending more and more of the taxpayers’ money, ignoring the incontrovertible fact that not all spending is equally productive.

For an economic recovery to be successful, policies must aim to stimulate private investment, not frighten it into submission.

It must first be explained how an economy can work correctly before policymakers can enact meaningful reform designed to spur a recovery.

A good place to start is the outright rejection of Keynesian economic theory.

***** State Senator Chris McDaniel

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Magnolia Tribune

This article was produced by Y'all Politics staff.