The Predictability of Economic Statism

Thomas Sowell once said “the first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

Using deductive logic, the first sign of this recession was a slumping housing market followed by the collapse of the government sponsored enterprises, Fannie Mae and Freddie Mac. The eye of the storm is the collapse of the American housing market which has had great reverberations. Millions of Americans made the irresponsible choice to buy homes they could not afford while President Clinton and President Bush drooled over "affordable housing" and record home ownership. All while the democrats in Congress promoted and protected Fannie Mae and Freddie Mac from any reform or criticism. If the housing market were tied to the free market then the housing crisis would have been adverted.

We say history should be studied in part to learn from it, ultimately to not repeat the mistakes of the past. Here we have a chance to see whether we will truly learn from the past. Everything the politicians of today are interested in has been tried before including during the Great Depression when the situation was far more severe. President Hoover drastically raised taxes on the rich (from 25% to 63%) along with the estate and corporate tax which took money away from the job creating private sector and deterred incentive. He also practiced protectionism which stifled competition and drove up our prices. It did not work. President Roosevelt came to office and essentially tried the same, but on steroids with endless social programs. He took tax payer money and pretended to create jobs through public works. The end result is that both Presidents big government policies failed to get us out of the Great Depression causing it to be prolonged until WWII hit over a decade later. Milton Friedman, recipient of the 1976 Nobel Memorial Prize for economic science said "the Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."

President Obama gave a speech at George Mason University on economics recently. He had the audacity to declare "only government can break the cycle that is crippling our economy." Spending tax dollars to provide jobs for tax payers is not a novel or new idea. Albert Einstein said "there is nothing that is a more certain sign of insanity than to do the same thing over and over and expect the results to be different." Obama said "we have already tried the wait-and-see approach to our problems, and it is the same approach that helped lead us to this day of reckoning." The notion that we have not tried to use multiple federal resources to fix our current situation is an insult to our intelligence. Dr. Walter Williams is a distinguished author, columnist and professor of economics at George Mason University. In his recent article "Congress' Financial Mess," he cited that regulations under the Federal Register (Cato Policy Report November-December 2008) rose to a record number of 75,526 pages during the Bush years.

If our government is serious about serving the best interest of the people then they should drastically cut domestic spending, balance the budget within 4 years, cut capitol gains taxes (or at least not raise them...), abolish the IRS while implementing a low, flat income tax and finally cut the corporate income tax. Lower taxes encourage positive risk taking along with increased incentive to work and save. We have the second highest corporate income tax in the world. As much as people like to participate in class envy against corporations and the wealthy, they employ millions. Ireland has cut their corporate tax rate now working wonders even for a country as small as theirs.

William F. Buckley said the role of conservatism is to "stand athwart history yelling STOP!" We have a chance to stand against the predictable decline in years to come. America has become the richest country on earth, not because our government produces such enlightenment, but because the people of this country know how to make it work. The only way we can recover is for our politicians to let us and the markets we produce take control of the situation for a change. That is "change we can believe in." That is something new.