The evidence over the last 30 years is clear.
Keynesian policies have left a trail of massive debt, slowing growth and falling real wages. Moreover, a look at each of the so-called stimulus measures shows that the so-called multiplier effect of government spending is practically non-existent, with long-term adverse effects on the health of the economy. increase. Stimulus packages bloat the size of government and require more dollars from the real economy to fund its activities.
As Daniel J. Mitchell points out, there is evidence of displacement costs because increased government spending displaces private sector activity, implying higher taxes or higher inflation or both in the future. Increased government spending cannot be financed by much greater economic growth, as the current nature of spending does not precisely provide real economic benefits. Government is not investing. It funds obligatory expenditures with the resources of the production sector. Each dollar the government spends means one less dollar in the production sector of the economy, creating a negative multiplier cost.
What is the productive capacity of the economy if society decides to use a certain portion of the resources generated by the productive sector for non-economic profit-generating activities, whether social expenditure or threat mitigation? You can only do that by understanding what you are capable of. in order to maintain greater costs. If we don’t see costs as burdens, but as entitlements that only grow, we undermine, not enhance, production capacity.
The main problem in the last few decades, especially since 2008, is that government spending and monetary policy have become the first solution to the slowdown in economic activity. in a health crisis. Furthermore, the growth period continued with increased government spending and accommodative monetary policy. This creates an unsustainable public deficit that needs to be monetized or refinanced. Both mean more harm to the production sector, as increased debt not only leads to higher taxes for everyone, but also higher costs of living resulting from the destruction of the currency’s purchasing power.
Government spending does not boost private sector activity, especially when the entire budget is spent on non-investment spending. It gets even worse when citizens believe that investments in infrastructure and the real economy should be made with taxpayer money. If the investment is productive and economically viable, there is no need to involve the government. At best, governments should only participate as co-investors and not as allocators of resources for simple reasons, as the example of technology and defense shows. Public intervention is always aimed at perpetuating existing inefficiencies and maximizing the budget. Efficient resource allocation does not come from an entity that has a central interest in expanding its budget and constantly perceives inefficiencies and poor outcomes as a result of not spending enough.
The past three decades have shown slow recovery from the crisis, slowing productivity growth, slowing real wage growth and employment. This coincides with the arrival of multitrillion-dollar spending and “stimulus” plans, ballooning each time, but without delivering sustainable and productive improvements. As a result, the debt continues to grow and deficit spending is never truly eliminated.
The Keynesian answer is that government spending drives economic growth and helps the private sector recover, and that deficits and debt are just creating private sector “reserves.” Isn’t that great? Even if you believe this nonsense, what they are saying is that your savings are at the disposal of the government, all private activity is a public sector service, and vice versa. It means that there is no
Government spending consumes capital. Do not create. As such, government spending must be seen as a last resort, not a first option. As it grows, and grows uncontrollably, it simply consumes more capital through taxation and inflation. Government spending must be viewed as a service provider, and service providers must precisely limit their activities to avoid disrupting their own clients. As with any business that provides services, if the cost of services is out of reach for customers, it can go bankrupt. The inherent downside of government is that it is the agents of the production sector who go bankrupt when the cost of their services exceeds the affordability of the private sector.
Increased government spending, financed by tax increases and a weakening of the currency’s purchasing power, is just one form of private sector nationalization.
The reason that enlarging government in times of crisis and perpetuating it in a period of growth is an unwise decision is that it does not suffer the consequences of a weakening economy. Some services may need to be raised in crises, unemployment benefits or health care, but prioritization is something that the administration should do. If you are aware, there is no such thing as administration.
The global economy is on the brink of another recession after trillions of dollars of public stimulus and financial injections. The story is that it’s all due to the war in Ukraine and a few rate hikes, which is simply ridiculous. The global economy has been hit hard by the production sector as unprecedented spending plans of the past few years have not benefited the economy, zombified a heavily indebted economy and crowd out the private sector’s ability to invest more in opportunities. We are entering a recession.
Some say it’s because the government didn’t spend enough. Ha.
The economy’s capital is being swallowed up by rising governments that always blame the most productive people for not contributing enough.
Every unit of government spending is paid for by you and comes with more taxes, more inflation, or both. All government excesses make you poor. Instead of giving you free money, the government will costly destroy your options for a better future.
Continued increases in government spending slow the nationalization of the economy, not increase choice, freedom and economic prosperity. When inflation and stagnation sets in, we become so dependent on the government that we can’t complain and just hope that the government absorbs more external resources to compensate. it won’t happen.
We all know how bad monopolies are. Consider what is a government monopoly with the power of oppression and coercion.
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