“If a liar and deceiver comes and says, ‘I will prophesy for you plenty of wine and beer,’ that would be just the prophet for this people!” – Micah 2:11
When the economy struggles Keynsian economists tend to blame “insufficient demand”. They tend to hold that sales are down, resulting in lower production (who builds stuff they can’t sell?), all because people don’t want enough – there is insufficient demand. “If only we could spur people to want more stuff, to demand more stuff, then sales would shoot upward, followed by production, followed by an economic recovery.” (It honestly reminds me of Dudley Moore’s declaration when stuck in a traffic jam in Crazy People – “don’t you understand? If you’d all just ‘go’ there wouldn’t be any traffic!” – not realizing that somewhere up ahead there is somebody stopped for a legitimate reason other than “the car in front of me won’t move”.)
The problem with the Keynsian theory is obvious to see, if one cares to step outside of Keynsian dogma. People want everything, all the time. There has never been a shortage of demand to consume from the people. We all want to have plenty of food and big-screen TVs and new cars and new homes, all the time. We always want these things. Demand is infinite! What we don’t want is to pay the price of these things. Or, to take the ubiquitous dollar out of the equation, we don’t want to produce enough goods and services to trade for these things goods and services produced by others. We don’t want to trade our production for somebody else’s production at the current “production exchange rate” – but we gladly would if prices were lower.
I remembered this little Keynsian conundrum as I perused news stories about the “Fiscal Cliff” and polling data regarding the disposition of the American electorate. Going all the way back to exit-polls from the elections, the same story emerges: Americans want lower taxes and higher government spending, and if somebody has to pay it should be somebody else.
Demand is infinite. People want everything. They want Social Security, Medicare, welfare, and all the “help those in need” programs. They want more government spending on defense, or better benefits for government workers (particularly if they are government workers). But they don’t want a market-based price for all of this, because they also want lower taxes, mortgage interest deductions, charitable deductions, and all the rest.
Oh, and they also don’t want massive government deficits. Uh-oh, now we have a problem. We can’t have it all. Somebody has to pay for all of this, but who? I know – somebody else (usually defined as those making over $1,000,000 or perhaps $250,000 annually).
When I was a 16-year-old in Conover, NC, my friends and I used to drive too fast in the neighborhood. I’d run my little Ford Escort GT (you heard me) down neighborhood streets at speeds that would surely enrage me now (now that I’ve grown up and have three kids). I remember there was one gentleman in particular who always yelled at us as we sped by (he had kids playing in the yard).
It turns out that yelling at a 16-year-old doesn’t exactly get the response you want. We responded with greater antagonism, and greater speed (to the extent that my four-cylinder was able), not to mention pranks (which we don’t wish to discuss further for fear that my own kids would read this someday).
At some point, and I honestly don’t have any idea how the subject came up, I landed in a conversation about the whole situation with my father (the speed, not the pranks, of which he was thankfully unaware). I explained, in brazen 16-year-old fashion that my friends and I didn’t much care for this fellow on the corner who always yelled at us as we sped by – so we antagonized him further by speeding even more. “Why?” Not sure, I guess we just don’t like the fact that he thinks he can tell us what to do.
At this point my father lit me up. He explained to me (to put it mildly) that I had no right at all to drive like that in the neighborhood. Furthermore, I had no right to look narrowly (or “pass judgment” though those weren’t the words he used) on this fellow. I had no idea what his life was like. I had no idea what motivated him or what concerned him (though, I can imagine it was the safety of his children).
In some small way, the whole conversation reminded me of the Fiscal Cliff discussion, and the general American disposition on taxing and spending. “You have no right to spend recklessly like this, no right to pass judgment on somebody else when they object, and no right to demand that they bear the burden of your recklessness simply because you think they can ‘afford it’.”
Determining what burden others should bear is a subtle yet ultimately destructive temptation for the voter in a democracy. We always seem to come to the conclusion that the “pain” felt by others is less meaningful than the “pain” felt by us, and thus they should bear a greater burden (“they can handle it … they can afford it”).
I don’t know what will come of the Fiscal Cliff discussion. I tend to hold that John Boehner will back down and offer up a “more taxes, slower growth in spending” proposal that the president will accept. Either that, or he’ll try to find some way to play this out so he can lay the blame at the president’s feet (it’s all politics, after all).
Regardless of the political back and forth, the country needs some new direction. “We the people” need to come to grips with paying the price for a balanced budget (if that’s what we want). I tend to prefer greatly reduced spending coupled with elimination of tax-code giveaways (deductions) and a general flattening of rates. I’m sure others have different preferences, but “make someone else [the rich] pay” doesn’t even get us close to the mark.