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The economic recession we're in has resurrected a long-standing debate between those who think government can smooth out the bumps in the business cycle -- the Keynesians -- and those who think government usually does more harm than good when it tries to intervene. That's undoubtedly far too simplistic a way to describe the situation -- economic opinions range many points over the same spectrum -- but the general argument is still there. To those who think lots of government intervention (like the stimulus package before Congress right now) can make things better, here's a question: If our elected officials were too dumb to see the recession coming and too dull-witted to keep it from happening in the first place, why should we believe that they're smart enough to manipulate the economy on our way out of trouble?
This isn't to say that government action doesn't affect how things play out, for better or worse. There's every reason to believe, for instance, that politicians were delighted to encourage many of the policies that led to the run-up in mortgage lending and the housing market. After all, Congress put the mortgage-interest deduction into the tax code decades ago and left it there. American politicians clearly have a general bias in favor of more homeownership.
But just as it's clear that government may have contributed to making things worse, it certainly could have taken action in the past that might have made things better today. It's too late to go back and balance the budgets that should have been balanced and to have put more aside in the "rainy-day" funds government should have in place, just like any smart household or business. Imagine, though, if the Federal government had balanced the budget and paid down the national debt like it should have long ago. In this dream world, perhaps the government had even put some money away in a national rainy-day fund. Then, when a downturn arrived (like it has now), it could have dipped into that rainy-day fund and stimulated the economy -- not from a position of weakness, like the one we're in now as we have to borrow ever more money from overseas because we can't pay our own bills -- but from a position of strength. You see, I wouldn't object to "economic stimulus" spending if we had been saving during the boom times so that we could get more bang for the buck in the tougher times. When the economy cools off, businesses tend to lower their prices. This benefits those who saved during the good times, since it means they get more for their money in the bad times. A responsible Federal government would have done this. But it didn't. And now we're trying to kick-start the economy of 2009 by borrowing money on which we'll still be paying interest in 2019. That's just not sensible at all.
Speaking of tough times, thanks to rising health-care costs, the Postmaster General is looking for permission to cut back on mail delivery, from six days a week to five. This, of course, will upset a great many people -- especially if it comes to pass. And that's largely because we rely on the US Postal Service as an institution. With the Detroit automakers also in financial trouble, it seems like we're realizing, if only a little bit, just how much affection we have for our favorite brands, products, and services. Fortunately, a market economy lets us have those affections. China, by contrast, remains an economy without a philosophy of true freedom. That's undoubtedly contributing to the recent dramatic rise in the frequency of mass protests in the world's largest country. And lest we think unrest in China is the kind of thing we can ignore, note that China holds more US debt than any other country. Unless we intend to go down the path of Zimbabwe, we'd better start getting a grip on our debt.
Could you turn down the opportunity to be a dictator? Sure, we all want to sound like we'd stand for democracy instead, but be honest. Haven't you occasionally said "If I were king (or queen) for a day..." and sort-of meant it? Just a little?
Our most powerful computers and our best programmers have found ways to destroy great popular music.
Good luck to the Cedar Rapids Gazette as it embarks on an ambitious project to make sure it survives as an institution, even if the traditional newspaper fades away. We'll keep doing the podcast thing ourselves, just in case the old "radio" thing doesn't work out.
Keywords in this show: Cedar Rapids Gazette • China • computers • Congress • debt • Detroit automakers • dictatorships • economics • free markets • health care • homeownership • inflation • interest • Keynesian economics • mail delivery • Microsoft Songsmith • money • mortgage-interest deduction • mortgages • music • newspapers • North Korea • Postal Service • protests • rainy-day funds • recession • stimulus packages • taxes • Zimbabwe