Book 3 | Chapter 1 | Economic Theory | Pg 21

If one was looking at the best apples vs. the best apples of supply side vs. demand side economics to determine which course should be taken in the future, a decent case could be made that both could be effective in fostering an immediate infusion of money into the economy as well as promoting long term economic growth.  There is no question given the inexorable rise of the equities markets over time, that the private sector can create wealth at a historical rate of around 7% per year.  The more capital that is  available, the more wealth that can be created.  That said, an argument could also be made, that the best and the brightest government planners could use that same money in a way that was more productive than individuals choosing to spend that money all over the world in a willy nilly fashion with no plan or direction.   To transform the trucking and/or railroad industry to locally and plentifully available natural gas is but one example of how a massive investment by government into the private economy can pay dividends in spades.

Unfortunately, we don’t live in a perfect world.  Because this particular downturn has made made so many investors skittish, a lot of the capital from a tax cut might go to an investment like gold, which does little economic good for the economy.  The effect of investing in gold is like hiding money under your mattress or burying it in a hole in your back yard as far as the economy is concerned.  That doesn’t mean it might not be the smartest thing you could do in a time of high inflation or high uncertainty,  but that the capital basically “disappears” from the economy.  Also, in the modern global economy, huge percentages of a tax cut might go into buying goods from or investing in and capitalizing companies in other parts of the world and, therefore, the benefits of that spending and investing would impact our own country in a less immediately positive way.  That this is also an argument for making our country more competitive from a tax and regulatory standpoint is obvious, but moot for the point of this discussion.

But, while allowing individuals in a free market to choose to spend and invest their own money might not create the same magnitude of benefits as they would have in the Twenties, Sixties and Eighties, the same is true for government spending the money.   In our modern system of government, bureaucracy, and politics, how wisely can this trillion dollars be spent?  Can it be spent with focus and long term planning in mind, or will it be subject to the whims of ideology, lobbyists, crony capitalism and the political needs of 535 Crooks and Thieves in the US capitol?

For me, this is where the pedal meets the metal so to speak.  All of my logic and common sense tells me that democratic government rarely spends money with focus and clarity and that special interests almost always rule the day and cancel out with waste and inefficiency whatever long term benefits the spending may have had.  Therefore, in my opinion, allowing the private sector to spend and invest the trillion dollars will have a much more salutary effect on the economy than allowing the Crooks and Thieves to spend it.  It just seems common sense to me on a purely intellectual basis.  Money in the hands of the people beats money in the hands of Crooks and Thieves every time.

Up Next | Chapter 2 | Annienomics: The Story Of Luddites

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