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Government Spending is a Parasite on the Private Economy

The key fallacy embedded in Keynesian economics and the GNP equation (C+I+G) is the
idea that government spending adds to an economy’s health. In reality, the
opposite is true: government spending subtracts from an economy’s
health. The real economy is the private economy  there is no other. Government
spending must come out of the private economy.

In olden days, no one would have accepted the argument that the king could
help his nation’s economy by increasing his spending. The king’s spending was
funded by taxes from the people. It is the same today, notwithstanding the
eyewash of central bank manipulations of its manufactured paper money.

All government spending is parasitical. The less government we have the
better off we are. No one would claim that an increase in crime (thus making
more police necessary) or an increase in international tensions (making a larger
military necessary) would be good for an economy. We are all better off when
people are honest and other nations are friendly so that we do not need to
provide resources for more police and a larger army. We would much prefer that
our sons and daughters produce goods and services that improve the quality of
our lives rather than standing sentry on America’s frontiers at our expense.

Government programs that do not provide essential security services are
especially illogical. For example, paying people not to work, which is the
consequence of unemployment insurance, must come out of funds that would have
otherwise employed people. Indeed, all government welfare programs are
funded by the private sector and do not, as the Keynesian equation might imply,
add to the nation’s wealth. The funds for these programs come out of the private
economy and further stifle its ability to increase the nation’s wealth by
reducing capital formation.

Caring people often feel it is necessary to lobby the government for more
funds for charity — even if taking from some at gunpoint to give to others is
morally questionable — but they cannot and should not claim that providing such
funds is anything but harmful for any economy. Once the government gets the
power to tax for the purpose of alleviating poverty, there is no logical
stopping point. The people will demand further expansion of these programs, not
because they believe them to be worthwhile, but because they feel victimized and
want some of their money back in the form of benefits.

The common man may not know the term “tragedy of the commons”, but he knows it when he sees it. As the scramble for public resources ensues, however, another economic phenomenon kicks in: the fallacy of composition, which states that what benefits one segment of the economy at the expense of everything else cannot possibly prove beneficial for the economy as a whole. Put simply, we cannot all subsidize each other and come out ahead. While most want to be subsidized by others without having to pay anything in return, special interests from all sides ensure that the looting becomes universal.

Keynesianism institutionalizes the tragedy of the commons and believes that
the fallacy of composition does not apply. It ignores the fact that government
spending must come either from tax dollars or from the printing presses, both of
which harm the common man. Instead, Keynesianism promises that we can all pick
one another’s pockets — and all get rich doing it!

Caring people often feel it is necessary to lobby the government for more
funds for charity — even if taking from some at gunpoint to give to others is
morally questionable — but they cannot and should not claim that providing such
funds is anything but harmful for any economy. Once the government gets the
power to tax for the purpose of alleviating poverty, there is no logical
stopping point. The people will demand further expansion of these programs, not
because they believe them to be worthwhile, but because they feel victimized and
want some of their money back in the form of benefits.

The common man may not know the term “tragedy of the commons”, but he knows it when he sees it. As the scramble for public resources ensues, however, another economic phenomenon kicks in: the fallacy of composition, which states that what benefits one segment of the economy at the expense of everything else cannot possibly prove beneficial for the economy as a whole. Put simply, we cannot all subsidize each other and come out ahead. While most want to be subsidized by others without having to pay anything in return, special interests from all sides ensure that the looting becomes universal.

Keynesianism institutionalizes the tragedy of the commons and believes that
the fallacy of composition does not apply. It ignores the fact that government
spending must come either from tax dollars or from the printing presses, both of
which harm the common man. Instead, Keynesianism promises that we can all pick
one another’s pockets — and all get rich doing it!

Caring people often feel it is necessary to lobby the government for more
funds for charity — even if taking from some at gunpoint to give to others is
morally questionable — but they cannot and should not claim that providing such
funds is anything but harmful for any economy. Once the government gets the
power to tax for the purpose of alleviating poverty, there is no logical
stopping point. The people will demand further expansion of these programs, not
because they believe them to be worthwhile, but because they feel victimized and
want some of their money back in the form of benefits.

The common man may not know the term “tragedy of the commons”, but he knows it when he sees it. As the scramble for public resources ensues, however, another economic phenomenon kicks in: the fallacy of composition, which states that what benefits one segment of the economy at the expense of everything else cannot possibly prove beneficial for the economy as a whole. Put simply, we cannot all subsidize each other and come out ahead. While most want to be subsidized by others without having to pay anything in return, special interests from all sides ensure that the looting becomes universal.

Keynesianism institutionalizes the tragedy of the commons and believes that
the fallacy of composition does not apply. It ignores the fact that government
spending must come either from tax dollars or from the printing presses, both of
which harm the common man. Instead, Keynesianism promises that we can all pick one another’s pockets — and all get rich doing it!

The only solution is to declare Keynesianism as dead as its author, end all
parasitical government spending, and free the economy from the tyranny of
bureaucrats armed with restrictive regulations. The latter is crucial, for to
end welfare spending without freeing man from the straightjacket of the
regulatory state would be to free him to starve.

In a free market economy, where each man is free to cooperate with all other
men on mutually agreeable terms without harming others, prosperity and peace
will prevail. It is the sure road to our economic salvation. Cuts in government
spending are not “austerity programs,” as the mainstream media so often states,
but rather are acts of economic liberation. Let’s bury that C + I + G = GNP
baloney — and get back to work.

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