As recession fears cause the nation to embrace greater state
control of the economy and unimaginable federal deficits,
one searches in vain for debate worthy of the moment. Where
there should be an historic clash of ideas, there is only
blind resignation and an amorphous queasiness that we are
simply sweeping the slouching beast under the rug.
With faith in the free markets now taking a back seat to
fear and expediency, nearly the entire political spectrum
agrees that the federal government must spend whatever amount
is necessary to stabilize the housing market, bail out financial
firms, liquefy the credit markets, create jobs and make the
recession as shallow and brief as possible. The few who maintain
free-market views have been largely marginalized.
Taking the theories of economist John Maynard Keynes as gospel,
our most highly respected contemporary economists imagine
a complex world in which economics at the personal, corporate
and municipal levels are governed by laws far different from
those in effect at the national level.
Individuals, companies or cities with heavy debt and shrinking
revenues instinctively know that they must reduce spending,
tighten their belts, pay down debt and live within their means.
But it is axiomatic in Keynesianism that national governments
can create and sustain economic activity by injecting printed
money into the financial system. In their view, absent the
stimuli of the New Deal and World War II, the Depression would
never have ended.
On a gut level, we have a hard time with this concept. There
is a vague sense of smoke and mirrors, of something being
magically created out of nothing. But economics, we are told,
is complicated.
It would be irresponsible in the extreme for an individual
to forestall a personal recession by taking out newer, bigger
loans when the old loans can't be repaid. However, this is
precisely what we are planning on a national level.
I believe these ideas hold sway largely because they promise
happy, pain-free solutions. They are the economic equivalent
of miracle weight-loss programs that require no dieting or
exercise. The theories permit economists to claim mystic wisdom,
governments to pretend that they have the power to dispel
hardship with the whir of a printing press, and voters to
believe that they can have recovery without sacrifice.
