Search This Blog


Monday, August 1, 2011

Economic illogic


Justin McAffee - editor of the Nevada View and I believe a spokesman for the Clark County Democratic Party - accidentally admits the inherent logical fallacies of left-wing economic theory.

Check out his recent op-ed in his own online newspaper the Nevada View.

First he states,
No, it’s true, taking money out of the economy will lead to a spiral of less demand, higher unemployment, and a smaller economy for the U.S. government to draw tax revenue from.
Paul Krugman offers a more detailed, but wrong, explanation for why this MIGHT occur (its based on the fallacy that government spending is always efficient, always necessary and that if people had more of their own money wouldn't spend it). However, there is a major fallacy lying here which Justin (and Krugman) doesn't recognize. Cutting the governments budget does not take money out of the economy. Cutting the government budget only takes money out of the government. 

Think of this another way. If you have  $10 in your wallet and move $5 from your wallet to your left hand do you still have $10? YES!!! Cutting the government budget results in the economy having the same amount of money, its only that different people decide how to spend it!

Justin - and other certifiably silly folk - literally believe that cutting the government budget makes money disappear from the economy. That is, you either spend it on government services or the money vanishes all together. Ask 100 people if they could keep more of their paycheck whether they would spend/invest the money or if it would simply vanish into thin air.

Justin's comments are patently absurd but his commentary gets better. He actually ADMITS he believes the money vanishes (not even Paul Krugman will do that and he's gone plum nuts!). He states,
The debt reduction plan simply takes money that would otherwise be a part of the U.S. economy during a vital recovery period, and burns it up into thin air. 
You read that right, cutting government spending means no one else will do anything with the dollars. Americans won't buy or invest and neither will foreigners (dollars are only green pieces of paper and only have value if you can trade them in for goods, services or other capital).

About the only thing Justin gets right is that Ronald Reagan really didn't do anything for shrinking the size of government and that George Bush II was a bigger spender than all Democrats before him going back to Johnson in the late 1960s!!!! And given how wrecked the economy was after GW II left office, that isn't a ringing endorsement for more Keynesian economics and big government.
Cutting your government budget is far more successful at reducing the debt-ratio
 than increasing revenue.

In other, more rational, fact-filled news....Veronique de Rugy of the Mercatus Center at George Mason University writes in Reason Magazine that far more nations solve their debt problems by cutting budgets not increasing taxes.