When the left takes a strident position on any given issue, that’s a clear signal that the policy they dislike is gaining momentum.
Take the recent liberal apoplexy over reducing the size and scope of government, often summarized as “austerity.” People in nations around the world, from Greece to Spain to the U.S., are bearing the brunt of massive over-spending by those they have elected. Reducing this spending and the dependency on government it has created – even by the most passive means, such as reducing the growth rate of government outflows – is giving liberal writers the vapors.
Joel Brinkley, formerly of The New York Times and now a journalism professor at Stanford, tells us that “imposing austerity now is utterly foolhardy – in fact, just plain stupid.”
Nobel Prize winner Paul Krugman writes, “Fortunately ... there was some ‘passive’ fiscal tightening as the Obama stimulus faded out, but no wholesale shift to austerity.”
And former Secretary of Labor in the Clinton Administration, Robert Reich (now a professor of public policy at UC-Berkeley), calls for “rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat.”
To summarize, in the words of Stanford economist John Taylor, “The proposals called ‘austerity’ are characterized (by the left) as going back to the Stone Age, with the connotation of drastic, Draconian, sharp, sudden reductions in spending.”
Why these hysterical and near-panicked characterizations? Because left-leaning economists recognize, as even Reich admits, “America has a long-term budget deficit that’s scary. So does Europe.” As a result, they know that policymakers and those who elect them are at last grappling with the hard choices needed to rein-in Washington’s spending.
The consequences of continued fiscal profligacy are profound. Michael Cembalest, chairman of Market and Investment Strategy for J.P. Morgan Asset Management, wrote recently in Forbes, “Financial markets remain concerned about the ability and willingness of the U.S. and Europe to tackle their respective fiscal challenges ... Downgrades, government shutdown rumors and political impasse on deficit reduction have not lost their ability to negatively affect equity markets, business activity and confidence.”
In layman’s language, this means that unless Western governments – led by our own – take steps to curb the growth rate of spending and reduce outlays in areas where calamitous over-spending is obvious (e.g., archaically-formulated entitlement programs), any nascent recovery will collapse.
Shawn Tully, a senior editor-at-large at Fortune magazine, argues that “lowering spending right now – as long as the downward slope is gradual – will do nothing to choke economic growth, and could even enhance it. And the anti-austerity solution, raising spending immediately, then reversing course at some future date, will not lift GDP, even temporarily, and threatens to further hobble deeply indebted nations.”
As Tully goes on to note, “The distinguished crowd that condemns austerity champions more spending instead. Once again, the extra dollars need to come from somewhere else. If they’re borrowed at home, they lower private investment. If they’re borrowed from abroad, they lower exports or raise imports.”
Increasing federal spending and raising taxes on any person or business doing even modestly well is a sure-fire way of forestalling the growth America’s economy and her families so urgently need.
To foster growth, we can lower the rate of federal spending, modernize entitlement programs, provide appropriate tax incentives for firms to expand and hire and liberate business from undue regulations. Most importantly, we can and must strengthen that single most significant engine of economic productivity, the family.
Family dissolution erodes economic growth, and the sharp decline in population growth has a negative affect on productivity. “Human capital and labor combined with physical capital each contribute roughly equal parts to growth,” write Drs. Pat Fagan and Henry Potrykus of the Marriage and Religion Research Institute. “Increasingly it has been hoped by many that physical capital may substitute for any decline in population’s and human capital’s contribution to growth. However, this has not been attained historically.”
Elsewhere, they have written, “Government revenues come from the taxation of our economy. Our economic growth is and will continue to be a fraction of that of the pre-1960’s era because of the breakdown in marriage. All the while, more citizens are pushed into dependency on this government, again because of marriage breakdown.”
Marriage. Children. Family. Economic growth. Fiscal discipline and spending reduction. All are indispensable ingredients to the professed goal of both right and left: prosperity.
(Rob Schwarzwalder is senior vice-president of the Family Research Council.)