With all the talks of recession lately, people demand action. Something must be done! Both parties recognize this (the problem that is, the solution is a different story) and have their stimulus packages to “solve” the problem; as if the country has ED and the stimulus is the Viagra to our problem. However as Bob Dole can vouch better than anyone, what goes up must come down.

In my World Trade Policy & Theory econ class even my Defensive-Democrat professor as I call him recognizes the necessity of free trade in minimizing the domino-recession effect our government’s monetary policy put us in. The students also recognize the ineffiency and utter incompetence of the Feds but no doubt haven’t taken the analysis one step further to understand the political pressure to make mortgage loan rates artificially low that caused this housing bubble in the first place. A good lecture on Public Choice Theory would be a good reality check for some of these kids. These students’ ignorance is multilateral. It’s not limited to seeing the smoke that caused this monetary policy fire but also with which to solve it.

            Two students spoke on this subject during break and were using the Keynesian formula as a platform (which already discredits their validity) to the solution.
“G-T=S-I+F-X. We have a large trade deficit, in the neighborhood of $5 trillion, a weak cultural sense of saving and due to the weak national confidence, low investment. Therefore we need more taxes.”
What’s wrong with this picture? Where’s the other variable? They both made good points: One proposed taxing the rich, the other countered that the rich can move to a different state/country. One said tax tobacco the other said tobacco tax generates lower revenue every year. One said equal tax increase among all brackets, the other said that reduces saving and investment. After a moment of frustration one cried, “Well, what are we going to do? We have to tax something!”
This is why I describe them as ignorant and not stupid. They just haven’t been opened to the idea that government spending can decrease (and if that’s true then it’s arguably even scarier). Or perhaps the letter “G” just wasn’t in their alphabet and is just decoration in the formula. In any case they have blissfully ignored the other side of the sword that’s become dull and rusty over the past 70 years.

    Reduce spending. There you go, problem solved, I must be some sort of genius. Not the case, I am just not ignorant to the idea that if a deficit is the result of costs being larger than revenue, you must find a way to lower costs or you’re in the wrong business. We have practiced pork-barrel spending for too long be it the 2004 $45 trillion unfunded Medicare obligations, the annual $300 billion Highway Bill, the 10 year $190 billion dollar Farm Bill (of which only 33% goes to the nation’s actual farmers), or this upcoming "rebate" which is nothing more than a low interest loan that future generations will pay off thanks to our lack of thrift. I say scrape off the rust and sharpen that dull forgotten side of that sword and take a good slice through those pigs. (the spending not the politicians….actually, can it be both?)