Reasoning like the enemy

(Guestpost by Drew)

A serious problem confronts today’s conservatives. We have begun to think, argue, and reason just like our enemies. All this talk about “economic stimulus,” for example, has nearly converted Republicans into socialists already! When did Adam Smith (much less Jesus or Paul) advocate government intervention in the economy for the purpose of stimulation? The government exists to punish wickedness, not to stimulate you when you feel down (Romans 13:4)

For a background, let us define some terms. Economic stimulus works as follows. First, the economy begins to drag a bit, and citizens grumble. Congressmen get worried — because both parties have accepted the notion that government should “manage” the economy. Once the congressmen get sufficiently nervous, the government decides to borrow more money…on your behalf. You may be debt-free personally, but the government puts you into debt anyway. Specifically, Congress puts the entire the nation into debt as a single collective. Finally, after the government borrows money on your behalf, it throws the money around…at whatever. Throwing money around is supposed to be the “stimulating” part.

Unfortunately, when I say throwing money around, I am not exaggerating. Technically, any expenditure is stimulation. GDP takes into account every expenditure, including government costs.

GDP = Consumer Expenditures + Government Expenditures + Investment + Net Exports

If the government paid men to dig holes…and then fill them back up, both jobs would contribute to the GDP. (Sadly, this hole-digging example actually comes close to describing the public work programs of the New Deal.) Afterward, as soon as the holes fill back up, economists on CNBC might holler with excitement about the “boost in productivity.” Only a few intelligent thinkers would point out the waste of money, or the uselessness of the project.

And a good portion of government projects are useless. But where do Republicans Fit in?

None of this sounds even remotely conservative so far, but unfortunately, Republicans do indeed contribute to the problem. Most people accept that along with government spending, tax cuts will also stimulate the economy. And as a rule, Republicans obsess over tax cuts.

Of course, low taxes are generally good, but tax cuts are not the holy grail. During the past election, for example many weak-spined Republicans voted for the $850+ billion bank bailout. Remember, the bailout was originally supposed to be $700 billion. All that remaining money was made up of random, small tax cuts and similar pork for individual districts. Republicans took the bait. They voted to “stimulate” the economy. In so doing, Republicans drove the country significantly further into debt. But unfortunately, temporary and random and porkish tax cuts can do nothing to improve the economy, at least not in the long run. Instead of helping the country, those random tax cuts merely served as a bribe to secure passage of the bill.

But done improperly, even overall tax cuts (such as Bush’s “stimulus packages”) can hurt the economy. The Laffer Curve correctly states that tax cuts will often raise government revenue in the long run. Unfortunately, the “long run” often means several years.

This delay in benefit from cutting taxes is understandable. An across-the-board income tax cut will generally prompt citizens to adopt higher-earning professions — but only once those citizens believe that the cuts will remain permanent. To guarantee such a productive response, any tax cut must remain on the books long enough for people to 1) learn about it, 2) believe in its permanence, and 3) take advantage of it by altering their earning habits. Each of these three reactions takes time.

In the meantime, unfortunately, the country racks up debt. Tax cuts require time to encourage productivity. Reagan nearly doubled federal revenues with his tax cuts, but doing so took eight years. In fact, Reagan ran deficits for the first several years following his tax cuts. To remedy this problem (according to true conservative beliefs), the government should reduce spending whenever cutting taxes. Reductions in spending would keep the country from amassing debt while waiting for economic growth to take effect.

Unfortunately, arguing for spending cuts is nearly impossible once you adopt the “stimulus” rhetoric. After all, spending money also raises the GDP, at least in the short term. (Remember the hole-digging/filling scenario.) Once we concede that the government should stimulate the economy, it becomes difficult to fight against wasteful spending. Ultimately, Republicans have trapped themselves with their corrupted thinking.

Republican treachery on such issues as the bank bailout helps demonstrate the slippery slope of stimulus packages. During Bush’s eight years in office, the national debt nearly doubled. Once you concede that the government should intervene to improve people’s current welfare, it is hard to stop. Bush always called his tax cuts “stimulus” cuts, and such rhetoric eventually led him down the path to the dark side.

Ultimately, stimulus plans are about short-term benefit – at the expense of long-term wealth. Ideally, America should reduce government spending while cutting taxes further. Such a wise plan would probably decrease the GDP in the short term. Nonetheless, it would allow for future productivity. Such a plan would be the opposite of a “stimulus” proposal.