June 22, 2013

Do Not Equate the Government with the Economy

By In Economics

“The economy is falling apart!”  This is true.  However, don’t be mislead.  To be mislead is to think that a falling economy is a failing economy.  This is not true.

The problem comes when people equate the government with the economy.  The fiscal cliff, for example is not an economic crisis.  It is a government crisis, with economic implications.

The government is economically incompetent.  How do I know this?  Because a business on the market would have long ago changed its behavior if in the same position as our government.   Unfortunately for the government, but fortunately for the case libertarians, government cannot run like a business.  By its very nature, a government is the antithesis of a business.  How so?  The government lacks profit and prices.

The fiscal cliff debacle is not about economic crisis. It’s about government crisis.  The government is failing and dying. The economy is being dragged down with it. The economy though will survive. The government will not.  The government is propped up by the politicians.  Anyone who seeks to “fix the government” is merely kicking the can.  You cannot fix something whose nature cannot be changed.

Many people, especially conservatives, cry out: “we need a good businessman to run the government!”  That is preposterous.  What they are saying is they would like government to become better at what it does; namely, take money from the economy, mis-allocate resources, distort the market, distribute wealth, and prevent free individuals to conduct voluntary trade.  So-called conservatives rallied behind Mitt Romney to “close loopholes” to fix the deficit.  Why would they want Mitt Romney to raise taxes like this?  The free-market perspective is the opposite of the Romney plan: “Capitalism breaths through loopholes.” (Ludwig von Mises) If a mouse is stuck in a can struggling to breath, short of letting it loose, one should cut more holes in the top.  Don’t seal the can.

The fiscal cliff is about the failure of central planning.  The government fiscal situation is about the crashing of a myth.  When the government falls apart, what happens?  The market will have its chains taken off.  To be conservative is not to fix the government.  To be conservative is to eliminate, as much as can be done, the impact of the government.  Sometimes, the best way to do that is to declare bankruptcy.   Technically, we are already declaring bankruptcy because we have more bills than we could ever pay.  The only way to pay in this case is to print money, which destroys the value of the currency.  The other option is to default, that is, not pay.  This would indeed be bad for government -and all who are dependent on government.

But if this takes place, the market will take off.  Capital could pour in.  The government currently is a capital repellent.  A free market, without the government, is a capital magnet.   The potential is limitless.

Let the government die. The more Repubs and Dems prop it up, the longer it will be before the economy can break free from the chains.

Written by C.Jay Engel

Editor and creator of The Reformed Libertarian. Living in Northern California with his wife, he writes on everything from politics to theology and from culture to economic theory. You can send an email to reformedlibertarian@gmail.com