By Bill Connor
“It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can’t be repaid. However, this is precisely what we are planning on a national level.”
– Peter Schiff, president of Euro Pacific Capital
As South Carolinians listen to arguments against using part of the stimulus money to pay down the state debt (as Governor Sanford has wisely recommended), they are learning prevailing economic philosophy of our political class.
Keynesian economics is based on the writings of John Maynard Keynes, who wrote prolifically about his view of economics during the Great Depression in the 1930s. He posited what has come to be “accepted” wisdom: the requirement for government involvement in the free market to stimulate spending. Keynes preached that government and consumer spending magically “stimulated” economic growth through demand. Therefore, he admonishes, political leaders should deter personal savings through inflation and interest rate tinkering. At the same time, Keynes argued, the government should engage in deficit spending to further produce demand.
As Peter Schiff writes about Keynesianism:
“Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system.”
Gary North, author of Mises on Money writes about Keynesian economic theory:
“It does not matter to the Keynesian whether a consumer with poor economic judgment goes out and spends his money, or whether a government bureaucrat with even worse economic judgment goes out and spends the government’s money on poorly conceived economic projects. The Keynesian is convinced that both of these individuals, despite their poor economic judgment, are capable of producing economic prosperity simply by spending money on whatever they find amusing… By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired.”
What causes this clearly flawed theory to hold such incredible sway over political leaders? Gary offers what I believe is the best explanation: “I believe these ideas hold sway largely because they promise happy, pain-free solutions.”
What Americans will learn over the coming months of a brutal recession is that many of these “trusted” elites were wrong. It is a hard truth to accept, but the government will not be able to spend and “bail” its way out of this recession. It will be painful in the short term, but digging our nation into insurmountable debt is not the answer.
South Carolina should give an example of the proper way to get out of our recession and support Governor Sanford in putting his discretionary 25% of the federal “stimulus” funds toward debt reduction. This is taking the long-term “right” over short term “easy money”. With all the strings attached, this money will not bring the promised benefits, only additional obligations to be paid by future generations.
It is high time Americans quit deferring judgment to those who have failed them. Collectively, we will have to go through hard times to come out of this recession. However, as at Valley Forge and Normandy Beach and The Great Depression, the American people always come through hard times. We’ll come through these as well.
Bill Connor is an attorney residing in Orangeburg. He recently announced his candidacy for the Republican nomination for South Carolina Lieutenant Governor.
By Not Sayin', Just Sayin' ... March 14, 2009 at 7:29 pm
Why are you letting this philandering Nazi take up space on this blog? He thinks a woman’s place is in the home, meanwhile he lets his pediatrician wife keep his sorry as up while he’s banging everything in site in law school. He’ll go down so hard in this election that it will almost be hard to watch.
By CHRIS March 14, 2009 at 10:28 pm
WOW….I was worried we would be in a vacum of true patriot conservatives after the govenors term was up. Glad to see there are still more in the pipeline.Maybe our country still has a chance of pulling this off
By Red Bank Bar March 14, 2009 at 11:19 pm
Well, well, well, Bill Connor’s exposed as just another Repuplican mo. A stuffed suit who hasn’t gotten over his adolescent crush on Ayn Rand. Someone who is too ignorant to realize Keynes got us out of the last Depression, and he’ll get us out of this one. Anyone who compares an individual’s finances to a national government is really stupid. Too stupid to lead, but obviously as a Repugnant in South Carolina, capable of being elected.
Thank goodness for us as a country the Repugnants are shrinking down to their base, angry bubbas, but too bad for South Kackkalacky.
By Gillon March 14, 2009 at 11:32 pm
Does Mr. Connor have any original thoughts, or is his every utterance based on hackneyed cliches or “cutting and pasting” from the writings of others?
By liz March 15, 2009 at 8:13 am
Nothing makes sense in the financial crisis until you hear my story, unfortunately. I am sitting on why and how the whole thing started.
Once you really understand what is going on, you just cannot look at this crisis in the same way ever again. Believe me, I have stopped people in their tracks, turned heads and counted gasps, after showing people my documentation.
I have the story of the year. GOP be warned, it’s all “fixing” to come out too.
Just for starters, I want to remind private employers of something: Private employers are NOT allowed to OPT OUT OF SOCIAL SECURITY> There is an institution in Columbia with a good many employees who have sent me written information that I was opted out of SSA WITHOUT my permission.
EMPLOYERS MUST PAY FICA>
By Elmo March 15, 2009 at 9:09 am
I am glad we are starting to see citizens with an understanding of printed money and debt run for public office. This editorial shows Bill Connor’s understanding of monetary policy is far ahead of the pack . Very few politicians have the intellectual ability to quote Mises and Peter Schiff.
I only wish Bill Connor and others would abandon the Republican party and run as Independents.
We can not continue to entrust our money and economic future with Republican and Democrat politicians who favor printing money rather than living within our means.
By Catherine March 15, 2009 at 10:43 am
I love it. Another pompous traditional windbag complaining without providing solutions. What about jobs for our citizens? What about unemployment funds? What about restructuring our incredibly silly tax system so that it makes senses and brings in reliable amounts of revenue? I might not find Sanford’s idea (or Connor’s)so incredibly frivolous if they came with some innovative ideas.
Like investing the 700 million in alternative energy. Like investing the money in the charter schools they always favor. Like investing the money in juvenile programs so we can save on corrections over the long term. Like providing all our children with health insurance. Like managing our water resources for more than developers and companies. Good grief — just SOMETHING other than tax cuts. Something that moves us into the 21st century so that then, yes only then, companies will see our state as a worthwhile investment.
By Watching Sewell Screw Up March 15, 2009 at 11:00 am
Sic, how much $ did Connor pay you yo publish this?
By fitsnews March 15, 2009 at 11:02 am
WSSU,
Eleventy kabillion dollars. Cash.
-FITS
By mackone March 15, 2009 at 12:02 pm
I am totally amazed. We have a government that is encourageing me to go out and spend money, that I don’t have, on things I don’t need. Isn’t that how we go into this mess to begin with. Some of you need to stop for a moment and think of someone other than yourself.
According to the latest numbers, only 7% of the home loans are in default. In the depression that FDR is given credit for resolving, the unemployment rate was at just about the 10% level it is now.
If spending money is the answer to getting out of this mess. I don’t understand how we got here. After all, isn’t that what everyone was doing.
We need to understand the true role of governement in our lives. It is not to provide every service we desire. It is to provide needed services.
I know some of you hate quotes, but I can’t help but pass on one that I recently read.
Christmas is when the kids tell Santa what they want and the adults pay for it. Deficits are when adults tell the government what they want and their kids pay for it.
The problem with the Governors answer is that it is not what we don’t want to hear. Interestingly enough, if we spend a kazillion dollars getting out of the jam this year and it doesn’t work. Oh my, we haven’t talked about that. But say it doesn’t, what do you do next year.
The legislature in South Carolina has always been very loose with spending one time revenue to fund long term projects. If you will look back at the way we have spent unexpected windfalls and the results in future years that resulted in unfunded mandates by the legislature. Who picked up the tab.
Does anyone remember revenue sharing? Another way for the Government to get the states and local communities dependent on Daddy Sam.
Do we need the money? You darn right we do. Is this the way to go about getting it? I would hope not. I would like to think that we would understand that even if the unemployment rate is 10% that means that 9 out of ten people have a job. The state and federal government have to learn, as most all of us have had to do. Live within your means. I have always been told what you can do in one hand and wish in the other hand. Then see which one fills up first.
By elroy jetson March 15, 2009 at 12:36 pm
Who is this Liz character–some sort of Lexington County Whittaker Chambers? I am sure this is true: “I have stopped people in their tracks, turned heads and counted gasps….”
Why does she put “fixing” in quotation marks? Is she fixing to do something, or not? And, isn’t it “fixin’?”
By Pat Hendrix March 15, 2009 at 1:40 pm
The fact that Republicans have discovered fiscal discipline, given that 10 trillion of the 11 trillion debt was accrued under Republican administrations, is almost comical. But rather than point out the obvious hypocrisy, I’ll tackle the central argument, which was not articulated with anything other than silly platitudes, against Keynes.
Most importantly, the notion that government spending is entirely waste is nonsense, typical partisan/ideological bullshit we’ve come to epect from Sanford. In an economy at or near capacity, that argument would have some merit. In a badly slumping economy, it has very little if any because the entire purpose of the government spending is to employ otherwise idle resources, particularly labor which, directly or indirectly, constitutes the overwhelming portion of the value of everything we purchase and produce. Labor is a wasting asset. Months or years spent not working or producing will never be recouped.
The incredible thing is that, even after the supply-siders like Mark Sanford and Bill Connor have had their say with the economy, producing bubbles and busts and economic crashes, you will always be able to find people who believe this crap. But then, it took the church several hundred years, two decades after we had already landed on the moon, to acknowledge that Galileo was right. Connor and Sanford are to economics what the virgin birth is to astronomy.
By Pat Hendrix March 15, 2009 at 2:03 pm
mackone,
“In the depression that FDR is given credit for resolving, the unemployment rate was at just about the 10% level it is now.’
No, actually the unemployment rate in 1933 was 24.9%. National Income which had been $87.4 billion in 1929, fell with the value of the dollar to $41.7 billion in 1932. Net Investment in 1931 was minus $358 million. The next year it fell to minus $5.8 billion. Wage payments went down from $50 billion to $30 billion. The economy contracted by 25%. There was a Republican president and Republican Congress.
Enter the New Deal and Keynes economics. The economy grew 10.8% in 1934, 8.9% in 1935, 13% in 1936 and 5.1% in 1937. And by 1937 the unemployment rate was back under 10 percent. By the end of the first FDR administration, the economy was back to 1929 levels.
Facts are stubborn things.
By Mackone March 15, 2009 at 5:36 pm
Pat Hendrix,
Good point, but it also depends on at what point you are referring to as the beginning of the Great Depression. Most economist indicate it was 1929 or 30 and at that point the unemployed rate wss at 8.7 and admittedly rising.
That still does not answer the question as to where is all the money going to come from to pay off the mountain of debt. The answer has to be in what the government did to the tax rate after the Depression. The highest rate was over 90% in the 40′s and stayed close to that until the early 60′s.
Keynes policies were effective for other countries but I don’t feel that these policies were as beneficial to the U.S. as was Roosevelt getting the U.S. into WWII. Now you want to talk about deficit spending. That is a mind boggling issue.
Do you really think that we are going to be able, as a society, that has very little production capacity anymore and depends so much on other countries for our products will be able to withstand 10 years of deprivation. It is said by someone with more optimism than I that with every crisis, comes opportunity. Do we as a country have that kind of resolve anymore?
Agree or disagree, it is not free money that we need, but jobs for people to earn a living and provide for their families. We need people to be able to hold their head up and not feel worthless. Unemployment is only a temporary answer and that will have to run out sooner of later. Not give away programs with no obvious benefit except to keep people quiet, let’s build something, improve something that makes life better or at least easier for some portion of society. We have so many glaring needs that every state has not had the revenue or the fiscal nerve to say no to special interest and do what needed to be done. Schools, Highways, Healthcare, just to mention a few.
We had soup lines in the Great Depression, people had gardens to provide for their families and in most instances they lived within walking distance of their job if they had one. Do you think that is the case today.
Unfortunately, there is not a half right answer. And I am afraid that neither party in Washington has any idea as to what will work.
I guess I have reached a point of not trusting our own Government.
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