“We Can’t Cut Our Way To Prosperity” When Prosperity Is Based On Government Spending

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“We cannot simply cut our way to prosperity,” President Obama said last night in response to the House sending him the “fiscal cliff” legislation to sign.

That statement always strikes me as curious, as though government drives the economy instead of burdens it.

I’m no anarchist. We need government. There are lots of things government should do. But the simple reality is that government is paid for by taxes on transactions and wealth created in the private sector. The government does not drive supply and demand. The government does not create wealth. The government takes some of the wealth we create in the private sector and uses it to do things our elected officials decide to do.

Thus, government is a burden to our prosperity in terms of direct cost. There are things the government can do to enhance our prosperity. The government can enforce contracts, and laws against theft and violence, etc. But the government doesn’t create prosperity.

Unless you’re Barack Obama, in which case you believe the government does create prosperity. Nor is this the only place where Obama makes that attitude clear. Look at the Presidents failed “stimulus spending” policy. The president, and his supporters, believe that they can foment prosperity in America by spending lots and lots of money.

And, in the reverse, they believe that if we cut spending we’ll have less prosperity. They take this as an article of faith, which is why the prospects for spending cuts in America’s future look pretty grim. It won’t happen as long as the people in charge have a fanatical (but economically illiterate) believe in prosperity flowing from government spending.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • SigFan

    In one sense he is right – cutting government spending is not a guarantee of prosperity, but it is a guarantee that more of the money earned by the private sector remains in the private sector. And that is almost always a guarantee of prosperity. A fine distinction, but one that is obviously above his pay grade.

  • Roy_Bean

    How do you argue with such a stupid statement? If the government is the source of prosperity then more government would equal more prosperity and eliminating the private sector would be the goal. I think BarryO wants to strut around in elevator shoes and turn us into North Korea.

  • Patrick R. Pfeiffer

    If you’re making $3,000 per month and spending $5,000 per month on your credit card on non-neccessary items, what do you do first?
    a-STOP USING THE CREDIT CARD
    b-Get an extra job 2 nights a week delivery pizza for minimum wage?
    This statement again highlight the President’s utter economic illiteracy.
    Not only WOULD slashing Federal Government spending get us on the road to prosperity, it’s the ONLY way that is going to happen. No amount of “revenue”-NONE-can accomodate the insatiable addicition to spending of these Federal Politicans.
    It’s the same old crap. “Shared sacrifice” somehow NEVER means the Federal Governement doing with less or sacrificing a thing. Government grows ever and only bigger and bigger.
    Politicans now tell us what they are going to take-WE the people have forgotten that it is our right to tell them what we’re going to allow them work with.
    The Government quietly prints and borrows gobs of money devaluing the worth of every dollar and asset you own.
    Reductions in tax rates increase tax revenues and liberals say it isn’t “fair.” Out of control spenidng outpaces the increased revenue from the tax cuts and liberals blame the deficits on the tax cuts, not the spending.
    Indiviuals like Mr. Obama and many of the posters here pontificate with their boiler-plate mantras about fairness and demonstrate again and again their complete lack of understanding of how the economy works in the real world.
    This stuff is what caused me to have a heart attack one week to the day following the election. I promoised my family I’d take a mental step back from Politics and I need to do it-I can’t take this parade of failure and incompetence anymore.

    • yy4u2

      Hope you stay healthy, I like your comments.

      • Patrick R. Pfeiffer

        Thank you yy.

  • Waski_the_Squirrel

    The concept of “cutting our way to prosperity” is ridiculous. The goal of cuts is not to make the country rich. The goal of cuts is to live within our means. Overspending is misuse of the people’s money. The idea behind cuts is responsibility and, eventually, to leave as much money as possible in the hands of those who actually earned it.

  • Jim

    Rob, this point has not been adequately made in the media. Much of modern day macro-economics and monetary theory is based on the calculation of GDP = C + G + I + NX, which inherently counts government spending as a portion of the economy equal to production and investment.

    In the long run, it is like measuring a firm’s Income Statement by lumping administrative overhead in with production expenses.

    It is how the Keynesian idea of increased government spending gains credence. But it is like a failing company hiring more lawyers and accountants because they are losing money; it won’t work. In fact the more you do it, the worse the eventual reckoning.

    The only answer to a failing economic structure or recession is more profitable production and investment. Economists knew this a hundred years ago, until Marshall and his acolyte Keynes came along and turned economics on its irrational head.

    As for the GDP calculation, its only utility is as a broad measurement of a nation’s productivity, and lumping government spending in with it only obscures it.

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