Government Stimulus Produces Stagnation

https://grantcoulson.files.wordpress.com/2014/04/incentiveseverywherepicturecorrect1.jpg?w=444&h=288

   Do not think about, write about or deal with  human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.

    Wherein we see that the lack of “stimulus spending” in the U.K. did not produce the stagnation promised by the government experts. Government experts are the only people who can be consistently wrong and receive yearly salary increases.

The United States Could Learn from Its British Ally
By Ivan Eland

In the wake of the global recession, beginning with the financial crisis of 2008-2009, the British government of Prime Minister David Cameron took a different approach from the U.S. governments of George W. Bush and Barack Obama—eschewing massive government stimuli (that is, profligate spending) for the economy and instead focused on moderate belt tightening to reduce budget deficits accumulating into higher national debt. That British budget reductions, including 4.3 percent real cuts in defense spending since 2010, has paid off. The British economy has experienced seven consecutive quarters of growth, three percent growth last year, and low inflation. With the upcoming British election, convention wisdom might predict that Cameron would ease off on the austerity and promise to throw out government candy to better his chances to win. Instead, he has promised the British people even more frugality.

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    Not only was the spending profligate, it was pointless. The “stimulus” package left the taxpayers on the hook for maintaining whatever pointless was built.

Usually, conservative governments at least try to avoid defense cuts. However, Cameron’s past military reductions have already taken Britain below the two percent of GDP per year defense spending requirement of the NATO alliance. Moreover, Cameron has promised to double down and cut even more from the British defense budget. The United States, which currently accounts for 70 percent of the alliance’s military spending, has complained loudly to Britain that the United Kingdom is losing military capability just when Russia is acting up in Ukraine.

The British have always been a reliable sidekick to numerous U.S. military adventures, but the British public is now wary of following the United States off the cliff—after the long disastrous nation-building quagmires of Afghanistan and Iraq. That helps account for Cameron’s doubling down on defense cuts in the election campaign.

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    Almost all Middle East countries will continue to flounder in the swamp of their own making. Nation-building is impossible. The only thing this West can do is what it’s always done, contain and punish.

Although Barack Obama’s “sequestration”—across the board budget cuts with some major exemptions—has helped reduce the U.S. budget deficit from the Bush days, he has also raised taxes but added significantly to the national debt. The United States has not matched even the moderate austerity of the British. As for U.S. defense, some slight cuts were made, but sequestration has since been eased. The United States still spends massive amounts on defense—what the next nine countries spend combined.

And the United States regularly worries more about regional threats—for example, Russia in Eastern Europe and ISIS in the Middle East—than do its allies in the particular areas. Now that the U.S. economy is finally showing some life, the United States can be less concerned about inducing short-term pain with significant across-the-board cuts in government spending (including previously exempt entitlements); such wide reductions are the only way to ensure that the United States remains a great power well into the future. In the long run, a robust economy enables all other indices of national power—military, political, diplomatic, and cultural.

Another lesson can be taken from Britain and its wartime ally France. Although Britain and France were on the winning side of both world wars, they lost their worldwide empires, in part, because those wars drained their coffers. Even years later, they are, at best, middling powers. The same could happen to the United States. The Afghan and Iraqi quagmires cost the American taxpayer $3.37 trillion, or almost one-fifth of the $18.2 trillion U.S. national debt.

Substantial cuts in the U.S. defense budget would limit the ability of politicians from both parties to regularly meddle in faraway conflicts that don’t affect U.S. vital interests, but nevertheless create new enemies that try to attack the United States at home—such as the Pakistani (as opposed to the Afghan) Taliban, al Qaeda in the Arabian Peninsula, and perhaps someday ISIS from Iraq and Syria, al Shabab from Somalia, and Boko Haram from Nigeria.

Reductions in the U.S. defense budget would also require the United States to create a plan to close a significant number of military bases overseas and abrogate a number of obsolete Cold War alliances, which nowadays only inhibit the flexibility of U.S. foreign policy. The next president, whether Republican or Democrat, should plan to substantially reducing such foreign overstretch over a period of four years, so that it could be completed in one presidential term and thus not be reversed. Unfortunately, with the hawkish Hillary Clinton the probable Democratic nominee for 2016 and a big government Republican Party (Tea Party veneer aside) that has already forgotten the lessons of Afghanistan and Iraq and has become more bellicose by the day, a Cameron-style austerity program for defense (and everything else) is extremely unlikely.

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     The only way to stop politicians wasting money is to give them less of it.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies

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