Will a decrease in government spending from the sequester cause a recession?

March 1, 2013 - PRLog -- President Obama warns that a reduction in government spending may cause a recession. Liberals believe whatever the government’s size is at any moment, it is the bare minimum necessary to forestall intolerable suffering. Socialists believe governments can spend money more constructively than those who earn it. However, as Economist Ludwig von Mises pointed out, central planning by the state is self-contradictory. Tax supported endeavors lack a price mechanism as a compass to remain on course.

According to Johnston’s Law, “Whatever a tax supported agency attempt to accomplish, beyond the true purpose of government, the opposite occurs, in proportion to the amount of money spent". As an example, the more money a government prints to stabilize the economy, the more unstable an economy becomes. The more the Federal government spends on education, the more inefficient education becomes. In 1947, after WWII, government spending dropped 40 percent in one year, and the economy boomed.

Recessions are not caused by a lack of government spending or business investment, they are the result of the breaking of bubbles, caused by excessive credit in preceding booms. Federal Reserve Chairman Ben Bernanke is incorrect in stating the 1930’s depression was caused by lack of money or lack of government spending. As economist Murray Rothbard, demonstrated “America’s Great Depression”, in the 1930s was the result of an excess credit expansion in the 1920’s. Bernanke is not a so called “expert on depressions”, he is a typical Keynesian economists who accepts the insane belief the economy can be stimulated by government spending or by increasing the money supply.　　

Austrian economist Friedrich Hayek demonstrated that Keynesian economic policies encourage centralized planning, which leads to malinvestment of capital, which ultimately result in booms and busts, know as the business cycle. The utopian idea that government spending can benefit the economy is a non-sequitur failure in logic. Frederick Bastiat, in the 1800s, used the broken window argument to demonstrate socialist projects do not benefit society. One could argue that if a boy threw a ball, and broke a shoe store window, this would help the economy of a village. What you see is the shoe store owner spending money to hire a glass man to fix the window. The glass man spends the money at the bakery, and the village appears better off, because of the broken window. What you do not see, is the shoe store owner does not have the money to pay the butcher. A bad economists or a bad politician focuses on  "that which is seen". A good economists or good politician includes that "which is not seen".

President Obama and Senator Harry Reid are focusing on "what we can see". The sequestration will result in $85 billion less dollars going into the economy. What we are not seeing is the Federal Reserve will not have to print another $85 billion dollars, which causes the price of food and gasoline to go up. Politicians are demagogues when they focus on "what is seen", but fail to point out "what is not seen".

Economists interpret facts differently based upon their worldview. John Maynard Keynes interpreted facts based upon his worldview. He was opposed to Christianity, he was a socialist, and a homosexual. His economics, moral ethics, and religious views were based upon his worldview. The core of many of Keynes’ writings were an obsession with the subject of savings and thrift. He understood that the “virtue” of savings was related to the Christian worldview. He believed the act of saving points to a cause and a purpose beyond oneself. It indicates a “purposiveness” to life and inescapably to a source of values, a reference point outside of oneself. It ultimately points to the transcendent God as the only true source of purpose. A homosexual lifestyle is, in essence, a choice to focus on the present rather than the future, and a decision to live for oneself rather than for others.　

For Keynes, “abstinence” of people impedes the growth of wealth, and savings are always a potential threat to economic progress. He saw savings as a “leakage” in the system, as opposed to the capitalist concept of savings being a source of wealth creation. There is a reason to defer present gratification and to avoid irresponsible debt. The reason is our children’s future; our motive is love and a desire to obey God. Excessive debt represents our lust to consume today without thought for tomorrow and our children’s inheritance. Proverbs 13:22 says, “A good man leaves an inheritance to his children’s children.” The proper Christian worldview would be for our country to stop spending more than we earn. If our country is to remain strong and leave an inheritance to our grandchildren, we must live within our means.

　

For more information on the culture war of worldviews:

　

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