The concept of Courageous Restraint has merit.  We should give out medals to Congress if it opts not to spend or even just proposes the idea. That alone would be courage indeed.  The Economic theory these days that governs policy creation and government spending operates through the “Think system.”

I read it.  I read it again.  I read it a third time and the closest I could come to understanding was this is where the economic realities of my life and those of the theories that win Pulitzers are 180 degrees polar opposite.  I can’t see how it works ergo, I must be an idiot.

Galbraith represents this sort of thinking.  One particular strain of Keyesian economics as it were, rules the day. 

Aparently debt plays a neutral part in monetary policy or aggregate demand for public/private money.  The theory goes like this: “inflation, unemployment, real GNP, and real national saving should not be affected by whether the government finances its spending with high taxes and low deficits or with low taxes and high deficits. Because people are rational, he argues, they will correctly perceive that low taxes and high deficits today must mean higher future taxes for them and their heirs. They will cut consumption and increase their saving by one dollar for each dollar increase in future tax liabilities.” 

Starting with the first principle, People are rational, please tell me another bedtime story.  Also, there’s the idea that one must and that cutting consumption so as to pay for more taxes is a good thing as versus spending it on anything else other than the state.

“Because the government needs to run a deficit, it’s the only way to inject financial resources into the economy. If you’re not running a deficit, it’s draining the pockets of the private sector.” 

If money is a zero sum game, then the money is either draining the private or public sector; ergo either the government or the governed shall have money to invest. 

If money is not a zero sum or fixed amount, how is it that not running a deficit by the federal government drains the pockets of the private sector?  To my way  of thinking, i.e. logic,  if you run a deficit, to pay the government so it can service it’s debt while providing the services you demand it provide, you must tax more, draining the pockets of the private sector to maintain or sustain a deficit.

Further, if the government runs a deficit in perpetuity that only grows, the money to pay those bills comes from somewhere and that is the tax payers –through fees, through state taxes to make up the difference in unfunded mandates, through federal taxes, through the “closing of loopholes” through value added taxes, sin taxes and tolls, interest on federal loans, limitations on profit, additional audits, and limitations on services.  Taxes will “drain the pockets of the private sector” to pay for the public sector.  It’s the only way the public sector exists, if the private sector pays.  

The creature that is Government unchecked, unrestrained, unmeasured and unending will devour everything it can. The hypothetical typical American family will be able to sustain itself at its current state only as long as nothing happens to increase debt or limit income.  Taxes do both at the same time.   If the government will not give up one red cent, then the tax payer must give up the red cents for it.

But I’m a mere Haus Frau so obviously I can’t understand.

Finally, and this is my 2 untaxed cents worth of thought here, how could the effect of the deficit being zero be true in perpetuity?  If people are rational as the orriginal premise of this arguement declares, wouldn’t they think spending one’s self in to further and further debt will eventually yeild diminishing returns by the state and for the self?  

If we spend more than our nation can bear in taxes, no matter how many times you shuffle the deck or redistribute the wealth, there will be people hurt by the government’s need for more money, who are on the line where the government deems too much, not enough and the only solutions are for those people unlucky enough to be targed will be to cut services and things they want or perhaps need, thereby increasing unemployment or lowering demand for goods and services, hurting other businesses. 

The consequence will be  an economic spiral of more demand for government services by those hurt by the cutbacks in business to make up the difference and less revenue, resulting in less generated tax revenue that had been heretofore budgeted to pay for those services.

Greater demand will spur further raise taxes to meet existing debt demands and services, ultimately meaning, still more people will have to surrender their little comforts for the good of the state. And our state will become less good. 

We will become a thin nation by default or because of default; our wallets will weigh considerably less anyway; that people are only angry and showing up at tea parties to voice concerns about the spiraling deficit and the wretched relenteless and seemingly perpetual excesses of Congress despite being labeled racists, homophobes, bigots, rednecks, ignorant yokels and the like, that might be the true definition of Courageous restraint.   After all, according to the smartest theorists running the country, we’re rational.

Wonder if we could get medals for our trouble.