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Leftist economists and pundits tell us that the current federal binge is nothing to worry about. It’s necessary to “build back” the economy and those right-wingers who talk about inflation are just glomy “market fundamentalists” who can be ignored.
Wrong, argues Veronique de Rugy in this Law & Liberty essay from a recent symposium. There must be costs. The dollar’s value will decline and economic growth will be stifled as the federal government absorbs resources that would otherwise have gone into productive investments. (The so-called “investments” in education and infrastructure are just transfers to interest groups.)
Here is her key paragraph:
Milton Friedman was correct: The true measure of government’s size is found in what it spends and not in what it takes in in taxes. Because borrowing allows politicians and citizen-taxpayers to push the bill for today’s spending onto future generations, borrowing encourages too much spending today—thus irresponsibly enlarging the size of government.
Right. The real problem is the enlargement of the federal leviathan. The bigger the government, the more potentially productive resources are squandered on things that politicians like (more IRS agents, more diversity bureaucrats) and the less is left for growth. People will see their government checks but will never see the increased output and innovation that was crowded out.