The Economic Paradox No One Wants to Talk About

There is an economic paradox that few people understand, much less wish to acknowledge, because to do so would reveal the level of societal deterioration that has caused it. In simple terms, there are two schools of economic thought: one posits that massive amounts of government spending, aka stimulus in all its odious forms, is the only way to save an economy. The other posits that until massive over-spending by government is brought under control, aka austerity, economies over-burdened by debts and deficits will continue to founder. Who's right? There is merit to both arguments -- but only because we've reached the aforementioned level of societal deterioration. Let me explain.

For decades, the growth of government both here and in Europe, has been inexorable. For perspective's sake, it should be noted that the last budget submitted by the Clinton administration for fiscal year 2001 was $1.9 trillion. Exactly ten years later, president Obama introduced a budget of $3.8 trillion. Thus in the space of a single decade, spending by the federal government doubled.

What has such doubling produced? A myriad of things, but one of the foremost is an American public that has become more dependent on government, not just for benefits, but employment. This is no accident, since the more such largesse emanates from Washington, D.C., the greater the power that flows back to Congress and the president as a result. It is also no secret that one political party would like this particular dynamic to go on unimpeded, until the nation is driven into fiscal oblivion. Whether that ambition is the result of ideological stupidity or a Machiavellian plan to create a totalitarian state full of Americans who can no longer function without the "benevolent" hand of government controlling every aspect of their lives, is one of the prevailing issues of the current election season.

Unfortunately, we have reached sufficient levels of dependency, that the economic paradox occurs. We all know that $16 trillion of debt is a time bomb, and that the only way we can save ourselves -- in the long run -- is to bring revenues in line with expenditures first, and then have revenues exceed expenditures, so that we can begin paying down the mountain of debt we have already accumulated. Hence, the austerity argument is legitimized.

Except that it isn't, in the same way that taking a heroin junkie completely off heroin all at once will cause a pretty unpleasant experience for the junkie. Hence we have methadone clinics, created (ostensibly) to wean the junkie off drugs incrementally. In economic terms, as we are seeing it played out in Europe, the attempt to wean entire societies of "junkies," i.e. those addicted to government largesse, off the government teat has created havoc. Furthermore, and this is where it gets to the nub, societies structured to live off government, the ones where government is the major employer -- even as that employment has driven those societies to fiscal insolvency -- are now faced with the economic "ripple effect" that the laying off government employees produces.

Ergo, in step the progressive economists who can then posit that austerity is a "failure," because the unemployed government worker is no longer capable of buying goods and services from his private sector counterpart, who is no longer able to pay the taxes necessary to solve the government debt crisis that necessitated the layoffs of public sector workers in the first place. Thus, the progressives argue, it becomes imperative to continue "priming the pump" with fiscal stimulus, in order to avoid the economic contraction that austerity is bringing to people in Europe.

Sound good, until one realizes that stimulus is nothing more than an increase in the very same government debt -- and government dependency -- that brought Europe to its knees in the first place. In short, fiscal stimulus is an effort to kick the can down the road, even as the debt load piled onto future generations becomes so obscene that it would take a miracle to get out from under it. The progressive "solution" to that problem? Tax the "rich," which includes people making $200K a year and businesses making $250K -- now. I say now because the progressives' dirty little secret is that that particular threshold will have to be lowered considerably in order to maintain the level of government spending, interest payments -- and dependency -- that those who wish to see as much power as possible concentrated in government hands need to maintain that concentration. In other words, those currently suckered in by the siren song of class warfare have precious little idea how far down the income ladder the term "rich" can be extended to accommodate such ambitions.

Furthermore, as some Americans have begun to notice, "priming the pump" is debasing the hell out of our currency.

The responsible solution to this whole mess is the one that few people are willing to embrace: weaning people off government dependency as quickly as possible, and educating them as to why it is necessary. In other words, without the expansion of the "on your own" society that the current president and his fellow Marxist/socialist soulmates despise, we are doomed -- or ripe for a government takeover.

In the coming months, Americans will be bombarded by both fiscal arguments. It is important for them to remember that the argument against austerity is only legitimate because progressives have successfully turned a critical mass of people on both sides of the Atlantic into government-dependent lemmings with little or no ambition or dignity, even as they wholly embrace a giant sense of self-entitlement. It is a sense of self-entitlement so all-encompassing that no amount of economic reality -- as in we've run out of other people's money to spend -- can penetrate it. That's social deterioration in a nutshell.

Hence the paradox -- and the precipice.