As I read from both the right and the left side in our current economic troubles, it strikes me that each side has inconvenient truths that it ignores.
The left likes to say that we spend too much on defense, and the world will be a better place when schools have all they need and the Air Force has to hold a bake sale to buy a bomber. But that’s not quite true: in the 2010 Federal budget, 18.74% of expenditures went for defense, while over 56% went for Social Security, Medicare, Medicaid, unemployment, and welfare. And our leadership is contemplating drastic defense cuts to help address the deficit: the bomber bake sale is not far off.
The right believes that tax cuts are the answer to everything, as they will unleash a flood of productive activity. But the best returns on investment do not come from productive activity in this country. They come from productive activity elsewhere, and trading in third-hand, second-rate mortgages.
Both sides believe that a little deficit spending is a good idea to help spark a stalled economy. But Keynesian stimulus, as we’re finding out the hard way, only works when applied intermittently. If you indulge in deficit spending all the time, it loses its impact.