History dictates cuts
Contrary to Keynesian theory and what Nobel Prize-winning economist and New York Times columnist Paul Krugman said recently on “Charlie Rose” — that even wasteful government spending shouldn't be cut, because it would undermine job creation and economic recovery — government spending absolutely should be reduced.
Spending on other than what is constitutional should cease. At the very least, wasteful spending should be cut drastically. Doing so would free capital to flow where it is needed — the private sector — thereby creating jobs, increasing revenue and creating wealth.
The business cycle's booms and busts are normal and necessary to a vibrant economy. The Fed has altered this cycle in the belief that recessions can be controlled or eliminated. Recessions drive growth; businesses downsize, reorganize and become more efficient. With efficiency come increases in productivity, leading to hires that reduce unemployment, increasing business and individual tax revenue.
This system has worked over and over again. President Coolidge knew the best thing for government to do was get out of the way and allow free markets to work. His laissez-faire approach created the conditions for the “Roaring Twenties.”
If President Obama and Congress desire to turn around the economy and reduce the deficit, they should review history, especially the 1920s and 1980s.
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