PrintDecember 4, 2008
Keynesian borrowing won't solve our economic problems
Washington's response to the recession has been ever-expanding borrowing for stimulus packages and bailouts: (1) $150 billion in February; (2) $850 billion in October, and, coming soon; (3) Obama's $800 billion stimulus package. These packages are implementations of Keynesian economics which advocates increased government borrowing during recessions. But government borrowing has severe long-term costs. The late Milton Friedman, founder of the fiscally conservative alternative known as monetarism, often pointed out: "There ain't no free lunch!" For one thing, borrowing from abroad artificially strengthens the dollar, which causes American producers to lose market share both at home and in world markets. In fact, the first two stimulus packages may have actually made the U.S. recession worse, not better.But the biggest costs of government borrowing are borne when the government has to make payments on its increased debt. The rapid pace of Washington's borrowing, at...(Read Full Article)
