Atlas Shrugs and Caesar Ignores

Atlas is shrugging. John Galt has his bags packed and his plane is warming up for a one-way trip.

As this scenario plays out, the Lords of the Political Realm don’t appear to care. They either have no understanding regarding what is happening or they just don’t care. Or possibly they have no other options, at least as they view circumstances.

A recent post featured a rather outspoken interview with Steve Wynn who expressed his disgust with governmental policies. Now, an outstanding article by Jon N. Hall in American Thinker amplifies Wynn’s qualitative judgments with detailed figures. It is worth reading.

Regarding the deterioration in the U.S. economy, Mr. Hall writes:

… OMB estimates that total revenue will be only an anemic $2.165 trillion. If the current decade had kept pace with the last two decades, the feds would have receipts in 2010 of $4 trillion.

Hall further points out that had government revenues grown as they had historically, there would be no budget deficit. More shocking, he determines that in real dollars (adjusted for inflation), government revenues actually declined for the decade ending 2010. To my knowledge, that probably has never happened before, except perhaps during the Great Depression. Even then, because there was deflation, government revenues  might not have declined.

Liberals likely would be quick to add: “See, Bush did it. It was those we warned you about tax cuts.” According to Hall, that is not the reason:

The shortfall in federal revenue isn’t that the feds can’t suck enough money out of the economy due to low tax rates; the problem is the economy itself. The economy is ailing. And it’s not a cyclical disease; it’s chronic, structural. The current problems with the economy have been festering for decades and have finally come to a head.

Quite simply, the economy is not growing fast enough. It has not been since probably as early as the late 1970s, a common theme on this website.  The so-called “New Normal” started back then. not recently. This fact was hidden by the extreme borrowing entered into by all segments of society. That borrowing enabled spending to increase relative to incomes, seemingly pushing up GDP (albeit at diminishing rates). Spending cannot grow in excess of incomes forever. This current crisis appears to be the point where this imbalance ends.

So what has caused this dramatic change and decline? According to Hall (embolding added):

We mustn’t delude ourselves that we can go back to the halcyon days of healthy federal revenue by merely hiking tax rates. We must be correct in our diagnosis before we can write a prescription. The cause of our economy’s sickness is government.

OMB’s Table 1.2 shows that total federal outlays were equal to 18.2 percent of GDP in 2000. In 2010, outlays are estimated to hit 25.4 percent of GDP, higher than in any other year since 1945. Such spending is a drag on the private sector. As government grows, the real economy atrophies. And yet, the feds have plans for even more spending. The public-sector parasite is killing its private-sector host.

Hall’s diagnosis is consistent with common sense analysis of the data and numbers. He terms it the most intractable bubble of all, a “government bubble.” Only economists of the Keynesian persuasion seem unable to comprehend this issue. Unfortunately, these idiot savants dominate Washington policy-making. They and their political masters would rather worship at the altar of a discredited theory and more spending than do what is correct.

Hall concludes with the correct prescription:

With mountains of mandates, regulations, red tape, and the second-highest corporate income tax rate on the planet, government has heaped too many burdens on business. The economy has buckled and fallen to one knee, and while it struggles for air, yet more burdens are placed on its back: the retirement of baby boomers and ObamaCare.

Government must slash its spending and radically downsize itself. Only then will the economy stabilize and heal. And only with a vibrant, healthy private sector will government revenue return to normal.

To do so would require admitting that the welfare state does not work and that Keynesian economics, at least as practiced in Washington, was little more than a half-century fraud designed to buy votes and grow government. Our policy-makers will not deal with these issues pro actively, nor will the Keynesian clowns admit to their ignorance or scam.

Markets, however, will halt the nonsense. Hall’s prescriptions will eventually be applied, but not before a collapse of unimaginable proportions occurs.

Batten down the hatches.

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