Beware of Governments Bearing Gifts

The popularity of inflationism is in great part due to deep-rooted hatred of creditors.

Ludwig von Mises, Human Action (1963, p. 467)

In this pivotal moment in our economic history, battle lines are being drawn from the halls of academia to the chambers of our Congress. The intellectual geography upon which those ramparts of ideological combat are drawn is the issue of whether a government can create something from nothing. On one side of the battlefield are the faithful, those people who have defied all of the empirical evidence available to them and have blindly accepted that something comes from nothing. Opposing the followers of blind fiscal faith are those that rely on historical evidence and the common-sense knowledge that is the result of their own individual experiences.

The faithful belong to a religion known as the Keynesianism and the god upon whose alter they sacrifice our tax money is the modern deity known as the state. Keynesians believe that their god has the power to rain down manna upon its people, providing them with bread where before there existed not even the grain to mill into flower. Their logic is simple: if people are becoming poor, the state can just produce more money and give it to them. Paying no heed to the idea that real economic wealth is measured in commodities such as food, cloths, houses, and automobiles, the Keynesians claim that if commodities are purchased with money, all the state has to do is produce more money and the commodities will just appear out of nowhere.

The opponents of the faithful include the practical economists whom the Keynesians have labeled as being classical, neoclassical, Chicago school, Austrian school, or supply-siders, and libertarian and Republican politicians whom ABC’s Cokie Roberts has collectively condemned as “those who should be punished.” The single characteristic that has held these diverse opponents together is their tendency to look beyond blind faith and empty promises and try to find the source of the newfound wealth that the Keynesians have assured us comes from the simple application of green ink to paper.

It is the source of the state’s blessings that the Keynesians have always kept bound in layers of promises of other blessings, each one meant to distract the seeker in his probing to their empty core. For example, to inhibit the least forceful probers they have claimed that the cost of state largesse is “built into the system” or “just a write-off.” And with each additional level of probing there is the assurance that if the prober was only sufficiently sophisticated he would see that the state is so great that it does not need a source.

Pressed by those whom Cokie Roberts truly believes are in need of punishment, the Keynesians will admit that wealth must come from someplace but that someplace is in the future. Rest assured, you will not have to pay for the state’s gifts – it is your children and grandchildren who will gladly foot the bill. You should just accept your role as a devourer of your own young and depend on later generations to pay for today’s play. In the words of their founder, John Maynard Keynes, we should not worry about the long run because “in the long run, we shall all be dead.”

But the Keynesians are wrong – there is no long run that we can dump on our young. The future of the state’s devouring is not the future of your children and grandchildren; the future that pays for all exists in the present and is called “credit.” The extra money that the Keynesians produce does not create more wealth, only more paper. The additional paper reduces the value of existing paper, and more importantly, it reduces the value of money invested in American businesses as credit. The people who are really paying for the state’s gifts are the creditors, exactly those people who are needed most to help gives us jobs. The quote from Ludwig von Mises is an accurate one; government handouts are little more than thinly veiled attacks upon creditors, the very people who can turn the threats of the present into the promises of the future.

Beware of governments bearing gifts – what appears to be manna from the sky is really hail.