Government spending and regime uncertainty

Shifting resources from the government to private individuals and free-market firms is always a beneficial development, given that the government not only wastes many resources, but actually employs resources in destructive ways that harm the welfare of the general public.

Mainstream commentators seem to get their knickers in a twist especially when government employees are furloughed or some sort of government handout is temporarily suspended. In anything but the shortest-term perspective, however, these developments are positive, not negative. It is good to get people off the dole, and if budgetary mismanagement brings about this result, so much the better for the mismanagement.

Above all, people need to learn to assess such incidents without falling back into the misleading framework of Keynesian analysis. In particular, the inclusion of government purchases of newly produced goods and services in the calculation of GDP has worked much mischief over the years. The current wailing and gnashing of teeth over the government’s inability to produce its budgets responsibly and on schedule is only the latest occasion for such misinterpretation of the government’s role in the economy.

If only people could bring themselves to see the government for what, all in all, it is — a force for plunder, waste, and destruction — they might then have the wit to worry less about government spending cutbacks and to worry more about the manifold ways in which the government generates what I call regime uncertainty and thereby impedes real economic recovery and sustained long-term progress.

Robert Higgs is Senior Fellow in Political Economy for The Independent Institute, Founding Editor of The Independent Review, and the author of Crisis and LeviathanDelusions of Power, and other books.