Book Review: John Tamny's "The Deficit Delusion"
You Cannot Avoid the Consequences of Avoiding Reality
Economics is not hard, but with different factions of economic science competing for university or government benefits, the subject is riddled with man-made complexity.
As a result, the precepts surrounding federal government spending are wrong and dogma rules the day. When universities are funded by government “research” grants and student “loans,” objectivity becomes optional. And when there is little concern for cause and effect, good intentions are all that matter.
In that environment, does John Tamny’s latest book, The Deficit Delusion, become a badly needed intervention for academics, the credulous, and this reviewer? “Clown question,” as Tamny repeatedly quotes baseball great Bryce Harper.
And because long-held beliefs are the most difficult to throw off and replace (most people never do), repetition is necessary. Moreover, it takes a talented communicator who knows the landscape to help people gin up their courage and do so. Meeting the challenge, Tamny introspects,
“How could someone who loathes government spending, but who doesn’t blame debt on government spending not see the government debt as the problem? Better yet, how could this individual see projections of future debt as a bullish signal while loathing government spending and government debt in parallel fashion?”
But for peer confirmation, there is none. As the subtitle of the book asserts, everything the left, right, and supply-side tells you about the national debt is wrong. While “the left” favors more government spending, “the right” favors less government debt, and “the supply-siders” favor lower tax rates – all of them are delusional about a “looming debt crisis” that is merely a symptom. In fact, the academics and think tankers encourage the disease behind the chronic deficit spending.
In effect, The Deficit Delusion is a book about causes - and that is radical. It deals with the fundamental nature of wealth creation and is far-reaching. Consequently, it is politically neutral. The partisans may have different priorities and remedies, but the book’s moral compass points to the integrity of money, the free flow of risk capital, and the immense knowledge of markets:
“Production is the only way to increase demand. Which is a reminder that government spending and wealth redistribution don’t increase demand as much as they shift consumptive power into other hands.”
Which leads to another important theme of Tamny’s book – and just as radical: government does not create money. Or to quote Tammy, “money printing as the source of demand presumes ferociously dumb producers.”
To reinforce his defense for all that is good, Tamny asks, “They really want us to believe that a creation of government can meaningfully fund government?” Clown question. In her epic 1957 novel Atlas Shrugged, novelist and philosopher Ayn Rand (through her heroine Dagny Taggart) asked: “We never had to take any of it seriously, did we?” she whispered. “No, we never had to.” (answered John Galt).
The important premises to know are that money is production and government’s purpose is to spend. It produces nothing. Furthermore, production creates demand and producers are not stupid. Repeat that over and over - as Tamny recommends. Creators will not exchange their valuable wares for flyers from government snake oil salesmen. The corollary to that is money in circulation is the only money supply that matters, and it will always maintain its ideal level. Money flows to production.
In that regard, Tamny stresses that money is never easy. On the contrary, money is ruthless and money that is loaned is the most ruthless. It expects to be paid back with a profit under demanding conditions. Yet, for entrepreneurs with marvelous ideas for a brilliant future but no current revenue, nothing is more scarce than the money they need to succeed or fail.
On the other hand, “government has legal access to the wealth produced in the private sector.” That is the cause of the debt, and its effect is: “the surest sign we don’t have a debt crisis is the debt. Get it?” Repeat that over and over again. Trust me. And study John Tamny’s book. For good reason.
The debt our children will owe is chump change compared to the bloated, corrupt, incompetent, money laundering protection racket they will inherit. One that is paralyzing their aspirations as you read this word.