Bear Mountain Bull

As BMB has said before — if you don’t spend your money, the government will spend it for you.

From Peter Schiff:

While Obama commended millions of American families for making the hard choices to reduce spending, pay down debt and replenish savings, he later outlined the government’s intention to spend every American household deeper into debt, thereby undermining all the good that personal austerity would have otherwise produced.

Obama also made the clear-eyed observation that the foundation of our economy was unsound and that a sturdier one needed to be laid. To do this, he even asserted that we need to import less and export more. This has been one of my fundamental points. Our economy is unsound precisely because it is built on a foundation of consumer debt. Instead of spending for today, we need to invest for tomorrow. However, we cannot save more unless we spend less. Production requires capital, which only comes into existence when resources are not consumed.

However, by interfering with this process, Obama prevents the very transformation he acknowledges must take place. When the government spends what individuals save, private investment is crowded out. Society is deprived of the benefits such savings would otherwise have brought about. How can we lay a solid foundation if the government takes away all our cement?

This brings up an oft-repeated, but oft-forgotten, point: government does not have any money of its own. It only has what it takes from the rest of us. If individuals repay their debts, but their government takes on additional debt, we are all simply swimming against the tide. All forward progress is lost as private debt is replaced by public debt, which must be repaid by private individuals. Whatever gains individuals hope to achieve are negated by the higher taxes or increased inflation necessary to repay their share of a larger national debt.