Is Deficit Spending the Problem?

Yes, it’s a problem. No, it’s not the real problem. The real problem is a lack of primary focus on what matters. What matters are fundamentals.  Not focusing on what matters results from not understanding what really matters and a constant distraction by people with megaphones, columns, blogs and other vested media and commercial pecuniary interests who promote misplaced and, in many cases, just erroneous analysis of and solutions to problems.

The American media, including the ranting right which lays claim to a more balanced agenda, just simply cannot bring themselves to focus on basic, fundamental issues. For reasons that TheFundamentals doesn’t grasp, they prefer to focus on a partisan agenda and occupy valuable and wasting time on topics of no import. It appears that they believe that this programming attracts more viewers than a worthwhile focus on the real problems in our country.  They are more interested in lining their pockets than informing their audience.

If you believe that deficit spending is the best way to counter a drop in consumer demand even in the face of massive preceding deficits, then you are not grasping the problem. Many problems manifest themselves in symptoms. Symptoms are not the problem; they are the indicators of a real problem – something systemic or something basic or something fundamental. Stimulus spending cannot solve a fundamental problem. And, after years of stimulus spending, it just aggravates the basic problem. It actually feeds the problem. It actually makes the problem worse.

What creates consumer demand, you ask?  People working in wealth creating jobs who are confident about their future.  The most basic essential of a thriving, growing economy is the ability to create wealth. This is the fundamental; this is the foundation; this is the essential that must be grasped or all else is lost. America has lost focus on this essential.

If you can grasp that wealth creation is the most basic essential of a thriving, growing economy then you can move to the second most essential component of growth and that is the promotion of competition.

Let us just stop for a moment and ponder these two essentials. A growing economy is based on wealth creation and wealth creation derives from several essential activities (see: TheFundamentals, February 4 and July 6, 2009). In order for a growing economy to survive in a larger environment; a community of other growing, thriving economies; it must promote competition. Not be neutral on the topic of competition and most certainly not be negative. If you think competition will come naturally you are wrong. It will not. There are too many forces that will seek protection and, no, they do not seek protection by asking directly for protection in most cases. They seek protection under the guise of lofty goals and betterment. Lofty goals have become a part of America's economic mythology.  Betterment is selfishly directed.  It betters those who seek protection.

America is no longer an economic growth machine. It relies on mythology about its past accomplishments and blunders around the globe with its confused and short sighted foreign, military and trade policies. But back home it has chosen protection and favoritism of special interests over competition. And that folks is not a symptom; it is the problem. It is the problem that is known to all but those who should and can do something about it.

What will get our focus back on wealth creation and competition? We don’t know. We just don’t know. The corrective actions that the marketplace forces on us are now being countered with activities (deficits and debt; stimulus and bailouts) that build a greater problem and, the obvious need for an even greater correction in the future. Our competitors know that we are on a path of self destruction. They will speak among themselves about it but they will not force or encourage corrective action because they know it will ultimately arrive and they do not want their fingerprints on it.   They know that they will be the beneficiaries of its arrival.

There are only a few paths to correct America’s real problem. Eliminate the years of laws, rules, taxes, spending, regulations, bureaucracies and policies that either burden wealth creation or suppress competition. When that job is done, get about promoting rules and policies that promote wealth creation and competition. Protected groups, special interests and millions of their beneficiaries will holler (remember the line from Summertime Blues, “I’m gonna raise a fuss, I’m gonna raise a holler”) and complain and spread fear of doom. When that occurs and their fuss occupies the media; then, and only then, will you know that help is on the way. That the problem; the real problem; not the symptom, is being corrected.

Let’s just repeat this simple truism. You will know that the real problem is being corrected when the forces that burden wealth creation and suppress competition are occupying regularly and consistently the attention and focus of the media, regardless of political leaning. Until that happens the problem is just getting worse.