If this week has proved anything it’s Bastiat’s famous dictum: Government is the great fiction through which everybody endeavors to live at the expense of everybody else.
When asked by U.S. News and World Report what he thought about bailing out consumers deep in all sorts of debt, Ron Paul, channeling Bastiat, answered, “If they’ve spent more money than they’ve had and can’t pay their bills, they have to either quit spending and work hard to pay off the debt, or, if [necessary], file for bankruptcy. But they shouldn’t ask other people, who may be poor themselves and just barely making it [for help.] If you ask taxpayers to do it, someone else gets stuck with the bill. Someone else always has to pay the price. This idea that there are no victims, that’s a fallacy.”
This may as well be the lesson of political economy…someone always has to pay the price. How are we going to finance these bailouts? Either massive inflation, taxation, or borrowing. Though this might temporarily stave off recession, it will also stave off the correction. Markets need to correct themselves.
With Bastiat’s aphorism in mind, it shouldn’t be too hard to understand why 61 Nobel Laureates recently endorsed Obama after he promised to double NIH funding.
On the free market people choose for themselves what they feel comfortable spending. The hallmark of the planned economy is that someone other than the individual decides how he spends his money. But if economists have taught us anything, it’s that the fiction of socialism is untenable and leads to ruin, poverty, and war.