Clear thinking about economic progress and the role of government

Now that Joe Wurzelbacher, aka “Joe the plumber,” has shown Republican politicians from coast to coast that it’s possible to discuss economics effectively (i.e. government taxing and spending issues) , we decided to post a couple of excerpts from economists James Gwartney and Richard Stroup.

A few years ago the Prairie Centre Policy Institute published a piece based on their book “What Everyone Should Know About Economics and Prosperity.”

Much of it is common sense – what follows below is an abbreviated version. Read the original here.

1. The role of government is to protect the rights of individuals (life, liberty, and property) and supply goods and services that cannot be provided through markets.

2. Government is not a corrective device. While people tend to think that government can solve all their problems, it can’t.

3. The real cost of government is: a) the decline in private sector output that results from the government’s use of resources; b) the cost of collecting taxes; and, c) the unrealized gains from exchanges squeezed out by government.

4. Unless restrained, special interest groups will use the democratic political process to fleece taxpayers. Unfortunately, democratically elected officials often gain support by favoring special interest groups at the expense of the general public.

5. Unless restrained, legislators will run budget deficits that are often harmful to the economy. Debt is a politically attractive alternative to taxation because it pushes the cost of government on to future generations.

6. When government attempts to help some people at the expense of others, resources will move away from production and toward plunder and economic progress will be retarded.

7. The cost of government income transfers will be far greater than the net gain to the intended beneficiaries.

8. Government central planning of an economy merely substitutes politics for markets, which will waste resources and retard economic progress.

9. Competition is just as important in government as in markets.

10. Constitutional rules that bring the political process and sound economics into harmony will promote economic progress.

In the last, #10, this sentence is included:

“Both history and economic theory indicate that democratic elections alone cannot establish an environment conducive to economic progress.”

If the polls are to believed, we are about to see the worst manifestation of an economic climate few thought possible.

Up next: Common sense economics – Ten things every candidate and voter should know.