Lead, Follow or Get out of the way!

1-question multiple choice test:

What should be the government’s role in the economy:

a) Government should lead the way out of the recession!

b) Government should continue to follow the current track they are on!

c) Government should get out of the way, so this recession can end!

None of the above answers are correct.

Answer A is incorrect because it takes wealth to exit a recession. Wealth is defined as “any asset that has an exchange value in the marketplace.” It is created by people through innovation, creativity and efficiency. Individuals use their skills and knowledge to create products and services that others are willing to pay for. Wealth can be tangible (e.g., products) or intangible (e.g., skills). On the other hand, the government does not create wealth. For any government initiative or program, it must take resources from those who are the wealth creators, the people. When the government touts “shovel ready jobs” or “growing the economy”, it must use the resources of others to implement. If the government does not create wealth and does not have the knowledge to create it. Therefore, it cannot lead the way out of the recession.

Answer B is incorrect also. Technically, the government has conducted three stimulus programs. The first occurred in the summer of 2008. Americans making less than $75,000/year were sent $300 checks. The hope was that the $300 would be spent on items in the marketplace which in turn would stimulate the economy. Similar to the Cash for Clunkers program that the Obama administration hoped would stimulate the economy through car purchases.  Both were unsuccessful.  The second stimulus of 2008, consisted of $700 billion that went to the Treasury Department for the purchase of “toxic assets” (e.g., JP Morgan Chase, Bank of America, etc.). Now, we are on the third and latest stimulus that occurred in the first quarter of 2009, $787 billion. What is changed? Unemployment, foreclosures and the deficit are up while consumer spending, consumer confidence and the other measures that drive our economy are down.

Answer C is incorrect because the government does have a role in the free market enterprise. It has a verylimited role.

According to Heritage.org, “government can provide a

stable environment for economic growth when it can be depended upon to maintain the stability of the currency, enforce and defend property rights, and provide oversight that assures private citizens that their transaction partners in the marketplace are held accountable.” More specifically, the government is to create an environment where property rights are honored, predatory practices to eliminate competition are eliminated and contracts are enacted as promised.

When the government enters the private sector, it does not endure the process of marketplace competition such as supply/demand pressures, resource allocation, pricing analysis and, even marketing. Government enters the marketplace as a monopoly. In addition, when it loans money to private sector companies in exchange of ownership, it becomes a majority stockholder in that company. As the majority stockholder, the government owns the authority to tell the company how to conduct its business.

It is the government’s role to support the private sector not compete against it. The government’s credibility as overseer of the marketplace is questioned when it enters the same marketplace it seeks to regulate.

As your legislator, I am re-evaluating the role of government. I support legislation that tells government to create a hospitable environment for small business owners and large companies. A 10.1% unemployment rate for Georgians is unacceptable and shows there is much work to be done to get Georgia back to work.

No one person has all the answers to what we’re facing. However, when we work together we don’t just create a good solution but the best solution for Georgia. I invite you to contact me with any ideas, questions or concerns.

For further reading:

Heritage.org: The Economic Role of Government: Focus on Stability, Not Spending

http://www.heritage.org/Research/economy/bg2316.cfm

Economist.com: Government:

http://www.economist.com/research/economics/alphabetic.cfm?letter=G#government

Forbes.com: Does Stimulus Stimulate? The Role of Government in Economic Recovery:

http://www.forbes.com/2009/01/22/stimulus-keynes-taxes-oped-cx_bb_0123bartlett.html

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~ by hunter7taylor on October 18, 2010.

3 Responses to “Lead, Follow or Get out of the way!”

  1. Hey, I attempted to email you pertaining to this post but aren?t able to reach you. Please e-mail me when get a moment. Thanks.

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