Saturday, March 26, 2011

Davidowitz on What He Would Do About Our Economic Woes

For my money, one of the most entertaining economic commentators working the circuit is Howard Davidowitz. He was recently interviewed on the newly-named Daily Ticker by Henry Blodgett about what he would do to get us out of our current economic mess. You can watch the interview here:

Davidowitz is surely right that our current path is unsustainable. The idea that annual budgets over a trillion dollars is the new normal is foolish in the extreme. He is also right that the actions by the Federal Reserve over the past several years has done tremendous damage to the value of the dollar. He is also right that if the value of the dollar drops enough for it to no longer serve as the world's reserve currency, things will get very ugly very fast.

Regarding his suggested solutions, he is absolutely right that we need to get our fiscal house in order, but the best way to do this is to cut spending, not to raise taxes. It is true that we could raise taxes enough to balance the budget, but the true drag on the economy is not the deficit, but spending, regardless of how it is funded. If we raise taxes to balance the budget, the higher level of government spending still sucks capital out of the hands of private entrepreneurs and places it into the hands of government bureaucrats, reducing our productivity and prosperity.

Davidowitz is also right that when he says we need to deal with our entitlement problems, if by "dealing" with entitlements he means getting rid of them. What he is really saying is that we need to dismantle the welfare state. Another thing way to greatly help our fiscal situation is to halt our adventures in foreign military intervention. Our bombing of Libya has already cost us hundreds of millions of dollars.

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