Liberty Letters: the dishonesty of deficits in a free society

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by Steve Farrell

Keynesian deficit spending is dishonest on many fronts. In Ludwig Von Mises 1952 lecture series, “Marxism Unmasked: From Delusion to Destruction” (released for the first time under the sponsorship of The Freeman magazine), Mises gives us one example:

Credit expansion is fundamentally really a problem of civil rights. Representative government is based on the principle that the citizens need to pay to the government only those taxes that have been legally promulgated in a constitutional way: “No taxation without representation.” However, governments believe they cannot ask their citizens to pay as much in taxes as is needed to cover the whole of government expenditures. When governments cannot cover their expenses out of legally enacted taxes, they borrow from the commercial banks and so expand credit. Therefore, representative government can actually be the instigator of credit expansion and inflation.

If the institution of credit expansion and other types of government inflation had been invented in the seventeenth century the history of the struggle of the Stuarts with the British Parliament would have been very different. Charles I [1600–1649] wouldn’t have had any problems in getting the money he needed if he could simply have ordered the Bank of England, which didn’t exist in his time, to grant him credit. He would then have been in a position to organize an army of the King and to defeat Parliament. This is only one aspect.

Mises is right; though he is wrong about the principle of representation instigating it - is he an economic determinist on this point? - for the instigators are dishonest politicians inspired by a Fabian despiser of capitalism.

And those “principled,” “conservative” politicians in the Republican Party who now promote such “stimuli” like the Holy Grail under the guise of tax cuts, rather than the truth, that they are borrowing the difference (with interest), thus continuing the the expansion and grasp of the state, reveal themselves as far less principled, and conservative, as their constituents suppose.

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Filed under Deficit Spending, economics, ludwig von mises

Tags: liberty letters, politics, government, steve farrell, conservative, libertarian, libertarianism, representative government, conservatism, john maynard keynes, republican, deficits, keynesian economics, no taxation without representation, consent, united states constitution, charles I, bank of england, credit expansion, economic philsophy, marxism unmaksed