A front-page article in the New York Times today describes how the economic policies advocated by both John McCain and Barack Obama are the same old tired ideas that Republicans and Democrats have been advocating for years. McCain’s panacea is tax cuts for the rich and Obama’s panacea is redistribution of wealth to the poor. Both claim that their plan will provide economic salvation for the nation.
The Times is right and both McCain and Obama are wrong. These ideas are old and tired, and they are only going to cause more damage to the American people. The problem is that both presidential candidates, along with most Americans, refuse to acknowledge the real economic problems facing our nation, which are federal intervention and federal spending, both of which are soaring out of control on both welfare and warfare, with no end in sight.
Most Americans have been taught to believe that the president is responsible for “running the economy.” Therefore, one of the primary criteria that people use to decide who to vote for is which candidate will do the best job “running the economy.”
However, in a truly free-market economy — that is, one that is unhampered by government intervention — people plan and run their own economic activities. They open businesses or secure jobs in which they draw an income. They save, invest, donate, or spend their money on things that they consider important. They use the price system to guide their economic decisions. They coordinate their economic activities with others.
The result of all these trillions of individual decisions is an infinitely complex system that produces positive results, many of which are not part of anyone’s intention. For example, while a person working on a ranch in North Dakota is doing so because he loves working with cattle, New Yorkers who love to eat steak are the beneficiaries of the ranch worker’s actions in North Dakota.
The 19th-century French free-market legislator Frederic Bastiat once wrote an essay on how Paris got fed. Every morning Parisians would wake up to find that thousands of Parisian food markets were filled with foodstuffs on which people depended for their survival. Yet, there was no government agency planning and coordinating this vitally important task. Instead, the fact that Parisians got fed was, in the words of Friedrich Hayek, the results of human action, not of human design.
Thus, the ideal is a way of life in which everyone is free to plan his own life, freely enter into business relationships with others, keep the fruits of his earnings, decide what to do with his own money, and coordinate his actions with others. It is this process that raises standards of living for everyone, especially those at the bottom of the economic ladder.
When presidents “run the economy,” what they’re actually doing is damaging people’s economic well-being with rules, regulations, spending, borrowing, taxation, and inflation. “Running the economy” includes, for example, having the IRS collect taxes and or having the Federal Reserve print the money to “rebuild Iraq” or to send a federal grant to some friendly congressman for redistribution in his district. That means less money for people to use for their own plans. On top of the taxes and debasement of the currency, of course, are the hundreds of thousands of rules and regulations that interfere with people’s economic liberty.
As long as the American people continue to hope for a president who can “run the economy,” rather than demanding the freedom to run their own economic affairs, this damaging and destructive process will continue, with economic ruin and loss of liberty at the end of the road.