Growing the Economy: Separating the Myths from the Facts

"Government policies can have a huge effect on the U.S. economy—and on the family bank account. Policies that try to transfer income from one group to another are based on myths, not reality. They do far more harm than good. In contrast, if public officials will pay attention to the lessons of history and common sense, avoid short-term “stimulus” gimmicks, and instead enact reality-based economic reforms, they can put the country back on the road to sustained prosperity." So end the concluding author remarks of a new Heritage Foundation booklet: "The Economy Hits Home: What Makes the Economy Grow?".

The authors for the booklet are Leslie Carbone [author of Slaying Leviathan: The Moral Case for Tax Reform (Potomac, June 2009)] and Jay Richards [author of Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem (HarperOne, May 2009)]. You won’t need a degree in economics to follow these authors. And the graphs and supporting material are great! The authors present a common sense approach to help expose some popular but mistaken myths about the economy. You will want to download, save, read and share this information with others in the coming days as we hear the false myths repeated by the government buracracy. As detailed in the report:

[E]conomic growth is not the consequence of government policies or of some master economic plan. It results from millions of people individually seeking what is in their own interests by providing what is in the interests of others, and the collective consequence of their actions is to increase the number of jobs in the economy, the wages earned by workers, and the income and wealth of the nation. But lawmakers rarely admit these realities. The idea of transferring income from families and businesses to government gets repackaged in all sorts of creative but deceptive ways. We hear talk about stimulating the economy, creating jobs, putting people back to work, bailing out allegedly critical industries, and making the rich pay their “fair share.”

The following myths, all variations on the same theme, are exposed by the authors:

MYTH #1: Government spending grows the economy by pumping new money into it. FACT: Every dollar that government “injects” into the economy must first be taxed or borrowed from families, businesses, or other nations.

MYTH #2: Government spending makes people more productive. FACT: Government spending often encourages behavior that has bad economic consequences.

MYTH #3: The federal government should bail out faltering industries and states to revive the economy. FACT: Bailouts harm the economy because they reward reckless private and state spending, leaving it unchecked and effectively encouraging more of the same in the future.

MYTH #4: Public works projects stimulate the economy by creating new jobs. FACT: In the short run, public works projects have no real effect on overall unemployment. They simply displace resources that could be used to create jobs in the private sector and move those resources to the government payroll.

MYTH #5: Tax cuts simply pad the pockets of the rich without helping a weak economy. FACT: Smart tax cuts encourage work, savings, and investment to help stimulate economic growth that benefits people across the board.

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Tags: economic development, Heritage Foundation, Jay Richards, Leslie Carbone, Myths, the economy To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!