April 27, 2010
– Comments (3)
According to the American Institute for Economic Research (aier.org), Congress has raised the borrowing limit of the United States government nine times since 2002. Although Dr. Galbraith is correct to point out that the cost of servicing our national debt is relatively low, and thus is, in the short-term, not a major problem (especially if government utilizes its leverage to make smart investment decisions, which it seems to rarely accomplish), Peter Schiff correctly points out that when federal deficits compete in the capital markets they tend to crowd out private investments and raise interest rates. Higher interest rates result in higher debt servicing costs and thus higher opportunity costs for the United States government. It's relatively simple mathematics. The United States government either has to use its leverage to invest in programs that make long-term sense (by reducing long-term costs and general government expenditures), or it has to increase its receipts, e.g. taxes, or do both. Dr. Galbraith, although correct in his short-term orientation, ignores problematic long-term challenges and thus, in my view, unless other information is made available to me, is rather silly.
Near the end of this video, Galbraith states that "if markets are as inefficient as you say, then we should tax and regulate them!"
First, Austrian School economists and their followers like Schiff, make no claim that markets are efficient in the first place. They do not support Efficient Market Hypothesis. So Schiff would always say that markets are inefficient. Would Galbraith claim otherwise? He can't if he rejects the value of gold as illogical, which he did in the video.
Second, why does it follow that the inefficiency of markets requires taxes and regulation? Markets have always had inefficiencies. How does taxing and regulating them improve the situation? And let's just say that if Galbraith's dream of a perfect, noble, Progressive government ever did tax and regulate markets in a perfect way, that still doesn't address the moral issue that taxes and regulations (which is a tax) are forms of theft and I thought we all agree that stealing is wrong.
Finally, Galbraith wrote a book called The Predator State. My friend bought this book and we flipped through it for laughs, and boy what laughs did it provide! Galbraith has the gall (or ignorance or plain stupidity) to claim that FEMA shows the failure of free markets.
Yeah, and this guy teaches economics to thousands of college students every year. Wow.
David in Qatar
Galbraith is yet another one trick pony statist.
He'll always advocate higher taxes regardless of the size of the government debt or the interest payments incurred to pay for it.