Government spending does not create wealth

Prior to the pandemic, the federal government collected more money in tax revenues than ever before in American history – $3.5 trillion.

And that was after the Trump tax cuts, which increased middle-class household income by $4,000 in just three years (compared to only $1,000 per household gain under Obama in eight years); and reduced unemployment to a 49-year low (compared to the highest jobless rate for any administration since the end of World War II under Obama).

However, none of this keeps the Democrats from repeatedly claiming that the Trump tax cuts overwhelmingly benefited “the rich.” But the data doesn’t bear this out. In fact, the tax savings of families earning be tween $50,000 and $100,000 was three times as much as the tax savings of those families earning over $1 million.

As you can see, it wasn’t just the proverbial “rich” getting richer. It was the poorest Americans whose household incomes increased the most, as a percentage, during the Trump presidency.

Yet Joe Biden called all of this, just last month, “the most unequal economic and job crisis in modern history. He promised, “Help is on the way.”

But what kind of help? Well, he’s planning on $4 trillion in new taxes, which is the biggest tax increase since the end of World War II, by the way. He’s laid out $11 trillion in new spending. He’s planning to eliminate the Trump tax cuts on day one.

It’s estimated that the Biden administration will oversee an increase of deficit spending totaling $7.4 trillion by 2030 (and that’s after raising corporate taxes by 15%).

They’ll start with $2.4 trillion of additional coronavirus “stimulus” spending, then $2 trillion for the New Green Deal, then $1.5 trillion for the expansion of Obamacare (soon to be known as “Bidencare”) and then nearly $1 trillion for “free” college.

The spending of trillions of dollars is a continuation of the Obama administration’s belief in Keynesian economic theory and the “multiplier” effect: This is the theory that presupposes for every $1 in government spending, there will be a greater than $1 economic activity that results. This is why folks like Nancy Pelosi believe that extending jobless benefits “creates jobs faster than almost any other initiative you can name.” But it’s a fallacy. How?

Well, first, governments do not create wealth or prosperity. Governments can influence the distribution of wealth through economic policies by providing financial incentives, but they do not create it, regardless of how much they spend. They merely move it around. Wealth is created by a free market system that rewards efficiency and where innovation flourishes. It creates an environment where our God-given gifts are realized to their full potential.

Secondly, government spending does not create wealth because the source of government spending is tax revenue from taxpayers.

If the government doesn’t have the money to keep up with its expenditures, it will need to borrow it. If you are the federal government and can’t borrow it, you start printing dollar bills. Of course, each dollar printed diminishes the value of the dollars already in circulation. As King Solomon wrote in Proverbs, “The borrower is servant to the lender.” Simply put, a weak currency leads to a weaker nation.

If you take Biden’s $11 trillion in new spending to “stimulate” the economy, you are “robbing Peter to pay Paul.” You are borrowing money from the nation’s left pocket and putting it in its right pocket. You cannot boost the wealth of the country this way; you are merely redistributing it.

Now, we have been over this ground before. During the Obama administration, Congress spent nearly $800 billion to create jobs, supposedly to build an economy that “would work for everyone.” Instead, unemployment rose from 7.6% to 9.3% (with an effective unemployment rate of 16.2%, when you count the unemployed folks who have given up looking altogether).

Then there was the time the Obama administration spent nearly $17.2 billion for the administration’s “green” energy programs and yet only created 3,545 permanent jobs, at the cost of $4,853,000 per job. And that’s on top of the bankrupt Solyndra, who took $545 billion in government-backed loans to build solar panels.

Democrats refuse to learn what the Nobel-prize winning Chicago-school economist Milton Friedman said many years ago:

“There is no such thing as a free lunch.” He said this to explain the reality that if any goods or services seem “free,” this is only because you are paying for it some other way.

The problem is that many of us won’t end up paying for this “free lunch,” but our children will, and our children’s children will.

Sure, Joe Biden may promise “help” is on the way, but if history is any guide, that simply can’t be any help at all.

Louis R. Avallone is a Shreveport businessman, attorney and author of “Bright Spots, Big Country, What Makes America Great.” He is also a former aide to U.S. Representative Jim McCrery and editor of The Caddo Republican. His columns have appeared regularly in 318 Forum since 2007. Follow him on Facebook, on Twitter @louisravallone or by e-mail at louisavallone@mac.com, and on American Ground Radio at 101.7FM and 710 AM, weeknights from 6 - 7 p.m., and streaming live on keelnews.com.