The 'forgotten people' are already doing something for economic recovery
By: Steven Horwitz, OpEd Contributor
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February 13, 2009
As I sat watching President Obama explain the so-called stimulus package Monday night, I felt several times that he was speaking directly to me. He kept saying that doing nothing is not an option, which is precisely what I would propose the government do.
Like many of the forgotten people in America, I have strongly recommended that the government do nothing to bring us out of this deep recession. But I know we're going to lose the argument. The debate now is really all about what politicians should do, not what the American public should do.
To my way of thinking, economic recovery requires the creation of wealth,something Congress is not even remotely capable of achieving. By contrast,the American people are already doing something to create wealth and hasten the recovery, even if we are the ones forgotten in the battle over what Washington should do.
Americans are going to work every day and providing for their families, they are increasing their savings rates, making much needed capital available to the private sector, and they are imagining new and more efficient ways to use valuable resources.
As wrapped-up as politicians are about solving this problem, they forget that it is individuals, families and companies that have the local knowledge and strong incentives to fix economic problems.
Rather than helping, when politicians attempt to "do something," they actually interrupt the delicate processes by which millions of Americans do business.
It is analogous to what we tried to do in Iraq militarily. Even with the best of intentions, we stumbled blindly into what were very complex challenges. Improving an economy in a recession is a challenge of the same sort.
Those of us critical of the stimulus package are very much in favor of action, we just differ on who knows best what action to take. Every day in the market, millions of products get made, shipped and sold, from the simplest pencil to the most complicated computer.
Individuals, households, and companies use exchange, contracts, prices and the other institutions of the marketplace to coordinate their behavior without central direction. All of those people are "doing something" to create wealth, but because they do it without a plan or package or program from Washington, they are often overlooked when the politicians take center stage.
When Obama asserts that only government has enough resources to get us out of the current situation, he conveniently overlooks the fact that the resources government makes use of are created by those same forgotten people.
And the trillion or so he says Uncle Sam needs to spend is money the government has to acquire by taxing guess who or borrowing from you know who.
The more that government taxes and borrows, the more costly it is for small entrepreneurs to expand and for families to pay for college. And the interest on government borrowing will be paid for by yet another group among the forgotten people-- generations to come.
The president was certainly confident and articulate in his first news conference. I was, however, struck by the irony that the stimulus package would be impossible were not for the forgotten "doing something" already to generate wealth, yet the package when enacted will make it harder for them to do so.
The sound bite of the moment, that our government must act quickly, carried the day. The media in attendance seemed to forget the fact that it was government programs to address low home ownership rates and stingy credit that caused the downturn in the first place.
Politicians may try to take the credit when we finally climb out of this hole, but in reality it will be the forgotten people who will have solved this crisis. They do not need to be stimulated by a wheelbarrow full of Washington pork.
They just need to be remembered as the ultimate source of wealth and left alone to do what they can do to create it. Forgetting that wealth ultimately comes from everywhere but Washington is what got us into this recession in the first place and continuing to forget it is not the path to recovery.
Prof. Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University, Canton, N.Y., and author of “Micro-foundations and Macroeconomics: An Austrian Perspective and Monetary Evolution, Free Banking, and Economic Order.”
