The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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A Time and A Place

During the Great Depression, Democrats faced a moribund economy and needed to jump-start it.  To do so, they adopted Keynesian economics which calls for deficit spending.  This is sometimes called “demand-side” economics and is the mirror image of “supply-side” economics, which has been adopted by Republicans.

One calls for the government to increase its demand for goods & services, while the other calls for businesses to increase the supply of goods & service whenever they get a tax cut.  BOTH jump-start stagnant economies, and BOTH cause huge government deficits, and BOTH promise the deficits are temporary, which will decrease over time, as the economy gains strength.

Does either approach make sense now, in 2017?  NO!  This is time for Austrian economics.

Nobody likes to admit the economy is doing just fine.  It doesn’t need to be jump-started.  Trump’s cutting of red-tape will do more good for the economy than a tax cut will.  When the economy is doing well, you don’t cut taxes — you should repay debt incurred during the last round of supply-side or demand-side deficit creation.  That’s the Austrian approach, i.e., balance revenue & expenses whenever possible and keep debt minimal.

President Trump is drinking the supply-side Kool-Aid, when he actually needs a good Austrian beer!  Let the economy grow and use the surpluses (once we get some) to repay debt.  Cutting spending is good, cutting taxes is not . . . at least, not now!