- May 20, 2010
- Reaction score
- Political Leaning
G20 drops support for fiscal stimulus - CNN.com
(FT) -- Finance ministers from the world's leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction.
The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, also dropped proposals for a global banking levy, instead giving countries leeway to do what they thought best for their domestic circumstances.
The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries' public finances. "The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability," the communiqué stated.
Proponents of free-markets have been saying as much for quite some time now. Government stimulus and expansionary monetary policy cannot facilitate the creation of wealth or prosperity; they only provide short-term relief to long-term problems, the equivalent of more drugs for a drug addict; they'll feel better temporarily, but the underlying malady remains and festers.
The previous article offers a convenient segue for a WSJ editorial written by Arthur Laffer:
Arthur Laffer: Tax Hikes and the 2011 Economic Collapse - WSJ.com
By ARTHUR LAFFER
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.
Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.
The free-market is being stifled by government interference, and free-market capitalism is being replaced by increasingly centralized economic and monetary tendencies. When will the ivory tower academics and elites learn the lessons of history, and when will they learn to keep their hands off the market?
The economic paradigm is shifting. Big government, big debt, and the centralized allocation of money and resources have proven to be historic and contemporary failures. Low taxes, minimal government, and the invisible hand will put us on the road to recovery and sustained prosperity.
Government is the problem, not the solution.