All politics is ultimately about economics. Most politicians get elected by convincing voters they are the best choice to help improve our economic situation. If they do not understand economic cause and effect they are incompetent as elected representatives. It is distressing that most media reporters and columnists lack sufficient knowledge of economics and economic history.

It is dismaying when I see someone suggest that President Reagan caused a huge budget deficit by lowering tax rates in the 1980’s, even though anyone with the slightest intellectual curiosity could discover that the lowering of tax rates resulted in the almost doubling of Federal tax revenues during the following 10 years. Not knowing or acknowledging that the deficit was caused by a tripling in spending by a Democrat-controlled Congress is either pure ignorance or deceit.

Last weekend President Obama and the Congress congratulated themselves on cutting the budget by $38.6 billion, less than 3% of the deficit. Virtually no one in the mainstream media pointed out how meager that is. Are they that uneducated?

We should be thankful that the new Republican-led House of Representatives has stopped the massive increase in spending by the Democrats, which in Obama’s first two years saw an increase of nearly 30% in federal spending compared to fiscal year 2008, the most staggering increase in Federal spending in USA peacetime history. Yet most of the Liberal media are telling us the sky will fall if we cut back the budget by 2-3%! Is much of the public that ignorant?

Federal spending during the past two years has been nearly double that of taxes raised. The deficit has been paid for by creating dollars out of thin air and some new borrowing.

The mainstream media, the President, and liberal Democrats do not seem to know or care that when a government creates money out of thin air without producing anything of value, you have more dollars chasing the same amount of goods. Prices go up. Our savings are being wiped out because we discover that we are spending more to buy the same amount as before.

It is obvious to anyone with a basic understanding of economics and finance that since people can buy less with their earnings, there will be less need for goods. That means more companies will have to cut back production and employees. More people will lose their jobs.

According to the Congressional Budget Office (CBO), the jobs created and saved by the 2009 economic stimulus packages cost an average of $228,055 per job. We now know that most of the money went to cover government deficits and pay salaries and their gargantuan fringe benefits in state, county and local governments, not toward the creation of new jobs.

The President and the liberal Democrats either do not understand basic economics or they do not care. Either way, unless the public gets educated in economic reality, things will get a lot worse. Putting your head in the sand will not make this terrifying situation go away.

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About the author

James F. Davis
James F. Davis is a Director of Accuracy in Media. He was an international banker for 20 years. Positions held include head of the International, Latin America and Real Estate Divisions.