In the March 6 edition, Mr. Rod Livdahl presented a lively and articulate apology for the tax/borrow/spend insanity running amok in our country. The presentation lacked only one component of importance—accuracy.
Mr. Livdahl proudly observed that our current debt to EDP ratio (102.9 percent) is lower than it was at the end of WWII, but forgot to put that figure in perspective. Russia is at 8.8 percent, Hong Kong at 4 percent, and China at 16.3 percent. The average for all countries, including Greece, is around 50 percent, which economists consider the safe upper limit for that statistic. Current projections have our ratio of debt to EDP rising to 112 percent by 2016.
Mr. Livdahl correctly alluded to our remarkable post-war growth. His analysis for the cause of that growth is suspect, however. He attributed the recovery to government spending for infrastructure, such as the Interstate highway system. But, the interstate system didn’t even begin until 1956, 12 years after the end of the war, at which time the recovery was an accomplished fact. The other infrastructure projects he mentioned were done by local governments, and were economically insignificant in scope.
Another point that Mr. Livdahl failed to consider was that the Truman government eliminated the war taxes, which freed up the capital necessary to fuel private industry. A valuable lesson could be learned from that. Cutting taxes led a quick recovery from a long and painful depression caused and sustained by massive government spending and foolish regulation.
I don’t know how old Mr. Livdahl was during the Reagan years. Those of us able to remember that period recall an era of unprecedented prosperity and growth, standing in contrast to a dismal time of recession under the previous administration. The turnaround was unquestionably the result of lower taxes and reduced regulation. Reagan inherited a bigger mess than Obama did, and had it cleared up well before his next election. Obama took the opposite approach and we sank deeper into the doldrums.
The evidence has been out there for thousands of years. government control, whether monarchy, dictatorship or quasi-democratic excess, has produced poverty and misery wherever it has existed. Free enterprise has always produced prosperity and happiness. Freedom is more successful than “sensible politicians.”