Writing a column on CJ today, Roy Cordato tries to explain why it’s misleading for politicians (and pseudo-economists) to contend that “austerity” will damage economic growth. Government spending, contrary to the assertions of the likes of Obama and Clinton, does not stimulate production. All it does is to transfer wealth and resources away from the productive sector of the economy and into the control of politicians. Austerity for the state (that is, less government spending) means more output of goods and services people want and more jobs where people are creating value. Many government jobs create little or no value.
In short, the Keynesians and statists ignore one of the fundamental concepts of economics — opportunity cost.
