I attended the New Castle County Chamber of Commerce Economic Forum for lunch yesterday. I had to leave just as Finance Secretary Tom Cook began his remarks and missed New Castle County Executive Chris Coons’ remarks. However, I did hear former St. Louis Fed President, and U of D economist professor in residence Dr. William Poole speak.

My takeaway from Dr. Poole was that there are 3 solutions to our government fiscal mess — raise taxes, cut spending, or inflate our way out. His position seemed to be that we will raise taxes, cut spending, or some of both. He didn’t think that the Fed would start to print money to inflate our way out of our mess. He is an economist which is why I think that he is wrong. I spent 6 years with politicians. Politicians do not think like economists. As a matter of fact, one of the fundamental problems with Keynes was that he expected politicians to act in an economically rational way which, of course, they don’t. That is why a Keynsian governmental stimulus does not work as theorized. (Maybe there should be a whole new area of behavioral economics called political economic behavior).

For the record, we should and can cut spending without cutting bone, and we should start now. You can check previous posts of mine to see how this would be accomplished. This type of productivity improvement has been made across the private sector for at least the last 3 decades. However, the liberals in Congress really don’t mind destroying the economy through tax hikes so they will be raising taxes on everyone. However, the ultimate solution that will be imposed will be inflation. The market understands this which is why the yield curve is getting steeper.

Taxes and inflation. A recipe for further disaster.