As I’ve mentioned before on this blog, my friend Don Boudreaux has a great website with a fellow economist, Russ Roberts: www.cafehayek.com. Roberts was recently thinking aloud about the correlation between government spending and job creation. He does a nice job taking to task some of the Keynesian ideas on the topic. Toward the end of his piece, Roberts rightly identifies one of the main reasons for our current sluggish economy:
“The simplest answer is that businesses are not investing. Investment is still very low. I’d like to hear the case of how government spending lots of borrowed money encourages business to invest. It would be a hard case to make. It seems to me that government spending of borrowed money, especially on unproductive stuff, discourages business investment.”
And with the current state of uncertainty in the business world due to Congress’s gross negligence of the tax margins, we can expect that businesses will continue to refrain from real investment for awhile.