The Austrian School of Economics foresaw this years ago. The standard of living for Americans is going to be much lower for many years to come because of the government created financial boom. The financial stimuli that the government is throwing at the problem is only going to make our standard of living that much worse.

“The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.” To paraphrase Ron Paul, an economy that lives above its means is destined to live below its means. The price of homes and schools were way too high-price of schools are still way too high. Economic sanity is going to return the American culture.

The end of American consumerism is a good thing. There will be no more going to malls because we are bored and buying useless crap because we have nothing else to do. The pain is going to come no matter what government does. The government can affect how painful it will be. It can make it less painful by getting smaller and decreasing spending. it can make it worse by getting bigger and increasing spending.

In true government fashion, it has chosen the latter route. It tells us it is here to help. It speaks as if no government action will result in the end of the world. The reality is that increase in government will make the problem many times worse than it already is.

Not that it should be a surprise to anyone who understands politics and economics–they always go hand in hand–but, the stimulus bill being pushed through into law contains many things that may not boost the economy. The only thing we hear about is how we need to act immediately to combat the worsening economy. No politicians talk about how the use of money in the stimulus is actually going to stimulate anything.

I’m under the impression that these politicians have no idea how or even if all this spending is going to “stimulate” the economy. If they were masters of economics, they wouldn’t have to rely on the rest of us to provide them a living. The one thing politicians are good at is taking other people’s money–by force of government–and then spending it recklessly on projects they deem important or necessary.

It is economic fact that central planning does not work and it only makes society poorer. The United States has been the shining light for prosperity because of the freedom of our markets. They have never been truly free but, still freer than most other places.

The idiocy of all the economic policies coming out of Washington is that they are all central planning tactics. We know what works and we know what doesn’t. Why are we constantly trying to use what doesn’t work?

It is more than possible that we need to rebuild some of the infrastructure in this country and that we need to find alternative forms of energy. The question is not if we need it but, does government know better than the rest of us if we need it.

And of course, do you take money from someone in California to build a bridge in Minnesota? The obvious is answer is, no. What all these stimulus bills and government works projects does is exactly that, take money from one person for the benefit of another.

There is nothing wrong with charity however, an attribute of charity is that it is voluntary. If one cannot opt out, it is stealing. It doesn’t matter if you use the barrel of a gun or the force of government. Thievery is thievery.

At best this stimulus package will shuffle money around and by pure luck the end result will be close to the optimal result the free market would have made. At worse, this bill will plunge the American economy into an even greater recession/depression.

No entity or person is capable of making better decisions faster than hundreds of millions of people making decisions with their money several times a day. To believe that you know better than the independent decisions of millions of people is incredibly arrogant to say the least.

Yahoo! has an interesting story today about 15 Companies That Might Not Survive 2009. Most of the companies on that list I would not mind seeing perish. The only one that I would like to see remain is Six Flags! I like roller coasters. According to the article:

Six Flags. (SIX; about 30,000 employees; stock down 84%). This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moody’s expects cash flow to be negative in 2009, and if consumers aren’t spending during the peak summer season, that could imperil the company’s ability to pay debts coming due later this year and in 2010.

Well then, I might want to get going to Six Flags this year for the last time. Blockbuster, Rite Aid, Sbarro, and Krispy Kreme are on this list as well. I have no love for Blockbuster, Sbarro,  or Krispy Kreme. Rite Aid I find useful but, its competitors seem to be doing a better job.

Hopefully, none of these 15 companies get a bailout if they don’t make it. It will be better off in the long run for those who can better manage and use capital to take over the failed companies’ resources and make better use of it.

The United States government’s attempts at fixing the current financial crisis has been a complete failure. Nothing has worked. We have spent or allocated trillions of dollars–$7.36 trillion–to “fix” the problem. The irony, of course, is not only will more spending not solve the problem but, it will make things worse.

It is important to remember that government has no money. The only way for government to pay for anything is to take it from citizens through taxes or inflation. Knowing that, the only way for the government to pay for the bailouts and stimulus packages is to take money from one group and give it to another. It is no more useful than taking blood from the left arm to give it to the right arm.

In the case of bailouts, money is taken from productive members of society and then given to nonproductive members of society.

This is called rewarding poor performance. If no one is buying GM’s cars, that means GM is making cars that nobody wants. To bail them out is to force taxpayers to “buy” GM. This only reinforces their current behavior and they will continue to make cars that nobody wants. The result is the same as throwing money into a black hole–nothing will come out of it.

We hear politicians telling us how hard they are working to solve this financial crisis. More bailouts and stimulus packages and tax cuts need to be passed, immediately! They have already stolen trillions of dollars from us and no positives have come from it. No one cares how hard you are trying. We want to see results.

If these politicians really want to solve the financial crisis and keep the pain to a minimum, they would try something else. I propose repealing the 16th Amendment and the abolition of the Internal Revenue Service–most lovably known as the IRS. This would eliminate the income tax. The amount of extra real money available to the people will be a stimulus that no amount of government spending can emulate.

The usual resistance to this idea is the question of how government will function without taxes? First, we aren’t eliminating every tax; just the income tax. Second, the income tax has been around for less than a century–we managed to run this country for over a century without it. Thirdly, individual income tax will only amount to $1.25 trillion in 2008. Compared to all the bailout spending, this is a drop in the bucket! And it will actually do some good.

Without income tax revenue, the government will have to cut spending by–at least–an equal amount. If the government is just going to make up the difference by printing money, it will be no better.

If we give the people $1.25 trillion dollars to do with as they please, the economy will turn around so fast that the history books will not have to rename the Great Depression. What we don’t want is a repeat of the Great Depression where Presidents Hoover and Roosevelt spent the nation into oblivion and turned a recession into a 16 year depression.

Increased government spending is a tax increase no matter how you cut it. Whether the government borrows it and we have to pay it through taxes later or it prints the money and we find ourselves buying a loaf of bread for $5 at the supermarket.

The average American almost spends half the year working to pay taxes. Imagine if we were able to use that money to pay our mortgages, student loans, credit cards, etc. We would be able to dig ourselves out of debt quickly and then have the extra income to spend. However, we cannot simultaneously spend and have a mountain of debt. At some point, the debt will catch up to us and the party will have to end–happening right before our eyes.

The real magic of the removal of the income tax is not just the extra money Americans will have, it is the means by which that money was obtained. If it was just about the absolute number of dollars every citizen had, the government could just print each of us $1 million dollars and everything will be roses and lollipops.

There is little difference between giving everyone $1 million dollars and what all these bailouts and stimulus packages are doing. The common theme is that none of the money was derived by production and therefore does not add to our wealth but, subtracts from it.

The removal of the income tax would provide Americans with “stimulus” money that was derived from production–we had to work for it. This will have the opposite effect of money created out of thin air and we will truly be wealthier.

Few members of Congress are talking about ending the income tax and most of the talk about abolishing the IRS relate to the Fair Tax Act. Although the Fair Tax is better than the current system, we are just moving the burden of taxation from one group to another. The best solution is to abolish the IRS and replace it with nothing.

There are movements across the web to repeal the 16th Amendment, abolish the IRS, and the Federal Reserve System that is most responsible for the financial mess we find ourselves. You can check out the End the Fed website to find the latest on the movement.

The only means of economic relief the politicians can come up with are ones where they spend more and more money while real relief is to stop spending. It is time to tell our representatives in Washington that they need to change course–not just talking about “change” but, actually do it. Tell them to abolish the IRS and the income tax if they are really on the side of the people.

I submit a lot of what I write to Associated Content. They are a more sure-fire means for my content to be read by more people. I have not created that strong of delivery system but, I am creating the content. So, I will borrow the delivery system of AC–makes sense to me.

While I was looking through what other content producers on AC have written, I came across an article about helping the US economy recover. The article‘s title is How You Too Can Help the US Economy Get Better: Really, It’s Not that Difficult. The title alone was rather intriguing–mostly because of its length and use of mostly single syllable words. I’m a big fan of using as few and as low syllable words as possible when I am seriously editing my writing. There is something elegant about sentences being short, simple, and to the point.

The title didn’t give away the author’s prescription for saving the ailing US economy so I had to read the article. I consider myself a student of the Austrian School of Economics. I read articles on Mises.org and LewRockwell.com daily. I have a few books on the subject as well but, most of what I’ve learned have come from the articles, videos, and podcasts on Mises.org.

The author’s prescription to the illness is this: spend more. I had to laugh as the idea of spending the economy into prosperity is a misguided Keynesian pipe-dream. The mainstream media is also advocating that we should spend more and that a decrease in consumer spending is bad news.

It was recently reported the consumer borrowing dropped by $7.94 billion dollars in November. That was really good news as this means Americans are saving and paying down debt. The media reported it as bad news and a bad sign for the economy. The truth is, this is good for the economy.

The idea that we can have a sustainable economy by spending like drunken sailors is wishful thinking. The reason for our economic problems is because we were spending too much. The average savings rate was effectively below zero when debt was calculated. It is not possible to have growth without capital and capital can only be obtained through savings. Printing money through various stimulus packages or bailouts is only going to make the problem worse.

All of the businesses or business investments–also known as risks–that are not able to stay afloat should be allowed to disappear. If consumers–you and me–are not willing to spend money on an item then maybe we don’t need it. The idea that everyone is doing stop spending money is absurd. We still need to buy food, clothes, groceries, and other necessities.

Money will be spent. It is just a matter of whether or not businesses are selling things of value. We are no longer going to waste money on things we don’t need or don’t value enough to trade money for. By not saving, and spending as the author of the AC article suggests, we are only going to dig ourselves into a deeper hole. The first step in getting out of a hole is to stop digging.

Economics tells us that the sooner we can free up capital being used in non-productive areas, the quicker it can be used by more productive and creative people to create products and industries that never existed before. The way to do this is not by spending money with companies who are not offering things we find valuable. That is only going to reinforce the false idea that we value what they are selling.

There is no good reason to just randomly spend money on things in the name of “improving the economy”. I have often joked with friends that I or they are propping up the US economy when we go on a spending spree–this was when things weren’t as bad.

The most atrocious part of the AC article was about investing. The author suggests we put money into the stock market because the panic and fear as caused everyone to leave and therefore stocks are undervalued. This may or may not be the case but, there is no clear or even half-vague indication that the stock market has hit a bottom. The Austrian theory of the business cycle will tell you that we far from a bottom with all the recent government intervention.

With the amount of inflation that we will be experiencing, the safest “investment” to make is in commodities–look up Jim Rogers for his interviews on the topic. If there is one thing that the US economy and the world economy is going to be short on, it will be things of real value like agriculture and metals.

If you really want to make an investment, invest in your future by paying down your loans–student loans, car loans, mortgages, credit cards, etc. The stock market is not the best place for just anyone to jump in right now.

The author points out that what goes down must come up eventually. That may be true but, it is the time it takes for the market to come back up that is the problem. It could take years or decades. What are the opportunity costs of that?

The real means of helping the US economy recover is to stop spending and start saving and paying down debt. If the secret to global prosperity was to simply spend every dollar we made, poverty would have been eliminated a long time ago.