Liberals' Plan to Stimulate InflationBy Thomas E. BrewtonLiberals propose to follow the same game plan that gave us  stagflation in the 1970s.As success with the military surge in Iraq increasingly belies their  claim that the war is already irretrievably lost, liberals have  changed the subject from Iraq to the economy and the rising  possibility of a recession.  Liberal Republicans and Democrats, as  usual, prescribe Federal deficit spending and higher taxes on "the  rich."That is the doctrine of Keynesian economics, which advocates consumer  spending as the exclusive highway to full employment and prosperity.   According to Keynes, consumer and business savings must be offset by  massively increased Federal spending.  What the money is spent for  doesn't matter; just flood the market with money created by  bookkeeping entries at the Federal Reserve banks.Keynesian economics failed to end the Depression.  Its repetition, as  we saw in the bitter experience of Great Society stagflation in the  1970s, discouraged investment in projects of long term value and led  to speculations that promised high rates of return in the short-run.For example, during the 1970s stagflation, is was only marginally  profitable to build rental apartments, because the rate of return on  those investments was far below the inflation rate.  What occurred,  instead, was an unprecedented boom in hotel construction, because  room rates could be increased every day.  By 1980, there was a  shortage of rental apartments and an oversupply of hotels.In the real world, the only road to non-inflationary economic growth  is lower taxes, offset by reduced Federal spending, grounded on a  stable currency.Non-inflationary economic growth is not a product of consumer  spending.  It must be funded by business and consumer savings.   Consumers who save will not max out credit cards and add to  inflationary pressures.  Businesses that save will make long-term  capital investment in higher productivity that enables increased  production of useful goods and services at lower cost.  That higher  productivity makes possible higher wages and an improved standard of  living for everyone.Federal deficit spending inevitably spurs inflation, which over time  wipes out the purchasing power of people's lifetime savings.   Increased deficit spending is the way to go if we want to eliminate  self-reliance and personal responsibility, while training people to  turn to government for all their needs.  That, of course, is a  description of socialism.Higher taxes reduce incentives to save, the only non-inflationary  source of funding to grow the economy.  Increased production funded  by savings adds to consumer purchasing power when workers and  suppliers are paid, without inflating the money supply.In contrast, higher welfare-state handouts create artificial demand  that merely raises prices, because of the time lag between the Fed's  out-of-thin-air addition to the money supply and increased  availability of goods and services.  That, of course, is a  description of inflation.Thomas E. Brewton is a staff writer for the New Media Alliance, Inc.  The New Media Alliance is a non-profit (501c3) national coalition of  writers, journalists and grass-roots media outlets.His weblog is THE VIEW FROM 1776http://www.thomasbrewton.com/Email comments to viewfrom1776@thomasbrewton.com