Once again, US perception of China vs. what is really happening in China is far off the mark.

The trouble is that spending is not the cause of economic growth. Investment, which begins in saving, is the root of economic growth. It doesn’t matter that consumption makes up a certain percentage of economic activity. That’s only the surface you are looking at. Spending and consumption without saving and investment is a prescription for devouring the prospects for prosperity down the line.

When it comes to state budgets, the low lying fruit has been picked. Indeed all the fruit has been picked and next year’s harvest has been spoken for as well. Thus it’s the end of the line for state’s ability to kick the can down the road in a meaningful way, if employment does not dramatically pick up soon. Here’s a hint: it won’t.

Alas, there’s nothing special about exports – which is to say, there’s nothing special about the geographic locations in which products are sold. Economic activity serves the public interest best when competition drives firms to produce those outputs whose sales yield the highest profits. If some of those sales are to foreigners, that’s fine. But it’s poor reasoning to conclude that because competition leads 100 American-made products to be profitably exported, then Americans would be even wealthier if government distorts competitive markets to ensure that 150 American-made products are exported. Exports, as such, are no more or less fundamental to a country’s economic prosperity than are, say, products that are yellow. Suppose that in competitive markets growers of lemons and sunflowers thrive, along with producers of yellow polka-dot bikinis. Would it therefore be wise economic policy for government – impressed by the profits earned by these yellow-thing producers – to artificially encourage the production of greater numbers of yellow things? Clearly not; such a conclusion is obviously unwarranted. Yet a similar error in reasoning is applauded when the products are labeled “exports.”

The Democrats’ legislative program has proved unpopular with voters, but we haven’t yet gotten to the really unpopular part: the most massive tax increase in American history, scheduled to occur on January 1. Congressional Democrats have mostly avoided talking about it in hopes that voters won’t notice that their taxes are about to shoot up. The Democrats’ plan has been to defer discussion of taxes until after the election, when the lame duck session would symbolically extend a few of the Bush tax cuts while allowing the vast majority to expire. That plan, however, overestimated the ignorance of the average voter, something on which the Democrats routinely count. A Rasmussen poll out today finds that 66 percent of voters now say taxes are a “very important” issue, up ten percent from May’s survey

I will say it one more time: you cannot create wealth by subsidizing the inefficient production of energy.

America’s pols should be honest about what their fixes and non-fixes amount to: yet more central planning, which jeopardizes our sovereign credit, endangers the Western world’s ability to grow its way out of a crippling recession, and makes it even harder for free markets to fight government mistakes.