By Terry Coxon in Casey's Daily Dispatch:

A “spending freeze” would last just long enough for everyone to publicly congratulate himself on his prudence. Then there would be a silent thaw.

1. Some spending would be attributed to a future year.

2. Government corporations would be invented and given tiny budgets but big loan guarantees.

3. One by one, programs would be exempted from the freeze because of their pressing importance.

4. Tax credits or other incentives would be given to individuals and businesses to encourage them to do the spending that government wants to pretend isn’t part of the government’s budget.

5. Oops! Another crisis just showed up. Sorry, we’ve got to have a moratorium on the freeze - just temporarily.

And those are just the devices I can think of off the top of my head by which the politicians could accept the applause for a spending freeze and then party on. If in August 2008 everyone in Washington had signed on for a spending freeze, do you think they would have responded any differently to the problems that surfaced the following month? Would TARP have been rejected because it was a braying donkey in the Church of Spending Freeze?

But even if there were an honest-to-goodness spending freeze, government spending is not the source of price inflation. The source of price inflation is the new money that the Fed creates to soften or end recessions, and the Fed could keep creating it even if the government balanced its budget.

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