Posted on 09/05/2011 7:12:28 PM PDT by sickoflibs
A recent article by the best-known Keynesian economist at Yale, Robert Schiller, begins this way:
[A] … fact … about our current economic situation … can no longer be denied: our economy is in desperate need of government stimulus.
Does the rest of the article provide a defense of stimulus? No. Since the need for stimulus is undeniable, there is no need to defend it. No reasonable person would disagree. Right?
Wrong. There is a problem here. Reasonable people do disagree, strongly disagree. Robert Barro, the distinguished Harvard economist, wrote an article about the same time as Schiller's explaining why neither logic nor evidence supports government stimulus programs. Barro is far from alone, among either economists or the general public.
Does Schiller really think this is undeniable because he says it is undeniable? Are we simply supposed to take this on faith? Are we yahoos if we don't? Is Robert Barro a yahoo?
Schiller is not the only Keynesian who adopts this position. Neither Keynes nor any subsequent Keynesian has ever provided a well-thought-out argument, much less real evidence, for thinking stimulus would work. Keynes said that for every $1 of stimulus, we should get as much as $12 of economic growth, and at least $3. He also said that the stimulus would pay for itself out of tax revenues. But he didn't bother to offer either logic or evidence to support these claims. They were tossed out as intuitions, really no more than "hunches," and they have remained "hunches" ever since.
Introduction by Hunter LewisKeynesians like Schiller not only take the validity of stimulus for granted; they are also maddeningly vague about how actually to implement it. When asked in early 2009 how much stimulus was needed, Schiller replied, "it must be done on a big enough scale." That was really helpful. When asked how long it would be needed, he replied "For a long time into the future" (Bloomberg, April 16, 2009). This is not the least unusual. When Christina Romer, leading Keynesian and President Obama's economic council chairman, was asked how long stimulus would be needed, she responded in identically vague terms. Not even Paul Krugman has ever been pinned down on any of this.
In his recent article, Schiller goes on to cite Keynes's argument that recessions are caused by a collapse of confidence, nothing more. This misstates Keynes. He also blamed too-high interest rates. But that is a difficult argument to make with interest rates below the rate of inflation, so it has been conveniently dropped. Nor can we just assume that recessions are just a confidence problem. The counterargument is that recessions reflect imbalances in the price system and that a failure to address these imbalances will just make things worse. Proponents of this view hold that massive money printing, driving down interest rates below inflation, stimulus spending, and other distortions of the market's own price equilibria just make things worse. Indeed these massive government interventions are what cause the serious recession in the first place.
Schiller goes on to suggest that government stimulus programs do not have to be done with borrowed money. Government can instead tax more and spend that money. This is a curious argument for several reasons. First, Schiller knows full well that all stimulus ultimately has to be paid from taxes, unless we just default on the debt. He is really just suggesting that we tax now rather than later, but characteristically does not explain why that is an improvement.
He also fails to note that Keynes did not suggest any such program. Keynes in several passages warns about the dangers of taxing employers more heavily when unemployment is high. As the supply siders have correctly noted, we can't assume that raising tax rates in a recession will actually result in more taxes being raised.
In one respect, Schiller is in full accord with Keynes. He seems to think that government will invest the assumed new tax revenue more wisely than businesses and individuals. Keynes argued in 1932 that public officials, unlike self-interested businessmen, would take "long views" and exhibit "collective wisdom." Unfortunately we cannot accept this bit of fantasy in 2011. Government spends in order to get reelected and in doing so is chiefly influenced by special interests.
This kind of crony capitalism is precisely what has gotten us into such serious trouble. More of it is the last thing we need now. Before asking us to travel further in this direction, Schiller should stop just assuming and take the trouble of offer some arguments.
If you realize both parties in Washington think that our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus that has some magic easy cure for the economy; someone who is going to get elected in Washington and fix everything just by cutting your taxes, investing (more government spending) a few trillion more we don't have and will never have, and who will just command some countries to lower their prices and others to raise their prices all to suit your best interests, then this list is not for you.
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The Austrian Economics School’s Commandments plus :From : link
1) You cannot spend your way out of a recession
2) You cannot regulate the economy into oblivion and expect it to function
3) You cannot tax people and businesses to the point of near slavery and expect them to keep producing
4) You cannot create an abundance of money out of thin air without making all that paper worthless
5) The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever
6) You cannot live beyond your means indefinitely
7) The economy must actually produce something others are willing to buy
8) Every government bureaucrat should keep the following motto in mind when attempting to influence the economy: “First, do no harm!”
9) Central bank-supported fractional reserve banking is an economically distorting, ethically questionable activity. In particular, no government should ever do anything to save any bank from the full consequences of a bank run, no matter what the short-term consequences.
10) Gold is God’s money.
Add mine:
1) Businesses don't hire workers just because of demand for products or services, they hire because it makes them money. Sorry to have to state the obvious.
2) Government spending without taxing is still redistribution
3) Taking one man's money and giving it to another is not a job.
4) Paul Krugman and Bernake have been wrong about everything, as well as the other best and brightest Keynesian's who have been fixing our economy for over a decade.
5) Republicans in the minority (esp out of the White House) act like Republicans, in the majority they act like Democrats .
Equity bubble rules:
1)If something goes up too fast, it is going down faster,
2) By the time it looks like everybody is getting rich, it’s too late, stay out!
3) To get rich you have to get in early start of recovery and get out at the first really 'bad' news, and ignore the experts that claim that they will stop the next crash(our buddy Bernake.).
4) Don't invest money you will probably need, or worse money you don't really have.
Your commandments are concise, logical, loaded with common sense...and very unlikely to be implemented. If you propose them in a public forum, you are very likely to be labeled a racist (!?)
We don’t need a Government Stimulus.
We need Government to get out of the way.
Do away with the Government Obamacare and about 3/4ths. of Government regulations and we will supply the stimulus.
| $2 trillion of QE and 860 billion flushed down the DC crapper - and it got us what? A lot of new hiring by big government and food-stamp offices!
We much resist! I say we much! He's one and done. Barry can't figure out what went wrong The people aren't singing his song Well, here is the gist The people are p...ed And we'll vote him out before long The annihilation of the Jackwagon Democrat Party in 2012 is so close I can taste it. |
Funny you should mention that,
MSNBC POLITICS NATION 8/29/2011('GOP’s States Rights=segregation and slavery=removing rights')
Another rule for you: Money given to states for “stimulus” will be used first to fill their budget deficit, i.e. save bureaucrats’ jobs and keep union coffers full, and them MAYBE they will spend it on infrastructure.
Hunter Lewis is an idiot.....as with anyone thinking or suggesting we need another FAILED stimulus. =.=
you are right.. you could raise taxes but kill a lot of regs and still get the economy moving. lower taxes and cut spending.. it really gets cranking
The author of this article (Hunter Lewis) is arguing against another stimulus.
It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. - Frederic Bastiat 1801-1850
Stimulus spending is like cocaine, it makes you feel good - like you can do anything - but then you hit the downside and you need another fix. Over and over and over again. Eventually the addiction becomes your life. You can no longer accomplish anything. Your life consists of waiting for the next dose.
Good analogy!
I don’t like the phrase “Crony Capitalism”.
I prefer “Progressive Fascism”.
Cap the spending and cut the program.
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