Economists and Christmas Carols!

Friday, December 7, AD 2012

Hattip to Instapundit. Anything that helps drive a stake through the idiotic notion that spending money we don’t have is good for the economy gets an enthusiastic thumbs up from me.  This from the brilliant, albeit a little twisted, mind of John Papola who performed the miracle of creating a rap video that I enjoyed:

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One Response to Economists and Christmas Carols!

Keynesian Twilight Zone

Monday, September 19, AD 2011

There are few things sadder than a one trick pony whose trick fails to work.  Obama, with a faith whose fervency cannot be doubted, believes with all his soul that vast government spending is the mechanism to lift the country out of this never ending bad slump.  That his policies have failed to do anything other than to increase our massive public debt, sways him not at all.  For a true ideologue, and that is what Obama clearly is, a collision between reality and  beliefs merely means that reality is wrong since the beliefs are beyond question.  Thus in economic policy this administration is one endless Groundhog Day where the nation is stuck in a loop of high unemployment, minimal economic growth and ever expanding public debt.

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15 Responses to Keynesian Twilight Zone

  • He makes Carter look good.

    Thomas B. Reed, “Every time he opens his mouth he subtracts from the sum of human knowledge.”

    “The Emperor Has No Clothes.”

    I know! I’m a racist.

  • That his policies have failed to do anything other than to increase our massive public debt,

    The last assessment I saw calculated the multiplier of the stimulus spending at 0.6, not at 0.0. (IIRC, there were economists who offered just that estimate going in). Arguably it was not worth the candle but not nothing.

  • At least one study Art asserts that the stimulus cost a net 595,000 jobs:

    http://canadafreepress.com/index.php/article/36584

    Much of the stimulus of course merely allowed the states to use federal money to pay for highway projects instead of state funds. Estimates of the cost of jobs “created or saved” by the stimulus range from 287,000 per job from detractors to a “mere” 100,000 per job by supporters. Blue smoke and mirrors is too kind a phrase for 787 billion dollars sent down a rat hole. Obama would have had more of an economic impact if he had just gone from town to town throwing $20,000 checks made payable to cash at random from the presidential limousine.

  • In fairness to the President, he seems to be channeling the Democratic Party’s cognoscenti in matters economic. The new line (propagated by Joseph Stiglitz) is that the stimulus was not large enough, we have a plentiful supply of useful public works, and that we are fools not to borrow at minimal interest rates (as if those rates were set in stone). Thomas Sowell posed the question some time back as to whether Dr. Stiglitz et al could state their propositions regarding stimulus in a manner that was potentially falsifiable. Morning’s Minion, take it away.

  • Arg, Matey!

    It likely isn’t Master Keynes’ fault.

    Nick Gillespie, “Whalen isn’t simply dumping on Keynesianism, he’s bent on pointing out that even its latter-day adherents are straying far from their master’s theory. And in this, he’s surely correct. As Allen Meltzer has argued, Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be ‘temporary and self-liquidating.’ And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works projects. Or, to put it another way: If the federal government had a strong track record of responsible spending, it would mean one thing if it went into hock for a short period of time to goose the economy (again, whether this would work is open to question). It means something totally different when a government that spent all of the 21st century piling on debt and new, long-term entitlement programs responds to an economic downturn first by creating yet another gargantuan entitlement (Obamacare) and taking on even more debt in the here-and-now.”

    Shiver me timbers! I doubt Master Keynes would call class war/demagoguery fiscal policy.

  • “There are few things sadder than a one trick pony whose trick fails to work. Obama, with a faith whose fervency cannot be doubted, believes with all his soul that vast government spending is the mechanism to lift the country out of this never ending bad slump.”

    Why do you hate Catholic Social Teaching?
    Love,
    Morning’s Minion

  • Catholic social teaching doesn’t say we should abdicate to Caesar what is our own God-given duty as Christians to do. It is NOT Caesar’s responsibility to feed the hungry, give drink to the thirsty, clothe the naked, care for the sick, etc. That’s our duty as the adopted children of the Great King, and every time we abdicate our responsibility and evade our accountability to keep the command that God gave us to love our neighbor as ourselves, then we sacrifice on the altar of political expediency our citizenship in the Kingdom of Heaven and the very power of God in our own lives for the temporal “graces” of a secular national socialist democracy and its Obamanation of Desolation. The lesson of Judas Iscariot is clear when he suggested that the proceeds from the oil with which Mary annointed Jesus’ feet could have been given to the poor. Judas said that not because he cared about the poor but because he was a thief. That’s exactly what Scripture says in John 12. Government is no different. And by the way, we shouldn’t be seeking the bread that perishes as that crowd did in John 6, but the eternal Bread of Life. Jesus didn’t feed that crowd a second time. He noted exactly what they wanted: another free handout. TANSTAAFL – There Aint No Such Thing As A Free Lunch – not then and not now.

  • The following is a Walter Williams column from 1998. Diverting money from the free productive private economy into the wasteful and destructive government command economy is disastrous.

    New study shows economic growth is inversely proportional to government spending

    20 MAY 98 – James Gwartney and Randall Holcombe, economics professors at Florida State University, and Robert Lawson, an economics professor at Capital University in Columbus, Ohio, have just completed a report for Congress’ Joint Economic Committee. The title is The Size and Function of Government and Economic Growth.

    The report points out, as just about every American knows, the expansion of the U.S. economy has now moved into its eighth year. It’s been 15 years since a major recession. That’s the good news.

    Despite this performance, the real rate of economic growth during the 1990s is less than half that achieved in the 1960s. In fact, our average rate of growth has fallen during each of the last three decades.

    Greater economic stability, but less rapid growth, has also been the pattern of other developed nations. Gwartney, Holcombe and Lawson, using data from 60 nations, produce convincing evidence that there’s a strong negative relationship between the size of government, increases in government expenditures and economic growth.

    In the case of our country, the authors conclude: If government expenditures, as a percentage of Gross Domestic Product (GDP), had remained at their 1960 level, the 1996 GDP would have been 9.16 trillion instead of 7.64 trillion. That translates into $23,440 for the average family of four.

    The authors also compared developed countries with the smallest increases in the size of government between 1960 and 1996 to those with the largest increases and looked at their growth rates. In 1960, government spending as a percentage of GDP in the United States, Iceland, Ireland, United Kingdom and New Zealand averaged 28.9 percent. The growth rate for those countries in 1960 averaged 4.3 percent. In 1996, government spending in those countries rose, averaging 39.1 percent, and their growth rates fell, averaging 2.7 percent.

    Developed nations with the largest increases in government size between 1960 and 1996 were Portugal, Spain, Greece, Finland, Sweden and Denmark. In 1960, those governments spent an average of 28.1 percent of their GDP, and their growth rates averaged 6.4 percent. In 1996, government spending averaged 54.5 percent of GDP, and their growth rates fell to an average of 1.2 percent. From these statistical estimates, Gwartney, Holcombe and Lawson show that for each 10 percent increase in government spending, there’s a 1 percent decrease in the rate of growth.

    The authors are not anarchists; they acknowledge an important critical role for government, namely that of providing the legal and physical infrastructure for the operation of the market and a limited set of public goods to provide a framework conducive to economic growth.

    As governments move beyond these core functions, however, they adversely affect economic growth through the disincentive effects of taxation, diminishing returns as government takes on activities for which it is ill-suited and government interference with the wealth-creation process. Governments aren’t as effective as markets in adjusting to changing circumstances and discovering innovative production methods.

    The Gwartney, Holcombe and Lawson study understates government size because it doesn’t take into account its regulatory burden. But even with this minor shortcoming, will the study’s persuasive argument and evidence lead Congress to reduce government size? I doubt it.

    The reason is that it is impossible for any of us to know or appreciate how much wealthier we would have been had government expenditures remained where they were when John Kennedy was president. In other words, how can a family of four know that it is $23,440 poorer because of Washington and its state and local governments?

  • “Why do you hate Catholic Social Teaching?”

    Do you equate CST with the progressive, Demorat class war? If so, I love more prosperity but love less economic destitution and financial repression.

    It’s not yer mother’s CST, minion matey.

  • It is time we all just understood the stark fact that Obama doesn’t know any better. No, he’s not very bright, doesn’t spend time thinking things over and wouldn’t know an idea if one fell on him. We elected the “Un-named Democrat” who always does so well in polling. We put upon Obama whatever wonderful things we wished to find and we then voted for our dream…but the dream was carried by a man who’s only claim to being worthy is to have two wonderful daughters…which is no small thing, but hardly something that fits a man for the Presidency.

  • Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be ‘temporary and self-liquidating.’ And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works projects.

    The Roosevelt Administration’s largest deficit prior to the War amounted to about 4% of gross domestic product. The president and Congress turned in two balanced budgets during the period running from 1933 to 1941.

  • Friends, Americans and undocumented immigrants, I come to bury Obama not to libel him. The failures men fall into . . .

  • So ten years ago we passed tax cuts lowering the federal tax take to the lowest it has been since before WWII, the result was the worst 10 years of employment growth in the same time frame. The response to the fact that the current President’s policies have not quickly enough repaired the damage of the last President’s policies is to ask for deeper tax cuts. And the Democrats are the one trick ponies.

    To hold true to Keynes’ teachings, President Clinton raised taxes and produced a surplus while during the good times. The president who followed him cut taxes and turned that into a deficit. Tracking from the end of WWII our total debt as a percentage of GDP continually dropped until1981 when we cut taxes on the promise that it would increase revenue. Revenue did not increase until the massive tax increases of the mid 1980’s took effect. Nowhere in historical economic data is there evidence to support tax cutting to produce long term jobs. There is plenty evidence that the government can spend money (even deficit spending) and create infastructure that leads to long term job creation. Two prime examples are the interstate highway system and the internet. This isthe type of spending originally proposed, unfortunately, it was changed to allow it to get through congress.

  • “So ten years ago we passed tax cuts lowering the federal tax take to the lowest it has been since before WWII, the result was the worst 10 years of employment growth in the same time frame. ”

    Get behind me, Satan.

  • Ziggy zoggy!
    Ziggy zoggy!
    Oy! Oy! Oy!

    Look it up. Terrorist attacks 9/11/2001. Recession. Global war on terror. Average unemployment rate during Bush presidency 5.2% (Eurozone average 8.2%). Also, tax reductions were passed to Buffett”s secretary: 50% pay no federal income tax. Stop me!

    Bush’s tax cuts were passed based on the same conservative, private sector growth concepts as another great American President: JFK.

    Employers are not hiring because taxes aren’t high enough . . . Actually, it’s Obamacare.

    You cannot reason with a person that will not agree that 2 + 2 = 4.

Vatican Bank Chief Condemns Keynesianism

Monday, January 24, AD 2011

Current fiscal and monetary policies in the United States and Europe risk increasing government control over national economies, resulting in weakened political strength throughout “the whole of the western world,” the Vatican’s top banking expert said.

Writing in the Jan. 14 edition of the Vatican newspaper, L’Osservatore Romano, Tedeschi warned of the growing influence of “Keynesian” economic theory on both sides of the Atlantic.

Governments on both sides of the Atlantic, he said, are committed to Keynes’ policy of increasing public debt to sustain levels of economic production, consumption, and employment.

He said artificially low interest rates are another key to the strategy of increasing spending and discouraging saving. With no incentive to keep money in the bank, those who would have otherwise been savers are pushed to spend.

“Zero interest rates factually equal a de facto transfer of wealth from he who was a virtuous saver (although not for Keynes) to he who has become virtuously (for Keynes) indebted,” he said. “Practically, it’s about a hidden tax on poor savers, a tax transferred to the wealthy, (that is), over-indebted states, business people and bankers.

More. That sound you hear is Morning’s Minion’s head exploding.

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5 Responses to Vatican Bank Chief Condemns Keynesianism

  • That sound you hear is Morning’s Minion’s head exploding.

    LOL. Maybe unsurprisingly that’s the first thought I had when I read the title of this post.

  • “If QEII is successful increases in the money supply will be matched by increases in output (as millions of currently unemployed workers find jobs), so the purchasing power of savings need not be degraded. And if you are one of the millions of unemployed, you will in fact be much much better off.”

    This seems quite problematic to me. Isn’t it somewhat “perfect world” analysis? “If all the money trickles down to the right people, who spend it on the right things, productivity will up, people will be employed” and so on. However, looking at it simplistically, it seems to me that employment is created by others’ need (or, more darkly, desire). If I want a wagon wheel, and I do not have one, I can either make it, or buy it. Therefore, we need wheelwrights (or car makers). If the needs do not exist, trickling down funds will create jobs temporarily, but demand may not necessarily rise.

    Daniel Goldman noted in First Things, here: http://www.firstthings.com/article/2009/05/demographics–depression-1243457089, that the recession we are experiencing is directly related to downfall in demand, especially for housing:

    “Housing prices are collapsing in part because single-person households are replacing families with children. The Virginia Tech economist Arthur C. Nelson has noted that households with children would fall from half to a quarter of all households by 2025. The demand of Americans will then be urban apartments for empty nesters. Demand for large-lot single family homes, Nelson calculated, will slump from 56 million today to 34 million in 2025–a reduction of 40 percent. There never will be a housing price recovery in many parts of the country. Huge tracts will become uninhabited except by vandals and rodents.”

    I would argue that as demand for housing falls and has fallen, so will demand for other material assets. Current fiscal stimulus (soon to be paying for growth in China’s military), combined with our individualistic and obsessive focus on no children / 1 child families, will sink us.

  • Jonathan,

    1. That is David Goldman, not Daniel Goldman. He is untrustworthy.

    2. Housing prices per the Case-Shiller index are almost precisely what they were in February 2009.

    3. That index has been criticised as exaggerating volatility in housing markets due to its national indices being derived from some of the most overheated markets.

    4. The 30% drop in the Case-Shiller 20-city index during the period running from August 2006 to February 2009 had nothing to do with demographic factors. Family structure was not revolutionized in that 30 month period.

German Economist: America Is Becoming Too European

Friday, September 3, AD 2010

I found this piece from the English-language edition of Der Spiegel by University of Hamburg economics professor Thomas Straughaar very interest, in part because it reads very much as written by someone who is looking at American history and culture from the outside, yet trying to understand it for what it is. A key passage from the second page:

This raises a crucial question: Is the US economy perhaps suffering less from an economic downturn and more from a serious structural problem? It seems plausible that the American economy has lost its belief in American principles. People no longer have confidence in the self-healing forces of the private sector, and the reliance on self-help and self-regulation to solve problems no longer exists.

The opposite strategy, one that seeks to treat the American patient with more government, is risky — because it does not fit in with America’s image of itself.

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4 Responses to German Economist: America Is Becoming Too European

  • I’d say the author has a better understanding of this country than many Americans do.

    The author fears that if America adopts European ways, “the American age will have really come to an end.”

    But the good professor fears this because he, unlike large numbers of leftists both here and in Europe, actually likes America. He sees the “The American Age” as a positive. The end of the American Age is precisely the result the left is after and when you look at it from that perspective, Obama’s not doing a bad job.

    America is evil in leftist eyes because – oh, heck, all you have to do is read Vox Nova and you’ll have the reasons. The secular left would add a few other reasons to loathe the US – far too many “Christianist” yokels who have silly qualms about abortion and gay marriage. These people never seem to ask themselves if the American Era might be preferable to a Chinese Era, or an era in which there is no superpower at all, just an ineffectual UN in thrall to states like North Korea and Iran and state-funded terrorist groups.

    Unless we get a grip on ourselves and steer back from the cliff’s edge, we may indeed find ourselves living out one of those 2 scenarios. And my bet is that many lives – not just American lives by any means – would once again become nasty, brutish and short, and the world would find itself yearning for the good old days of the American era.

    Another thing: I have noticed that Euro-admiring lefties are pretty good at ignoring aspects of Europe they disagree with. They’ll tout Europe’s smaller cars (it would be pretty difficult to maneuver a Explorer through narrow medieval streets) and railway system, but not, say, France’s nuclear energy program. Or they’ll praise more relaxed attitudes about adulterous politicians or public nudity, but when you mention that no European country allows partial birth abortions – well, that’s one example of American “exceptionalism” they don’t mind at all.

  • B…b…b….but Paul Krugman says …

  • [email protected]!

  • I’m always weary of these cultural arguments. How’s homogeneous state-friendly Greece doing?

9 Responses to Economics Rap Battle