July 19, 2011

Proof that Proof Doesn't Work With Liberals

If ever proof didn't matter, these quotes, compiled unintentionally by Ezra Klein in the Washington Post, indicates how dug in liberals are on Keynesianism.  For some,it's surely core belief as much as for others, it's simply a way to justify greater and greater government interventionism and ownership of the economy.

Take a look at some of these quotes to get a feel for their stubborn adherence to a highly discredited notion. First from Christina Romer, the former head of the Council of Economic Advisers under President Obama;
“What I didn’t appreciate was the extent to which we only got one shot on stimulus,” Romer says. “In my mind, we got $800 billion, and surely, if the recession turned out to be worse than we were predicting, we could go back and ask for more. What I failed to anticipate was that in the scenario that we found we needed more, people would be saying that what was happening showed that stimulus, in general, didn’t work.
$800 billion of stimulus spending didn't work and they figure, as liberals do with everything from education to foreign aid, it's because they needed more. More never works. It's a money pit. Recessions have ended without Keynesian stimulus and have even been prolonged by them as during the Great Depression. But proof is never enough. Unlike with spending where liberals want more, with proof, there is no point in more. All the proof in the world will not change their minds.

Here's why, as enunciated by Lawrence Summers, President Obama's former director of the White House National Economic Council:
“The central irony of financial crises is that they’re caused by too much borrowing, too much confidence and too much spending, and they’re solved by more confidence, more borrowing and more spending,” Summers says.
That's an interesting take except that the stimulus failed to achieve all three. In fact, it's the very reason confidence is diminished, not strengthened. We are on the right hand side of an imagined Laffer curve of solvency, or at least the perception of solvency. In fact far onto that side, and very close to insolvency. So doing more causes damage. That confidence piece aside, Romer is confusing government borrowing and spending with private sector borrowing and spending. The two are unequivocally not the same thing. As is the case with "shovel-ready" projects, government spending is not quick, it is not market-responsive, and a newer sewer, unlike a new McDonald's won't generate the same sort of future economic activity.

Lastly, the sense that more borrowing (and more spending) solves the problem of too much borrowing and too much spending (regardless of whether public or private) is absurd. Confidence is always important. Investment, whether through borrowed money or savings is typically good too. However too much borrowing and too much spending is by its very nature, a bubble. A recession is a correction of that bubble. A necessary correction too - recessions are part of the business cycle that keeps unrealistic exuberance from getting out of hand. They keep people honest - trying to generate wealth through work rather than getting free money off of inflated values. What matters is what government does, or doesn't do to mitigate it. Keynesianism is a panic reaction, letting the bubble burst, while painful, is more short-lived and would likely have allowed the recovery to have started already. We'll never know though.

Finally though, a moment of partial clarity from the gang that couldn't govern straight;
“Anybody who is honest and knowledgeable will say it is harder to move money quickly and well in reality than it is in the textbook model. I don’t think the idea that lots more money could have been moved is credible unless there had been a whole set of prior planning,” Summers says.
Harder to move money quickly in reality? Does that anybody who is knowledgeable include President Barrack "shovel-ready" Obama? Even this comment from Summers is an attempt to blame Bush - he didn't save, we couldn't spend. As if that's the reason for the deficit levels now. Sure, Bush spent too much, but it didn't stop this team from obliterating all previous deficit spending records.

They don't get it, and they won't get it. They just don't want to get it.

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