New Yorker's John Cassidy Can't Count, Digs In Heels On Precious Continental Spellings
The magazine where they put umlauts on exotic borrowed words like "coördinate" now blames America's lack of faith in Keynesian economic intervention for the world's "lacklustre" economy.
"The aversion to government spending, and government activity generally, which animates many Americans," writes El Neoyorquino's John Cassidy, "isn't actually based on economics, or logic: it is an emotionally driven belief system, founded upon a cockeyed view of American history and buttressed by a variety of right-wing shibboleths."
Cassidy has a problem with his own argument, however. As he notes, all holders of power, and all their media toadies, are Keynesians:
In the real world that rarely intrudes upon conservative economists and voters, both parties (and all Presidents) are Keynesians. Whenever the economy falters and private-sector spending declines, they use the tax-and-spending system to inject more demand into the economy. In 1981, Ronald Reagan did precisely this, slashing taxes and increasing defense spending. Between 2001 and 2003, George W. Bush followed the same script, introducing three sets of tax cuts and starting two wars. In February, 2009, Barack Obama introduced his stimulus. The real policy debate isn't about Keynesianism versus the free market, it is about magnitudes and techniques: How much stimulus is necessary? And how should it be divided between government spending and tax cuts?
Cassidy is correct: Keynesianism is the ascendant belief system of the state-managed economy. Because it is an orthodoxy rather than a thesis derived from evidence, Keynesian stimulus is not falsifiable, but it has recently been put to a trillion-dollar public experiment:
After the $700 billion Troubled Asset Relief Program and many lesser stimuli of the Bush years, such as the $400 billion Federal Housing Finance Regulatory Reform Act of June 2008, the incoming Obama Administration in 2009 proposed the $750 billion American Recovery and Reinvestment Act (ARRA). While the ARRA was being debated, administration economists warned that if the stimulus were not adopted, U-3 unemployment would peak above 8 percent and would today be above 6 percent.
Congress passed the ARRA and President Obama signed it in Feburary 2009. Cassidy again:
So far, some $750 billion in stimulus money has been paid out: about $300 billion went to tax breaks for individuals and firms; roughly $235 billion was dispersed in the form of government contracts, grants, and loans; and another $225 billion was spent on entitlements—unemployment benefits, Medicaid, food stamps, and so on.
Note that the above figures for tax breaks, contracts and entitlements actually add up to $760 billion, not $750 billion. But hey, that's close enough for government work: Keynesian belief requires a certain jesuitical approach to hard numbers.
Also, we're only counting Treasury expenditures, not the Federal Reserve's compulsive monetary expansion, which dwarfs those efforts. In any event, the stimulus experiment was conducted in broad daylight and we can now assess the result: Unemployment peaked (so far) above 10 percent. It is now above 8 percent and rising. The outcome with the stimulus is worse than the counterfactual without the stimulus.
Cassidy draws three conclusions, even the titles of which are riddled with weasel words and my-way-or-the-highway assertions:
1. It gave a much-needed boost to spending and growth.
2. The rise in federal spending under Obama was pretty modest.
3. Paul Krugman is right.
Note that there's nothing in here about actual economic performance on the only planet most of us (Paul Krugman is a possible exception) will ever experience. To explain that incovenient truth, Cassidy concludes that our faith our stimulus wasn't big enough.
It sure looks to me like Cassidy is the one repeating the shibboleths of a cockeyed, emotionally driven belief system. Do the Keynesians have any evidence, other than appeals to authority, to justify trillion-dollar expenditures of other people's money? Is the New Yorker's vaunted copydesk as indifferent to practical outcomes as it is to basic addition and subtraction?