New President Obama says that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy. In fact, many economists don't agree. They don't agree at all.
In fact, Mr President, hundreds of them, including Nobel laureates and other prominent scholars, have signed a statement that the Cato Institute placed in major newspapers across the United States confirming that they don't agree.
Click the pic to read a PDF of the whole document. You won't believe some the names, most of them over and above those Greg Mankiw has documented on his blog in recent weeks, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingalesl, [hat tip Anti Dismal], and in addition too to the fine people at both the Mises Institute and the Ayn Rand Institute.
They don't agree at all that your "recovery" plan will "jumpstart" the economy. In fact, most of them think the "jumpstart" is the very last thing that is needed.
So to say that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy would suggest you're either aware of the dissent but lying about the agreement, or unaware of the dissent -- which is to say, ignorant of the cogent arguments against the foolishness of you profligacy.
In fact, not even the textbooks support the antediluvian idea of such a response. As Ike Brannon and Chris Edwards point out[pdf], macroeconomics has long consigned such foolish Keynesianism to the dustbin of history:
It is difficult to find a macroeconomics textbook these days that discusses Keynesian fiscal stimulus as a policy tool without serious flaws, which is why the current $800 billion proposal has taken many macroeconomists by surprise.6 John Cochrane of the University of Chicago recently noted that the idea of fiscal stimulus is “taught only for its fallacies” in university courses these days.7 Thomas Sargent of New York University noted that “the calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research."In other words, this $850 billion of spending won't work, can't work, and will do nothing except drag out the time it takes for a real recovery to happen. The one thing economists without a political axe to grind do agree on is that "We Can't Spend Our Way out of This Quagmire" - as Lawrence White and David Rose point out, that's precisely what got us in this problem in the first place.
Current attempts to solve our crisis by increasing spending is exactly the wrong thing to do. No one wants to bear the political cost for appearing to be uncaring by favoring a policy of "doing nothing." Out of political cowardice, the federal government is attempting to produce a solution that is penny-wise and pound foolish. You can't solve an excessive spending problem by spending more. We are making the crisis worse.
We have been down this road before. Most recessions start with the bursting of bubbles that grew large because of excessive money growth. But again and again, we presume a Keynesian cause and a Keynesian cure.
Our recent stock market and housing market crashes can prove to be the start of a sound and rapid recovery — if we will have the courage to let it be so.
UPDATE 1: Here's more beautifully cutting commentary from two masters at the game:
- There Is No Santa: The Stimulus Spending Ruse by Walter Williams
Rob Peter to "Stimulate" Jane
- A Crisis is a Terrible Thing for a Politician to Waste by Thomas Sowell
If the Beltway politicians aren't really trying to solve this crisis as quickly as they could, what are they trying to do?
UPDATE 2: Thomas Jefferson vs. Obama:
"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
UPDATE 3: Link from pic is fixed.
UPDATE 5: "Arm yourself against the growing Keynesian counter-revolution," says the Hayek Center. "The time is now for executives and college students and small business owners and journalists and the general public to intellectually arm up — and participate in the beating back of the Cargo Cult science of the new Keynesians." And in this post the Center provides a mountain of intellectual ammo. What are you waiting for?