It would be comic if it wasn’t so pathetically tragic. On Tuesday, President Barack Obama stood at the White House to give a press briefing to reporters concerning a compromise deal cobbled together between the president and the Republicans. Just over two years ago this man soaked in the adulation of tens of thousands as he stood before the cheering, weeping, fainting throngs who saw him as a modern-day messiah. Indeed, he seemed to think of himself as such, proclaiming his nomination would be remembered by history as the “moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal; this was the moment when we ended a war and secured our nation and restored our image as the last, best hope on earth.”
Alas, he made a fatal mistake. He believed his own hype. Now, with our illustrious Community-Organizer-in-Chief still reeling from the fact that his personal charm and charisma has not ended the war our nation is engaged in (or even closed Guantanamo), his economic policy has been disastrous and has actually increased unemployment, and the planet still has a long way to go to be healed, To top it off he has been handed the worst electoral defeat in more than half a century, losing more than 60 seats in the House to give Republicans control. The sobering reality that he is a mere mortal must be stunning to him.
Yesterday, I noted that Friedrich Hayek is getting some much due attention and respect in as Keynesian economics has again turned out to be a bust. And I also posted the video of “Fear the Boom and Bust,” which was put together by Russ Roberts and John Papola of EconStories, that outlines the decades old battle between ideas of Hayek and John Maynard Keynes.
About a month ago, Roberts and Papola gave a sneak preview of their next video at the Economist’s Buttonwood Gathering. Here it is:
Via Dan Mitchell comes this chart that shows monthly unemployment numbers since the passage of the “stimulus” in February of last year. During the debate over passage of the Keynesian-style spending package, the Obama Administration told us that the “stimulus” bill would keep unemployment under 8%.
Here is his answer:
The answer was woefully inadequate, espousing much of the same in the way of economic policies that we’ve seen from President Barack Obama and Democrats, such restrictionist trade policies (Buy American) and government spending to drive demand for jobs (Keynesian economics).
In a new video from the Center for Freedom and Prosperity, Dan Mitchell explains that deficits aren’t the problem with the budget, it’s runaway spending that causes the red ink:
Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”
Next thing you know, Clinton will be jamming to “Fear the Boom and Bust”:
H/T: Greg Mankiw
A day after they launched a new website aimed at Blue Dog Democrats, the Club for Growth is continuing to expose these fiscal frauds by shining sunlight on their record on free trade:
Blue Dog Democrats claim to be fiscal conservatives, but to them, that means holding the line on just taxes and spending. Nowhere in their agenda do they profess to be supporters of free trade, which is something you would expect from a true fiscal conservative.
There’s a reason for that. The Blue Dogs, by and large, are huge protectionists.
Worse still, twenty-three of them have sponsored the TRADE Act, which is the ultimate protectionist bill to sign up for. It would reopen all of our previous free trade agreements and essentially gut them. It’s no wonder that the labor unions love it.
Supporting free trade is good for the middle class, despite the outright lies from populists like Lou Dobbs and President Barack Obama. Even Rep. Gene Taylor (D-MS), who often goes against party on fiscal matters, has fallen into trap of blaming free trade for the many of nation’s problems.
As I noted on Tuesday, 60% of economists support extension of all of the Bush tax cuts. To drive the point home comes a letter from the National Taxpayers Union signed by 313 economists expressing concern that if Democrats and President Barack Obama if fail to do the right thing that they will kill jobs:
Failing to extend the reduced tax rates implemented in 2001 and 2003 would constitute a profound and damaging “anti-stimulus” that would harm our prospects for expansion in the near future. The 10 percent bracket would disappear, and the three middle tax brackets would rise by three percentage points, heaping heavier burdens on the working class and wealthy alike. The top marginal income tax rate would rise from 35 percent to 39.6 percent, leading to higher tax bills not just for wealthy individuals but for many small businesses that file their taxes through the individual income tax system. Capital gains and dividend taxes would rise from top rates of 15 percent each to 20 percent and 39.6 percent, respectively, penalizing entrepreneurship and potentially leading to a harmful sell-off of assets in December of this year. Americans would also see the return of the now-defunct estate tax at a top rate of 55 percent, jeopardizing the ability of family businesses to remain intact as they pass to the next generation.
Despite a new report claiming that the recession ended in June of last year, a new survey shows that 60% of economists support extending all of the tax cuts passed under the Bush Administration:
[A] majority of a panel of leading economists surveyed by CNNMoney.com said that the tax cuts should be renewed for everyone.
The first in a series of economic surveys revealed that extending the tax cuts for all taxpayers is the most important thing Congress can do to help the economy. Of the 31 economists surveyed, 18 chose that from a list of options now being debated on Capitol Hill.
“Extend tax cuts for all income levels and do nothing else,” said Sean Snaith, economics professor at the University of Central Florida. “More of the same piecemeal, patchwork policies put forth by this administration will undermine confidence and do little to change the path the economy is on.”
The concern is that these looming tax hikes will hurt job creation in what are still volatile, and all you need to do is look around to see that things are still tough. And as Sen. Joe Lieberman (I-CT) said yesterday, extending the cuts is about keeping the economy moving:
The fight between Keynesians and free-marketers over the best way to handle the economy in a recession is decades old. Keynesians say that government spending will drive demand, thus stimulating the economy while also creating large deficits.
Alberto Alesina, an economics professor at Harvard, writes at the Wall Street Journal that the empirical evidence shows that cuts in government spending and tax rates are what boosts an economy (not Keynesian economics) by analyzing 200 fiscal adjustments in 21 countries over the last 40 years:
Politicians argue for increased stimulus spending, as opposed to spending cuts, on the grounds that it would speed up economic recovery. This argument might have it exactly backward. Indeed, history shows that cutting spending in order to reduce deficits may be the key to promoting economic recovery.
In Europe today, the risk of a renewed recession comes not from the spending cuts that some governments have enacted, but from a sovereign debt overhang and multiple bank failures. July’s stress tests were not reassuring because they didn’t test the exposure of European banks to sovereign debt; had they done so, many banks would have failed. Those banks remain a threat to the European economy.
In the U.S., meanwhile, recent stimulus packages have proven that the “multiplier”—the effect on GDP per one dollar of increased government spending—is small. Stimulus spending also means that tax increases are coming in the future; such increases will further threaten economic growth.